At a time when trade is facing deglobalisation headwinds, India’s decision to be part of the US-led Indo-Pacific Economic Framework (IPEF) along with 11 other countries is to be welcomed. This bloc aims to strengthen economic partnership among the participating nations to enhance supply chain resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the region. The global power axis has shifted away from the Atlantic-Pacific to the Indo-Pacific, stretching from the Indian sub-continent to the western shores of North and South America. This region now powers the world economy through its prowess in manufacturing, trade and investments. However, this putative bloc represents only a broad framework as the rules for closer economic engagement through greater market access for each other’s goods and services are still to be worked out. However, the level of ambition for a free trade agreement (FTA) is likely to be equivalent to that of the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or the Regional Comprehensive Economic Partnership (RCEP), a grouping that comprises 10 members of the Association of Southeast Asian Nations together with China, Japan, South Korea, Australia and New Zealand. This is only to be expected as eight members of the IPEF (Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam) are also part of the CPTPP and 11 are part of the 15-member RCEP that came into force in January.
From a geo-economic standpoint, India’s strategy for the Indo-Pacific is still evolving. What are its interests in the region? Is it only rivalry with China that seeks a growing presence in the Indian Ocean? There is, no doubt, a large element of this, as China’s rise as a global power has lengthened its shadow over South Asia, ASEAN, and East Asia. India has taken a consistent position of freedom of navigation in the South China Sea. Due to their quest for energy security, the Indo-China rivalry is the most intense at the Indian Ocean. This has also resulted in India prospecting for oil in Vietnam and Russia. The question is whether India’s interest also extends to engaging via trade and investments and sharing the prosperity of the booming Indo-Pacific region, a bitterly-contested arena where great power ambitions are colliding. India has sought closer relations with Japan which also has serious concerns regarding a rising China. Then there is South Korea. The US has now decided to focus on the region after earlier walking out of the Trans-Pacific Partnership, which is another word for the CPTPP. So, too, is India which decided to exit from the Sino-centric RCEP at the eleventh hour and is currently reviewing existing FTAs with ASEAN, Japan, and South Korea, among several others.
From India’s point of view, much depends on how IPEF aligns with the CPTPP and RCEP-type trading agreements. This is predicated on how the US looks to exercise leadership in this new bloc while also satisfying its domestic constituencies. Last year, US president Joe Biden mentioned IPEF at the East Asia summit, stating that it will define shared objectives on trade facilitation, standards for the digital economy and technology, supply chain resilience, decarbonisation, and clean energy, infrastructure, worker standards, among others. India, for its part, reaffirmed that it will work with partners to build an inclusive and flexible IPEF. Exemplifying India’s growing stakes in the Indo-Pacific, it recently inked an ambitious economic cooperation and trade agreement (ECTA) with Australia, which was hailed as a “watershed moment” by PM Narendra Modi. As Australia is a member of both CPTPP and RCEP, greater comfort levels in implementing the ECTA may well incentivise India to raise its level of ambition for deeper trade and economic engagements with the IPEF grouping.