A dominant concern in inter-country associations is about clearly laying down the path of long and medium-term geo-strategic goals while keeping one eye firmly on domestic interests. The Indo-Pacific Economic Framework (IPEF) needs to be seen through this lens. At first glance, it might appear that it should be a no-brainer for India to join the grouping that commands more than 40 percent of the world’s gross domestic product (GDP). It is, however, more complex than it appears.
It may be worthwhile to raise two questions about international trade’s role in a country’s broader economic goals drawing from two divergent strands of thought. First, how do we estimate the gains from international trade over an anticipated future, which involves not just measurable metrics of comparative and competitive advantage, but also intangibles including climate issues? Second, how do we ensure that an incipient global trade framework will not end up accentuating inequalities between the developed and the not-so-developed worlds? The eventual decision on whether India should join all pillars of the IPEF should be predicated upon detailing the responses to these two fundamental questions.
Tackling Inflation
During the launch of the IPEF in May 2022, US President Joe Biden had identified “tackling inflation is a top economic priority, and this framework will help lower costs by making our supply chains more resilient in the long term, protecting us against costly disruptions that lead to higher prices for consumers”.
This is a simple and fair goal, over which there should be no dispute. The world economy is facing the worst twin crises in decades: slowing growth and rising inflation. This has pinched households’ pockets everywhere from across the Atlantic Ocean to the Indo-Pacific area. So, in theory, it makes eminent sense to create a system where goods, services, data and information can travel seamlessly across the high oceans, in a global supply chain that will enable the movement of goods from places of abundance to regions of scarcity and help keep the inflation genie bottled up.
Persistently high inflation has considerably shaved off people’s buying power. The long periods of slowdown, and contraction in some geographies, have not spun newer jobs and raised household incomes enough to offset the rise in prices. A rules-based global trade framework—such as the IPEF—can come as a handy tool to deal with this enormity. That said, however, inter-country economic cooperation charters and frameworks have many moving pieces, the gains or losses that can play out over decades.
This is where India should navigate with a degree of caution on joining all four pillars of IPEF. India’s economic might and the current momentum make it a fit case for joining the framework, but only when New Delhi can seat itself in a position to influence and pilot the grouping with its long-term economic and strategic interests.
India’s Concerns
The White House fact sheet on IPEF clearly delineates four pillars for the framework of the association of its member nations. These are Connected Economy, Resilient Economy, Clean Economy, and Fair Economy. Of these, the third—Clean Economy—warrants careful examination and scrutiny from India’s negotiators.
The calls for “first-of-their-kind commitments on clean energy, decarbonisation, and infrastructure that promote good-paying jobs. (and)… pursue concrete, high-ambition targets that will accelerate efforts to tackle the climate crisis, including in the areas of renewable energy, carbon removal, energy efficiency standards, and new measures to combat methane emissions”.
In September 2022, Union Commerce and Industry Minister Piyush Goyal made India’s position clear during the ministerial meeting of IPEF, when he said that the contours of the framework — particularly on commitments required on environment, labour, digital trade and public procurement — are still emerging.
India will have to watchfully weigh the benefits that will accrue to the member countries and whether any conditionalities on aspects like environment may discriminate against developing countries who have the imperative to provide low-cost and affordable energy to meet the needs of growing economies, a point that Goyal underlined unambiguously. India faces the challenge of balancing its economic growth ambitions while still being on the correct side of the climate change fence.
There’s also the question of sharing information and what bearing it could have on India’s data and privacy laws that are currently being drafted.
In the final analysis, it is the responsibilities of the member nations that will define the success or otherwise of IPEF in achieving its goals. The balance should not be heavily tilted against the developing world through conditions that can derail growth in these economies. India should trade cautiously on the fourth pillar until the minutiae are hammered out to New Delhi’s interest to the last detail.
Gaurav Choudhury is consulting editor, Network18. Views are personal, and do not represent the stand of this publication.
