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Completing the Puzzle

After strengthening its security alliance in the region, the US is seeking stronger economic partnerships to complete its Indo-Pacific strategy

By Yu Xiaodong Updated Aug.1

(L-R) Australian Prime Minister Anthony Albanese, US President Joe Biden, Japanese Prime Minister Fumio Kishida and Indian Prime Minister Narendra Modi attend the Quad Fellowship Founding Celebration event, May 24, 2022, Tokyo, Japan

On May 23, US President Joe Biden finally unveiled the Indo-Pacific Economic Framework for Prosperity (IPEF) in Tokyo, Japan, his maiden trip to Asia since he took office. Subject to much speculation on both sides of the Pacific, the framework is widely seen as the missing piece to Washington’s Indo-Pacific puzzle.  

While Chinese and regional analysts predict the framework will have limited short-term impact, some believe it will pose long-term threats to China’s economic security. 

The Missing Piece 
Biden has advanced the Trump administration’s agenda of competing with China as a strategic rival. But unlike Trump’s unilateralist approach, Biden emphasized consolidating the US’s global alliances.  

Not only has Washington upgraded the Quadrilateral Security Dialogue, colloquially known as the Quad, which includes the US, Japan, Australia and India, into a collaborative security mechanism targeted at China, it also established the Australia-UK-US Trilateral Security Partnership Agreement (AUKUS), aimed at supplying Australia with nuclear-powered submarines to strengthen military deterrence against China.  

In the past months, Biden has initiated a major diplomatic push to woo regional countries, especially members of the Association of Southeast Asian Nations (ASEAN) that the US neglected under Trump. But with no concrete offers for further cooperation in the economy and trade, a policy focus for regional governments, the US has made limited progress in its Indo-Pacific agenda.  

During the virtual East Asia Summit held in October 2021, Biden said for the first time that Washington was developing an Indo-Pacific economic framework, which aims to set regional standards for cooperation in various areas.  

On February 12, the White House released a 12-page document on a new Indo-Pacific strategy, pledging to pursue 10 “core lines” of effort in the next 12 to 24 months, to counter China’s growing influence and “harmful behavior” in the region. Around the same time, US media outlets reported the US would soon unveil its first broad economic strategy for Asia. With the official launch of the IPEF, it appears that the Biden administration’s Indo-Pacific strategy is now complete. 

Pillars of Uncertainty 
Covering 14 participants, including seven ASEAN members – Singapore, Brunei, Indonesia, Malaysia, the Philippines, Thailand and Vietnam, together with Australia, Japan, India, South Korea, New Zealand and Fiji, as well as the US, the framework comprises four policy pillars: fair trade, supply-chain resilience, clean energy, decarbonization and infrastructure, and tax and corruption. Participating countries can choose which pillar to take part in, but are required to abide by all the commitments within the selected pillars.  

But unlike traditional trade pacts, the framework does not involve granting additional access to the US market, something US officials explicitly stressed.  

Under Trump’s “America First” doctrine, the US pulled out of the Trans-Pacific Partnership, a free trade deal agreed under former US president Barack Obama’s “Pivot to East Asia” policy. The TPP’s remaining 11 members, including four ASEAN countries, Japan, Canada, and Mexico renamed the agreement the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which took effect in December 2018.  

Since Biden took office, countries such as Japan and Singapore tried to persuade the US to join the CPTPP. But strong sentiments against any multilateral trade deal at home mean that it is politically unattainable and undesirable for the Biden administration to do so.  

Using an excutive order to launch the IPEF means the Biden administration does not need Congressional approval. But for many observers, this arrangement brings much uncertainty to the framework’s long-term prospects.  

“Because Biden launched the IPEF by executive order, which does not require ratification of the framework in Congress, it could be revoked if the Biden administration fails to win a second term,” said Zhao Minghao, a research fellow with the Institute of international studies at Fudan University in Shanghai.  

Zhao told NewsChina that the IPEF poses no immediate threat to China’s economic influence in the region. Offering no negotiations to lower tariffs and further open markets, the framework is not very attractive to regional countries, Zhao added.  

Song Guoyou, vice-director of the Center for American Studies (CAS) at Fudan University, said that the IPEF could share the same ill fate of previous US-led initiatives, including the TPP. In an opinion piece published in State-run newspaper the Global Times, Song argued the US had launched quite a few “innovative” initiatives in the past, but the lack of policy stability means that none have been effectively carried out.  

“When the US tries to promote an initiative, they wrap it in lavish diplomatic rhetoric to describe its visions, values and goodwill,” Song said. “But the reality is the US lacks the genuine political will and intention to devote real resources to these initiatives to promote cooperation.” 
The latest example might well be the “Build Back Better World” initiative Biden launched at the Group of Seven (G7) summit in June 2021. The initiative promised to invest hundreds of billions of dollars for projects in the region, though few have materialized.  

“The US proposed the IPEF to serve US interests, with the issues and participating countries handpicked by the US. It’s not intended to serve the interests of economic development in the region,” Song said. “While it is promoted as an economic deal, it is primarily driven by Washington’s geopolitical agenda, and regional countries are well aware of that,” he added. 

US Secretary of State Antony Blinken, Japanese Foreign Minister Yoshimasa Hayashi, former Australian foreign minister Marise Payne, former Australian prime minister Scott Morrison and Indian Foreign Minister S. Jaishankar attend the Quad foreign minister meeting in Melbourne, Australia, February 11, 2022

‘Doomed to Fail’ 
According to Xu Liping, a senior research fellow at the Chinese Academy of Social Sciences (CASS), the economic and trade relationships between China and regional countries, especially ASEAN countries, are resilient and can withstand the impact of the IPEF.  

In November 2020, China and all ASEAN countries, along with Japan, South Korea, Australia and New Zealand, signed the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade deal. On January 1, 2022, the RCEP went into force in 10 of its 15 member states, including China and six ASEAN countries.  

Trade between China and ASEAN countries reached US$878.2 billion in 2021, a 28.1 percent jump from the previous year, making the bloc China’s top trade partner, replacing the European Union. As tariffs on 90 percent of all goods will drop to zero under the RCEP, trade between China and regional countries is set to grow in the coming years. “If the US aims to use the RCEP to open a crack in the China-ASEAN relationship, it will most likely fail,” Xu said.  

Some participating countries have already voiced reluctance over the IPEF. On May 11, speaking ahead of the US-ASEAN summit held from May 12-13 in Washington, Vietnam’s Prime Minister Pham Minh Chinh said his country was ready to engage with the US, but needed more time to study the initiative as it lacks clarification.  

Malaysia’s Prime Minister Ismail Sabri Yaakob was more direct. Speaking during the same summit on May 13, he said that Kuala Lumpur has not decided which of the IPEF’s pillars it would join and called for the US to adopt a “more active trade and investment agenda.” 
In an ironic twist, Ismail instead urged the 6,200 US companies operating in ASEAN to take advantage of the RCEP. “I would encourage US businesses to tap into the largest FTA, with a market covering 15 countries, comprising 2.3 billion, or nearly a third of the global population and world GDP, and take advantage of the vast investment opportunities presented,” he said. 
Many regional experts are not optimistic. In a co-authored commentary published by Singapore-based Channel News Asia (CNA) on June 3, experts from the Southeast Asia-focused ISEAS-Yusof Ishak Institute in Singapore – Jayant Menon, Tham Siew Yean and Maria Monica Wihardja – questioned the framework’s future.  

“The fact that only 13 other countries [besides the US] from such a vast region have indicated interest is not a promising start – there is only one Pacific Island nation and one from South Asia,” the article said. The researchers warned that as participating countries are only committed to an initial round of discussions and may be required to make painful policy changes under IPEF rules, it is unclear whether the negotiations will lead to binding commitments. “There is a good chance that it may not actually amount to anything significant,” the article concluded. 
In an article published by ASEAN Briefing on May 19, the paper’s Jakarta-based editor Ayman Falak said the IPEF is framed around issues that matter most to the US and does not respond to the urgent issues of ASEAN states.  

Calling the IPEF a part of “a wider ‘America First’ policy that has been continued by the Biden administration,” he said the IPEF is “an unimpressive attempt by Washington to make up for its unwillingness to negotiate the type of open market access trade deals ASEAN countries are seeking.”  

The harshest criticism of the IPEF came from China. One day ahead of Biden’s launch of the IPEF on May 22, Chinese Foreign Minister Wang Yi lambasted the IPEF, questioning the US’ attempt of “deliberately creating economic decoupling, technological blockades, industrial chain breakage and aggravating the supply chain crisis.”  

Stressing that the Asia-Pacific region should become “the pacesetter for peace and development, not the arena of geopolitics,” Wang declared that with China’s large market and population of 1.4 billion, “all kinds of conspiracies that attempt to create camp politics, build an Asia-Pacific version of NATO and wage a new Cold War in the Asia-Pacific region are doomed to fail.”  

“The one trying to use a framework to isolate China will eventually isolate itself,” Wang said. 

US President Joe Biden visits a Samsung Electronics semiconductor plant in Pyeongtaek, South Korea, his first stop during a three-day official visit to South Korea from May 20 to 22, 2022

‘Prepare for the Worst’
Despite the IPEF’s limitations, most Chinese experts agree China cannot afford to take it lightly, especially if it further integrates with Washington’s overall geopolitical offensive in the region.  
According to Xu Liping, the expert from CASS, although the framework’s impact on the overall trade relationships between China and ASEAN countries will be limited, it poses a threat to China’s economic security.  

“It will make it hard for China to push forward its Belt and Road Initiative in the region, which will be subject to more stringent scrutiny and more ‘demonizing’ pressure,” Xu said.  

More importantly, Xu warned the framework would seriously undermine the resilience and security of China’s supply chain in some key industries, such as the semiconductor industry, which is largely controlled by advanced economies.  

Since the US blacklisted hundreds of Chinese tech firms, especially those in the semi-conductor sector, Japan and South Korea have served as major alternative suppliers.  

But as Japan and South Korea have joined the framework, China’s supply chain in high-tech industries may become more vulnerable. Biden’s first stop on his trip to Asia was a Samsung Electronics semiconductor plant, which sent a strong message about his Indo-Pacific priorities. The Quad Joint Leaders’ Statement released on May 24 also explicitly pledged to ensure that technology development in this region will be guided by “shared democratic values.”  

In a seminar held by the Renmin University of China in Beijing on “The US’ great encirclement of China,” Zhang Yanling, former vice-president of the Bank of China said that China needs to “prepare for the worst.”  

“In the coming years, we could witness some fundamental changes in some international norms and practices and some of China’s major advantages, such as its status as the world’s biggest manufacturer and largest trader, could be undermined,” Zhang said at the seminar on May 30. 

She advised China to handle its relationship with the international community properly. “Not every country within the orbit of the US agrees with its anti-China agenda,” Zhang said.  

“But both our government and our business sector need to have effective contingency plans if China’s supply chain is severed.”