April 4, 2023
Indo-Pacific Economic Framework for Prosperity (IPEF)
In May 2022, the United States and 13 partners launched
to IPEF partners, collectively, included oil and gas,
the Indo-Pacific Economic Framework for Prosperity
aerospace products, semiconductors, and grain. U.S.
(IPEF), the Biden Administration’s first major trade and
imports vary widely by IPEF partner, with leading imports
economic initiative in the region. Participating countries are
including semiconductors, motor vehicles, and
Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia,
communications equipment. In 2021, IPEF partners
New Zealand, the Philippines, Singapore, South Korea,
accounted for 11% of U.S. direct investment (stock basis)
Thailand, and Vietnam. The IPEF partners noted that the
and 18% of foreign direct investment in the United States.
negotiations are open to other Indo-Pacific countries that
Figure 1. U.S. Trade with IPEF Partners, 2022
“share our goals, interests, and ambitions for the region.”
Since then, Canada announced it would also seek to join, a
bid the Administration has supported. IPEF will not take the
form of a traditional comprehensive U.S. free trade
agreement (FTA). It is to involve commitments in four
separate “pillars” covering selected trade issues; supply
chains; clean energy, decarbonization, and infrastructure;
and tax and anti-corruption. The U.S. Trade Representative
(USTR) is leading the trade pillar talks, and the Commerce
Secretary is leading the remaining pillars. Most partners
opted to participate in all IPEF pillars, although India opted
out of the trade pillar. IPEF partners released objectives for
each pillar in late 2022 and held the first negotiating round
in December. IPEF’s latest round was in March 2023, with
the next scheduled for May. U.S. officials have said they
aim to reach major IPEF outcomes by the end of 2023.

Source: CRS. Data from U.S. Bureau of Economic Analysis.
Some Members of Congress and stakeholders support IPEF
Context and Rationale for IPEF
as an opportunity for the United States to reassert a leading
IPEF appears to be the Administration’s response to urging
role in establishing updated trade and economic rules with
from some policymakers, stakeholders, and allies to
key regional partners, and to support broader strategic aims
advance a more robust U.S. trade and economic agenda in
in the region. Others question IPEF’s potential to deepen
the region. Some observers argue that U.S. withdrawal from
economic linkages and note a lack of commitments on
the proposed Trans-Pacific Partnership (TPP) in 2017 and
market access, notably on tariffs, a central component of
absence from TPP’s successor, the Comprehensive and
past U.S. FTAs. At the same time, stakeholders also support
Progressive Agreement for Trans-Pacific Partnership
IPEF’s agenda in addressing issues not typically covered in
(CPTPP), has limited the U.S. ability to shape regional rules
FTAs, like supply chain resiliency. The Administration has
and counter China’s economic influence. Others supported
not committed to submit executive agreements that may
U.S. TPP withdrawal and are wary of IPEF as a potential
result from IPEF to congressional approval. Given
Congress’
stepping-stone to rejoining. In the view of some observers,
s constitutional authority to regulate foreign
without new binding trade rules, the United States may
commerce, the IPEF negotiating approach has raised
remain “on the sidelines,” impairing its ability to promote
concerns for some Members over Congress’s role in the
its commercial and strategic interests. Some analysts argue
negotiations.
that thus far, U.S. steps toward enacting its overall Indo-
U.S.-IPEF Partner Trade Ties
Pacific vision have been mostly diplomatic and military in
The initial IPEF partners are diverse in size and economic
nature. Meanwhile, China has requested to join CPTPP and
development, ranging from small, developed countries like
a digital trade agreement with New Zealand, Singapore, and
Brunei to large emerging markets like India. Collectively
others. In 2020, China and 14 Asian countries formed the
they represent 40% of global GDP. The United States has
Regional Comprehensive Economic Partnership (RCEP).
expansive economic ties with several IPEF countries. In
IPEF partners have generally welcomed U.S. reengagement
2022, Japan, South Korea, and India were among the top 10
in economic negotiations and are optimistic regarding
U.S. trading partners (goods and services), while U.S.-
IPEF’s potential benefits, including through new rules on
Vietnam trade has grown by more than 400% over the past
digital trade, trade facilitation, and supporting investments
decade. The United States has existing bilateral FTAs with
and public-private partnerships in key sectors. They have
Australia, Singapore, and South Korea. In 2022, IPEF
also voiced varying concerns over IPEF’s scope and design,
partners accounted for 21% of U.S. total goods trade and
particularly the absence of market access discussions.
17% of U.S. total services trade. In 2022, top U.S. exports
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Indo-Pacific Economic Framework for Prosperity (IPEF)
IPEF provides an opportunity to address concerns about
playing field ... by preventing and combatting corruption,
U.S. economic engagement, while advancing other U.S.
curbing tax evasion, and enhancing transparency.”
priorities. Administration officials have indicated they
Issues for Congress
envision potential IPEF deals as attracting a broader base of
Members may seek to influence IPEF talks via hearings,
U.S. domestic support compared with TPP efforts. USTR
letters to the Administration, and legislation on IPEF core
Katherine Tai has distinguished IPEF from traditional U.S.
issues or negotiating procedures. Key issues may include:
FTAs, framing it as a new model “to address the real
challenges we face today.” Tai has described FTAs as a
Congress’s Role in Limited Trade Deals? Pursuit of IPEF
“20th century tool” marked by “aggressive liberalization and
as executive agreements raises questions for Congress,
tariff elimination,” benefiting some sectors but harming
which historically has played a role in authorizing and
others. Economic studies have generally found that FTAs
implementing FTAs through legislation. Congress has
and trade liberalization support economic growth, and the
typically set procedures and requirements for trade deals in
economy-wide gains generally exceed adjustment costs for
Trade Promotion Authority (TPA). TPA expired in 2021,
certain sectors and regions. Some observers argue that
and the Administration has not sought reauthorization. In
omitting traditional FTA provisions may limit IPEF’s
December 2022 letters to President Biden, some Members
economic significance, remove incentives for countries to
of Senate Finance and House Ways and Means Committees
agree to provisions sought by the United States (e.g., strong
asserted congressional authority over approving trade deals
labor and environmental commitments), and disadvantage
like IPEF even if they do not cut tariffs or require changes
U.S. firms in Indo-Pacific markets. In response to concerns
to U.S. law. Members urged robust consultation, greater
over lack of tariff coverage, U.S. officials have countered
transparency, and collaboration with Congress over how
that various aspects of IPEF center on facilitating trade and
IPEF should be approved/implemented. Some Members
market access (e.g., addressing nontariff barriers, digital
also have questioned the potential lack of durability of IPEF
trade, and small and medium-sized enterprises activities).
deals across future Administrations as compared with trade
IPEF Agenda and Structure
deals approved by Congress. Members might consider
formalizing an approval or implementation process for
IPEF aims to establish “high-standard commitments” that
IPEF, or debate future TPA reauthorization.
deepen partners’ economic engagement through four
New Model for Trade Engagement? USTR has framed
pillars: (1) Connected Economy, covering “fair and resilient
trade”; (2) Resilient Economy,
the IPEF approach (e.g., targeting specific sectors and rules,
covering supply chains; (3)
omitting tariff cuts, not committing to a single undertaking)
Clean Economy, covering clean energy, decarbonization,
as a potential new model for U.S. trade engagement,
and infrastructure; (4) Fair Economy, covering tax and anti-
reflected in concurrent U.S. trade initiatives with Taiwan
corruption. Unlike typical FTA talks, IPEF is not to involve
a “single undertaking
and countries in the Americas. This approach presents
,” and partners may conclude multiple
various issues for Congress, such as IPEF’s scope and
agreements separately rather than waiting to finalize all
comparison to past U.S. FTAs; the need for and impact of
elements of a comprehensive deal. Some observers view
tariff and market access provisions; and the merits of
this approach as offering potential for “early harvest”
cooperative versus binding commitments. A related
outcomes; others are concerned it may limit incentives for
question is whether IPEF may build on or depart from
tradeoffs and compromise. It remains unclear what IPEF
USMCA precedents in areas like digital trade and labor.
commitments will be binding and subject to enforcement.
Some Members have urged using USMCA as a model and
IPEF rules also are to include flexibilities to account for
partners’
foundation for new deals with other allies and partners.
varying levels of economic development.
Complement or Counterpoint to Other Trade Deals?
The trade pillar, led by USTR, seeks to craft “high
IPEF has advanced as other FTAs covering major trading
standard, inclusive, free, fair, and open trade commitments
partners in the Asia-Pacific (e.g., China) have entered into
that build upon the rules-based multilateral trading system.”
force without U.S participation. These deals lower tariffs
Areas include labor, environment, digital economy,
and trade barriers among participants and may consolidate
agriculture, competition policy, transparency and regulatory
some regional supply chains through common rules, while
practices, trade facilitation, inclusivity, and technical
U.S. exporters are excluded from these benefits. These
assistance and economic cooperation. Several of these are
FTAs may also conflict with U.S. standards or FTA rules,
typical chapters of recent U.S. FTAs like the U.S.-Mexico-
potentially diminishing U.S. competitiveness and economic
Canada Agreement (USMCA). Some Members of Congress
influence. Further, the relative significance of deals like
and stakeholders view the digital economy in particular as a
CPTPP would expand with new members like the UK and
promising area, given groundwork laid in past and ongoing
China, which have applied to join. Some experts see IPEF
talks (e.g., the 2020 U.S.-Japan Digital Trade Agreement).
outcomes as important to reasserting U.S. influence and
The three Commerce-led pillars entail objectives to enhance
ensuring U.S. priorities inform regional rules. Others view
regional cooperation. In the supply chain pillar, countries
IPEF as a constructive step to advance U.S. economic
“seek to coordinate actions to mitigate and prevent future
interests but not a substitute to a more comprehensive trade
supply chain disruptions and secure critical sectors and key
deal. Congress may debate whether IPEF is an effective
products for our manufacturers.” Objectives include setting
counterpoint to other deals and/or whether the United States
criteria for critical sectors and an information-sharing and
should seek to join or negotiate agreements like CPTPP.
crisis response mechanism. In the clean economy pillar,
Cathleen D. Cimino-Isaacs, Specialist in International
IPEF partners seek cooperation on innovation and
investment related to clean energy and climate-friendly
Trade and Finance
technologies. The fair economy pillar aims to “level the
https://crsreports.congress.gov

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Indo-Pacific Economic Framework for Prosperity (IPEF)

Mark E. Manyin, Specialist in Asian Affairs
Kyla H. Kitamura, Analyst in International Trade and
IF12373
Finance


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https://crsreports.congress.gov | IF12373 · VERSION 1 · NEW

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