Biden’s IPEF: A banquet with no main course

The Indo-Pacific Economic Framework (IPEF)’s latest round of negotiations was completed during a ministerial-level meeting in Singapore. The US has been keen to talk up the “significant new achievements” of this latest round of negotiations, particularly in relation to the Clean Economy pillar of IPEF.

If the press releases are to be believed, the IPEF Clean Economy Agreement would add a major international dimension in support of Biden’s key domestic policies on clean energy industrial policy. Crucially, China is not one of IPEF’s 14 members, hence IPEF ostensibly offers a trade policy that supports Washington’s goal of de-risking US clean energy supply chains from Chinese dependencies.

The major problem with this hypothesis is that, as critics point out, IPEF is not a trade agreement and offers no tangible market access benefits. This begs the reasonable question of what IPEF is, if not a trade agreement.

Metaphorically, IPEF is best thought of as a banquet where guests receive a steady stream of tantalising appetisers but the promised main course — i.e. market access — never arrives. Yet the fact that it might arrive has thus far kept the guests in the room.

Hence, two questions about IPEF are currently relevant: (1) whether it is likely that the main course will arrive anytime soon; and (2) for how much longer the guests are willing to wait. Answers to these questions can be found by assessing both the Indo-Pacific geopolitical imperatives driving membership, and US domestic politics.

Geopolitically, IPEF was born out of Trump’s decision to pull the US out of the Trans-Pacific Partnership trade agreement in 2016, as part of his anti-trade policy. This left the US without an Indo-Pacific trade agenda, and therefore without a tool to counter China’s growing centrality and soft-power influence in regional trade. The Biden administration sought to remedy this gap through IPEF.

Engagement with Biden’s IPEF by 13 Indo-Pacific nations — seven of which are ASEAN countries — is evidence the region desperately wants Washington’s economic presence as a counterpoint to China. Furthermore, the truly impressive number of ministerial meetings (six) and IPEF negotiating rounds (seven) in less than two years since IPEF’s launch illustrate the willingness of countries to invest time and resources in the IPEF process. In comparison, it took the post-war GATT trade agreement almost three decades to enter its eighth round of negotiations. Yet what has all this effort delivered? Beyond aspiration, arguably very little.

A generous reading of IPEF’s Singapore ministerial meeting announcement of the Clean Economy and Fair Economy agreements marks a milestone in US regional trade engagement. IPEF supporters claim the Investor Forum on Clean Economy shows “tangible results are achievable”.

These “tangible results” amount to identification of potential sustainable infrastructure projects valued at US$23 billion, and 20 shovel-ready projects valued at US$6 billion that were presented to investors at business matching sessions. While this offers potentially useful business and investment facilitation, one must ask whether 13 high-level governmental meetings are a reasonable input for such a modest output.

Things look worse when one takes the time to examine the IPEF Pillar legal “Agreement” texts. Trade agreement texts are normally legal documents which lay out clear rights, duties and obligations in relation to the specific aspects of trade to be addressed with Parties to an agreement. When one compares the language of any IPEF agreement with a real trade agreement such as the United State-Mexico-Canada Agreement (USMCA), the claim that IPEF offers genuine benefits to members quickly falls apart.

IPEF agreement language is a masterclass in the art of dissembling and being non-committal. Pillars II, III and IV have final Agreement texts, and some examples of the language from the Clean Economy agreement is illustrative of how aspiration departs from reality in IPEF.

The 38 articles in the Clean Economy agreement use vague, ill-defined, platitudinous language throughout, such as “The Parties intend to cooperate on achieving energy security…Such cooperation may include, as appropriate, policy discussions…”, “The Parties recognize that…”, “Interested Parties may also explore…”, “Interested Parties intend to work together…” Note terms such as “intend to cooperate”, “may include” “may also explore” all entail no specific obligation or duty.

Compare IPEF language with the United State-Mexico-Canada Agreement (USMCA). Examples in this free trade agreement (FTA) include “no Party shall increase any existing customs duty”, or “no Party shall refund the amount of customs duties paid, or waive or reduce the amount of customs duties owed”, or “No Party shall, on condition of export, refund, waive, or reduce…”. USMCA language is precise in detailing strict obligations of Parties in relation to specific aspects of trade addressed by the Agreement. It is at this level of legal text comparison that the limits of IPEF compared to an actual trade agreement becomes clear.

In fact, the only true trade pillar in IPEF, Pillar I, was indefinitely suspended just before last November’s IPEF summit in San Francisco, when the Biden team had hoped for a big announcement on Pillar I’s conclusion. The announcement, however, was scuppered by one of Biden’s fellow Democrat Party senators, who is facing re-election in a state swinging towards the Republican Party. Trump has already threatened to axe IPEF if elected in November 2024, and public scepticism of free trade agreements mean that Democrats facing elections in swing states are coming out against the agreement.

Here we find the reason for IPEF’s maddening banquet of never-ending appetisers, but never arriving main course. Geopolitical conditions for IPEF are highly favourable. The US needs a regional trade agenda, regional participants want to keep their options open in a context of US-Sino rivalry. Yet ferocious US anti-trade politics is a spoiler that geopolitical incentives have been unable to overcome.

The language of IPEF’s text agreements, and the suspension of Pillar I give the game away. As things stand, none of IPEF’s pillar agreements offer a concrete challenge to China’s trade relations in the region. Rather, the spectre of a Trump re-election hangs over IPEF until the next US election.

What is the future for IPEF in such constrained circumstances? I argued in 2022 that despite no new market access IPEF offered a second-best forum that could drive modest trade facilitation gains amongst members, while building a platform that could morph into something more substantial when US politics became favourable.

This continues to be the case today, but IPEF’s ongoing unrealised potential comes at a cost of significant resources needed for governments to engage. It also includes risks to US credibility the longer the agreement plods along as a club of vague intentions.

A re-elected Biden administration in its second and final term may have the scope to finally secure some binding market access for IPEF’s participants, in turn gaining real concessions. But for now, IPEF’s high aspirations remain largely that, aspirations lacking binding commitment and facing an uncertain future.

Related: IPEF: How committed are the US and ASEAN countries? | No new market access, but IPEF could be a promising start