India opts out of the IPEF trade policy pillar; What message does India relay?

India opts out of the IPEF trade policy pillar at the IPEF ministerial meeting.

At the ministerial meeting of the 14-member Indo-Pacific Economic Framework (IPEF) held in Los Angeles on September 8–9, India decided to join its three pillars related to supply chains, tax and anti-corruption, and clean energy.

However, due to possible binding commitments on digital trade, labour, and the environment, India has, as of now, opted out of its trade pillar.

At a briefing to the media after the conclusion of the two-day Indo-Pacific Economic Framework (IPEF) ministerial meeting, Piyush Goyal stated that India would wait for the final contours before it formally decides to join the trade pillar and would continue to engage with the trade track in the Indo-Pacific Economic Framework (IPEF).

Goyal added that on one pillar, which deals primarily with trade, the contours of the framework, particularly any commitments required on digital trade, labour, the environment, and public procurement, are certain areas in which a broader consensus has yet to emerge amongst all nations.

The minister further added that what benefits member countries will derive is yet to be seen and whether any conditionalities on, and giving an example, said the environment may discriminate against developing countries. Developing countries have the imperative of providing low-cost and affordable energy to meet the needs of a growing economy.

News agency Press Trust of India (PTI) further quoted Minister Goyal, who said that the country is also in the process of strengthening our digital framework and laws, particularly regarding privacy and data.

piyush goyal

Indian officials will be participating in the discussions with an open mind and in the best interests of the people and businesses in India: Minister Goyal

In the meantime, Indian officials will be participating with an open mind in the discussions and in the best interests of the people and businesses in India, said Goyal.

In response to the question of broad areas of concern, Minister Goyal said that the linkage of the environment, digital trade, and labour to trade and possible binding commitments of any nature are juxtaposed with the benefits that India will receive as a developing economy.

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Adding to that, the Minister said that in any such agreement, the developed countries should also be an integral part and that is a matter which requires deeper engagement and more consultation.

Katherine Tai, United States trade representative, confirming India’s decision to opt-out of the trade pillar of the Indo-Pacific Economic Framework (IPEF), stated that India is not in the trade pillar of the Indo-Pacific Economic Framework (IPEF) and that she and Union Minister for Commerce Piyush Goyal have been talking a lot.

She further stated that they have our bilateral structure, the Trade Policy Forum, which should be meeting by the end of this year again and that they have covered the same issues in that bilateral channel and that the ministers are in very close touch.

ipef meeting

It may be mentioned here that the United States-led Indo-Pacific Economic Framework (IPEF) was launched in May and presently consists of 14 Indo-Pacific nations, viz. India, Brunei Darussalam, Australia, Fiji, Indonesia, Japan, South Korea, Malaysia, Singapore, New Zealand, Philippines, Vietnam, Thailand, and the US. This grouping represents 40 per cent of the global GDP and 28 per cent of the global trade in goods and services.

On the other hand, many view the establishment of the Indo-Pacific Economic Framework (IPEF) as a step to counter China’s growing influence in the Indo-Pacific. Although the Indo-Pacific region is still growing in economic significance, it is recognised by all major players. Also, its economic architecture is still evolving.

Also notably, the United States and India are not members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or of the Regional Comprehensive Economic Partnership (RCEP). Therefore, the Indo-Pacific Economic Framework (IPEF) has the potential to provide a solid platform for both nations to frame economic rules in an economically dynamic Indo-Pacific region.

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It is also worth mentioning that India moved out of the China-dominated Regional Comprehensive Economic Partnership (RCEP) two years ago. Besides, 10 ASEAN nations are also included in the 15-nation Regional Comprehensive Economic Partnership (RCEP). RCEP now consists of 10 ASEAN nations.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), similarly, is a Free Trade Agreement (FTA) between the remaining 11 members of the proposed Trans-Pacific Partnership (TPP). The membership now includes Brunei Darussalam, Australia, Canada, Chile, Malaysia, Mexico, Japan, Peru, Singapore, New Zealand, and Vietnam.

Meanwhile, the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership’s key provisions include digital trade, goods tariffs, procurement, IPR, services, etc., whereas the Regional Comprehensive Economic Partnership encourages deep supply chain integration among members.

Also, some countries like Australia, Japan, Malaysia, New Zealand, Vietnam, Singapore, and Brunei are members of all three groupings—RCEP, CPTPP, and the IPEF.
Amongst these countries, some have close strategic ties with the US. However, all of them are also united with China-centred value chains, and to them, the Indo-Pacific Economic Framework (IPEF) is an added integration in the Indo-Pacific under the United States’ patronage. The IPEF is also good for rebalancing increasing economic dominance by the Chinese.

The United States, along with its partners and allies, wants to enhance its economic engagement in Asia and the Indo-Pacific through the IPEF.

ipef meeting

India also has plans to play a crucial part in the Indo-Pacific security and economic architecture, being a large, fastest-growing economy, and an important part of the QUAD.

And since India is not a member of both the CPTPP and the RCEP, the IPEF is an opportunity to build multilateral economic linkages in the Indo-Pacific. Meanwhile, as trade and supply chains are closely linked with each other, all the members of the IPEF except India have agreed to join all four pillars of the IPEF.

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One of the major concerns of India for not joining the IPEF trade pillar has been cited as the labour issue. However, the supply chain pillar also mentioned that the partnering countries will seek to ensure that the work promotes the labour standards that underpin fair, sustainable, and resilient supply chains.

Therefore, India’s reluctance to join the trade pillar of the IPEF hints at a lack of confidence in its competitiveness, as per some experts in the field.

edited and proofread by nikita sharma

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