Explained: The new Indo-Pacific bloc

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Recently, the Indo-Pacific Economic Framework was launched by United States President with 12 other countries, including India, as a member. The aim was to reclaim US’s economic leadership in East Asia and the ASEAN region without losing them to China.

What is Indo-Pacific Economic Framework?

The IPEF will a) set the rules of the road for the digital economy, b) ensure secure and resilient supply chains, c) make major investments necessary in clean energy infrastructure and the clean energy transition, d) raise standards for transparency, fair taxation, and anti-corruption, etc.

What is the stand of India on IPEF?

The Issue of data localisation between India and the US

India has fought with the US over the last two or three years regarding data localisation. In 2019, the government has introduced a Bill in Lok Sabha that envisages a framework for localising Indian data and the establishment of a Data Protection Authority.

But the US, in its National Trade Estimate Report, said that the data localisation “will serve as significant barriers to digital trade” between the two countries, and will act as “market access barriers, especially for smaller firms”.

What are the issues surrounding IPEF?

Lack of clarity: The U.S. said that it is not a free trade agreement; nor will it discuss tariff reductions or increasing market access, raising questions about its utility. But the US did not explain what is the focus area of IPEF.

Question on common ground: The 13 countries are part of very different economic arrangements. This raises the question of whether there is enough common ground among the members or not.

Trade relations with members of IPEF and China: Each of the IPEF countries has considerable trade interests in China, with most having large trade deficits.

Credibility of US initiative: The U.S.’s previous initiatives (the Blue Dot Network and the Build Back Better Initiative) have made little improvements in changing the region’s infrastructural needs. Hence, the IPEF also faces a credibility challenge.

Source: The post is based on the following articles “Explained: The new Indo-Pacific bloc” published in Indian Express on 25th May 2022.

“Caution and clarity: On the U.S.-led Indo-Pacific Economic Framework for Prosperity” published in The Hindu on 25th May 2022.