Updated August 10, 2023
Indo-Pacific Economic Framework for Prosperity (IPEF)
In May 2022, the United States and 13 partners launched
Top U.S. exports to IPEF partners, collectively, included oil
the Indo-Pacific Economic Framework for Prosperity
and gas, aerospace products, semiconductors, and grain.
(IPEF), the Biden Administration’s first major trade and
U.S. imports vary widely by partner; lead imports include
economic initiative in the region. Participating countries are
semiconductors, autos, and communications equipment. In
Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia,
2021, IPEF accounted for 11% of U.S. direct investment
New Zealand, the Philippines, Singapore, South Korea,
(stock) and 18% of foreign direct investment in the U.S.
Thailand, and Vietnam. The IPEF partners noted that the
Figure 1. U.S. Trade with IPEF Partners, 2022
negotiations are open to other Indo-Pacific countries that
“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 partners held their most recent round of
negotiations in July 2023 and ministerial meeting on May

27, where IPEF partners announced the “substantial
Source: CRS. Data from U.S. Bureau of Economic Analysis.
conclusion” of a supply chain agreement. U.S. officials
Context and Rationale for IPEF
have said they aim to reach major IPEF outcomes in 2023.
IPEF appears to be the Administration’s response to urging
Some Members of Congress and stakeholders support IPEF
from some policymakers, stakeholders, and allies to
as an opportunity for the United States to reassert a leading
advance a more robust U.S. trade and economic agenda in
role in establishing updated trade and economic rules with
the region. Some observers argue that U.S. withdrawal from
key regional partners, and to support broader strategic aims
the proposed Trans-Pacific Partnership (TPP) in 2017 and
in the region. Others question IPEF’s potential to deepen
absence from TPP’s successor, the Comprehensive and
economic linkages and note a lack of commitments on
Progressive Agreement for Trans-Pacific Partnership
market access, notably on tariffs, a central component of
(CPTPP), has limited the U.S. ability to shape regional rules
past U.S. FTAs. At the same time, stakeholders also support
and counter China’s economic influence. Others supported
IPEF’s agenda in addressing issues not typically covered in
U.S. TPP withdrawal and are wary of IPEF as a potential
FTAs, like supply chain resiliency. The Administration has
stepping-stone to rejoining. In the view of some observers,
not committed to submit executive agreements that may
without new binding trade rules, the United States may
result from IPEF to congressional approval. Given
remain “on the sidelines,” impairing its ability to promote
Congress’s constitutional authority to regulate foreign
its commercial and strategic interests. Some analysts argue
commerce, the negotiating approach has raised concerns for
that thus far, U.S. steps toward enacting its overall Indo-
some Members over Congress’s role in the negotiations.
Pacific vision have been mostly diplomatic and military in
U.S.-IPEF Partner Trade Ties
nature. Meanwhile, China has requested to join CPTPP and
a digital trade agreement with Chile, New Zealand, and
The initial IPEF partners are diverse in size and economic
Singapore. In 2020, China and 14 Asian countries formed
development, ranging from small, developed countries like
the Regional Comprehensive Economic Partnership
Brunei to large emerging markets like India. Collectively
(RCEP). IPEF partners have generally welcomed U.S.
they represent 40% of global GDP. The United States has
reengagement in economic negotiations and are optimistic
expansive economic ties with several IPEF countries. In
regarding IPEF’s potential benefits, including through new
2022, Japan, South Korea, and India were in the top 10 U.S.
rules on digital trade, trade facilitation, and supporting
trading partners (goods and services), while U.S.-Vietnam
investments and public-private partnerships in key sectors.
trade has grown by more than 400% in the past decade. The
They have also voiced varying concerns over IPEF’s scope
United States has bilateral FTAs with Australia, Singapore,
and design, particularly the absence of market access talks.
and South Korea. In 2022, IPEF partners accounted for
21% of U.S. goods trade and 17% of U.S. services trade.
https://crsreports.congress.gov

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Indo-Pacific Economic Framework for Prosperity (IPEF)
IPEF provides an opportunity to address concerns about
and climate-friendly technologies. The fair economy pillar
U.S. economic engagement, while advancing other U.S.
aims to “level the playing field” by combatting corruption,
priorities. Administration officials have indicated they
curbing tax evasion, and enhancing transparency.
envision potential IPEF deals as attracting a broader base of
Issues for Congress
U.S. domestic support compared with TPP efforts. USTR
Members may seek to influence IPEF talks via hearings,
Katherine Tai has distinguished IPEF from traditional U.S.
letters to the Administration, and legislation on IPEF core
FTAs, framing it as a new model “to address the real
challenges we face today.”
issues or negotiating procedures. Key issues may include
Tai has described FTAs as a
“20th century tool” marked by “aggressive liberalization and
Congress’s Role in Limited Trade Deals? Pursuit of IPEF
tariff elimination,” benefiting some sectors but harming
as executive agreements raises questions for Congress,
others. Economic studies have generally found that FTAs
which historically has played a role in authorizing and
and trade liberalization support economic growth, and the
implementing FTAs through legislation. Congress typically
economy-wide gains generally exceed adjustment costs for
sets procedures and requirements for trade deals in Trade
certain sectors and regions. Some observers argue that
Promotion Authority (TPA). TPA expired in 2021, and the
omitting traditional FTA provisions may limit IPEF’s
Administration has not sought reauthorization. In December
economic significance, remove incentives for countries to
2022 letters to President Biden, some Members of Senate
agree to provisions sought by the United States (e.g., strong
Finance and House Ways and Means asserted congressional
labor and environmental commitments), and disadvantage
authority over approving trade deals like IPEF even if they
U.S. firms in Indo-Pacific markets. In response to concerns
do not cut tariffs or require changes to U.S. law. Members
over lack of tariff coverage, U.S. officials have countered
urged robust consultation, transparency, and collaboration
that various aspects of IPEF center on facilitating trade and
with Congress over how IPEF should be approved/
market access (e.g., addressing nontariff barriers, digital
implemented. Some also question the lack of durability of
trade, and small and medium-sized enterprises activities).
IPEF deals across future Administrations compared with
IPEF Agenda and Structure
deals approved by Congress. Members might debate TPA
reauthorization or consider formalizing an approval process
IPEF aims to establish “high-standard commitments” that
for IPEF, such as in P.L. 118-13 which approves a
deepen partners’ economic engagement through four
concurrent U.S.-Taiwan trade initiative, set conditions for
pillars: (1) Connected Economy, covering “fair and resilient
entry into force, and outline requirements for further deals.
trade”; (2) Resilient Economy, covering supply chains; (3)
New Model for Trade Engagement? USTR has framed
Clean Economy, covering clean energy, decarbonization,
the IPEF approach (e.g., targeting specific sectors and rules,
and infrastructure; (4) Fair Economy, covering tax and anti-
omitting tariff cuts, not committing to a single undertaking)
corruption. Unlike typical FTA talks, IPEF is not to involve
a “single undertaking
as a potential new model for U.S. trade engagement,
,” and partners may conclude multiple
reflected in U.S. trade initiatives with Taiwan and countries
agreements separately rather than waiting to finalize all
in the Americas. This approach presents various issues for
elements of a comprehensive deal. Some observers view
Congress, such as IPEF’s scope and comparison to past
this approach as offering potential for “early harvest”
U.S. FTAs; the need for and impact of tariff/market access
outcomes; others are concerned it may limit incentives for
provisions; and the merits of cooperative versus binding
tradeoffs and compromise. It remains unclear what IPEF
commitments. A related question is whether IPEF may
commitments will be binding and subject to enforcement.
build on or depart from USMCA precedents in areas like
IPEF rules also are to include flexibilities to account for
digital trade and labor. Some Members have urged using
partners’ varying levels of economic development.
USMCA as a model and foundation for new trade deals.
The trade pillar, led by USTR, seeks to craft “high
Complement or Counterpoint to Other Trade Deals?
standard, inclusive, free, fair, and open trade commitments
IPEF has advanced as other FTAs covering major trading
that build upon the rules-based multilateral trading system.”
partners in the Indo-Pacific (e.g., China) have entered into
Areas include labor, environment, digital economy,
force without U.S. participation. These deals lower tariffs
agriculture, competition policy, transparency and regulatory
and trade barriers among participants and may consolidate
practices, trade facilitation, inclusivity, and technical
some regional supply chains through common rules, while
assistance and economic cooperation. Several of these are
U.S. exporters are excluded from these benefits. These
typical chapters of recent U.S. FTAs like the U.S.-Mexico-
FTAs may also conflict with U.S. standards or FTA rules,
Canada Agreement (USMCA). Some Members of Congress
potentially diminishing U.S. competitiveness and economic
and stakeholders view the digital economy in particular as a
influence. Further, the relative significance of deals like
promising area, given groundwork laid in past and ongoing
CPTPP would expand with new members like the UK and
talks (e.g., the 2020 U.S.-Japan Digital Trade Agreement).
China, which has applied to join. Some experts see IPEF
The three Commerce-led pillars entail objectives to enhance
outcomes as important to reasserting U.S. influence and
regional cooperation. The supply chain pillar resulted in
ensuring U.S. priorities inform regional rules. Others view
the first IPEF agreement. The final text is not yet public,
IPEF as a constructive step to advance U.S. economic
but broadly the proposed deal aims to improve partners’
interests but not a substitute to a more comprehensive trade
coordination in response to supply chain disruptions and
deal. Congress may debate whether IPEF is an effective
collaboration over building resilience and competitiveness
counterpoint to other deals and/or whether the United States
in critical sectors. It would establish a labor rights advisory
should seek to join or negotiate agreements like CPTPP.
board to support promotion of labor rights in supply chains.
Cathleen D. Cimino-Isaacs, Specialist in International
In the clean economy pillar, IPEF partners seek
cooperation on innovation and investment in clean energy
Trade and Finance
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 7 · UPDATED

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