Economic policy

Deadlock in the Indo-Pacific Economic Policy Space

In a region that has seen the emergence over the years of multiple forums and agreements with an economic dimension – ASEAN, ASEM, APEC, RCEP, TPPA, CPTPP – the Indo-Pacific Economic Framework for Prosperity (IPEF) could easily join, as one Tweeter Put it, this Asian alphabet soup. The question is whether the IPEF, launched in May this year, would complement or replace existing regional economic institutions.

Critics have cited the informal structure of Asian institutions, the region’s preferred consensus-based approach to decision-making, and the non-binding nature with which Asia implements decisions as weaknesses. It doesn’t help that progress is sometimes hampered as a result. Consequently, the relevance of these regional institutions has been questioned.

The Asia-Pacific Economic Cooperation (APEC) receives as much criticism, if not more. Coincidentally, APEC just released a President’s Briefing statement on the meeting of ministers responsible for trade in May. For those unfamiliar, a presidential statement is issued when parties fail to reach consensus on a joint statement, which appears to have been an almost recurring theme for APEC since the 2017 Leaders’ Summit in Da nang.

The ‘ASEAN path’, which most institutions in the region adhere to, including APEC, seems to be thriving.

In counter-argument, proponents of APEC point to its success in reducing trade barriers through trade liberalization, as well as improving domestic regulatory frameworks, while strengthening interstate economic cooperation. More importantly, international relations scholars such as Amitav Acharya Argue that approaches to regionalism in Asia, such as those of APEC, are in line with the preferred manner and sensibilities of that part of the world.

Hardline approaches to regionalism, such as those of the EU, have struggled to gain traction, while theASEAN Waywhich most institutions in the region adhere to, including APEC, seems to be thriving. It makes institutions like APEC attractive and relevant.

However, IPEF poses an existential threat to APEC, despite some of its elements bearing similarities to a US-style free trade agreement. Great efforts have been made to present the IPEF as something other than an FTA, four pillars – connected, resilient, clean and fair economies – could potentially take on dimensions that mirror FTAs ​​like the TPPA and CPTPP, such as trade facilitation, digital economy, anti-corruption and transparency, competition and regulatory governance.

Nevertheless, IPEF has subtle but important differences. Its big difference lies in its approach. Compared to previous US FTAs, which were single commitments, it was reported that parties to the IPEF have the freedom to Choose which pillars they are committing to, although each will have to accept all obligations under that pillar. This is a major shift and means the United States recognizes that Asia operates differently.

Proponents of APEC claim that its success has been in reducing trade barriers through trade liberalization. Pasir Panjang Container Terminal, Singapore (Budak/Flickr)

Admittedly, it would be premature to speculate on the future of IPEF, but judging by its scope and approach, it poses a significant challenge to APEC, which deals with similar areas. The advantage of IPEF is that its potential members better match the emerging and dominant narrative of the Indo-Pacific. For example, India is present in IPEF, while it is conspicuously absent from APEC, despite attempts join.

This is in no way a criticism of APEC. The group has indeed accomplished a great deal over the past three decades. His contribution to the creation of a rules-based multilateral order has been significant. However, circumstances have changed significantly since the 1990s. Indo-Pacific has, to a large extent, supplanted Asia-Pacific as the dominant construct. Even the Association of Southeast Asian Nations (ASEAN), despite some initial reluctance, had to recognize this by establishment ASEAN Perspectives on the Indo-Pacific (AOIP).

There seems to be an acknowledgment that the process needs to be reinvigorated. Perhaps APEC as a whole does the same?

With the changing nature of the regional order, increasing competition – particularly between the United States and China – can upend existing regional institutions and frameworks. Those like ASEAN and the Asia-Europe Meeting (ASEM) can continue if their members still see the benefit of retaining them, given that they are more multifaceted. APEC’s fate is less clear.

If this trajectory unfolds, expect a slow death with many more statements from the president to come. Perhaps APEC, tasked with trying to save the multilateral trading system as it has done so many times before, has yet to see this problem. It’s unlikely. APEC leaders must realize that if IPEF becomes a reality, it may only be a matter of time before APEC members, some of whom are traditional U.S. allies , come knocking at his door.

A extract of the President’s statement on the Asia-Pacific Free Trade Agreement is telling:

Recognizing APEC’s role as an incubator of ideas, there remain challenges, gaps and areas of divergence between APEC economies on some elements of the PTATA agenda, but , at the same time, a consensus is emerging on the need for a renewed conversation on the FTAAP in light of the pandemic.

There seems to be an acknowledgment that the process needs to be reinvigorated. Perhaps APEC as a whole does the same? APEC must continue to adapt to emerging economic and geopolitical realities, at least to ensure its continued relevance.