India joins US-led Indo-Pacific economic bloc aimed at countering China

Prime Minister Narendra Modi on Monday formalised India’s entry into the Indo-Pacific Economic Framework (IPEF), along with 12 other countries, including the US, to strengthen economic cooperation as a geostrategic counter to China’s growing clout in the region.

The other countries that joined the IPEF ahead of the QUAD leaders’ summit in Tokyo are Australia, Brunei Darussalam, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.

But the Biden administration that conceptualised the IPEF diluted the language of the joint statement to allow more countries to participate in the initiative. The joint statement does not call for launching negotiations for a trade pact. It only promises to begin “collective discussions towards future negotiations” with an ambitious wish list.

Speaking at the launch event in Tokyo, Modi said India will work with other members to build an “inclusive and flexible” IPEF. “The Indo-Pacific Economic Framework is a declaration of our collective will to make the region an engine of global economic growth. I believe that there should be three main pillars of resilient supply chains: Trust, Transparency, and Timeliness. I am confident that this framework will help strengthen these three pillars, and pave the way for development, peace. and prosperity in the Indo-Pacific region,” Modi said, without mentioning the other three pillars of the proposed trade deal.

The joint statement talked about four pillars: Trade; supply chains; clean energy, decarbonisation and infrastructure; tax and anti-corruption. Under the trade pillar, the joint statement seeks to build “high-standard, inclusive, free and fair trade commitments”.

“Our efforts include, but are not limited to, cooperation in the digital economy,” the joint statement said without ruling out tariff negotiations under the proposed trade pact.

A fact sheet released by the White House made the objectives of the Biden administration clear. “We will pursue high-standard rules of the road in the digital economy, including standards on cross-border data flows and data localisation. We will also seek strong labor and environment standards and corporate accountability provisions that promote a race to the top for workers through trade,” it said.

On issues such as digital commerce, labour, and environmental standards, India and the US have contrasting views. India strongly resists putting such standards in any of the free-trade agreements it signs. India didn’t join the Osaka track on the digital economy at the G20 leaders’ summit in 2019 as it remains reluctant on setting global rules e-commerce holding that this may deny policy space to developing countries to expand their nascent e-commerce space.

Biswajit Dhar, professor of economics at the Jawaharlal Nehru University, said the language in the joint statement is deliberately vague and broad to avoid differences at the initial stage. “This allows each leader to interpret the animal the way he wants it. But India certainly needs to take it very seriously. We should weigh the proposals very carefully looking at our own comfort level, especially on the regulatory coherence front,” he added.