Updated December 14, 2023
Indo-Pacific Economic Framework for Prosperity (IPEF)
In May 2022, the United States and 13 partners launched
China has also requested to join CPTPP. IPEF partners have
the Indo-Pacific Economic Framework for Prosperity
welcomed U.S. reengagement in the region and see IPEF’s
(IPEF), the Biden Administration’s first major trade and
potential benefits to include provisions on trade facilitation,
economic initiative in the region. Partner countries include
digital trade, and support for investments and public-private
Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia,
partnerships in key sectors. At the same time, some are also
New Zealand, the Philippines, Singapore, South Korea,
concerned over the lack of market access/tariff provisions.
Thailand, and Vietnam. The initiative is not designed as a
USTR Katherine Tai has distinguished IPEF from
traditional comprehensive U.S. free trade agreement (FTA).
traditional FTAs, framing IPEF as a new model that is
IPEF aims to establish “high-standard commitments” in
better designed to address “21st century” issues and to
four pillars: (1) Connected Economy (select trade issues);
advance “worker-centered” policies and global economic
(2) Resilient Economy (supply chains); (3) Clean Economy
resilience. Tai views past U.S. FTAs, centered on market
(clean energy, decarbonization, infrastructure); and (4) Fair
access and tariffs, as “20th century tools” that benefited
Economy (tax, anti-corruption issues). The U.S. Trade
some sectors while harming others and contributed to
Representative (USTR) is leading the trade pillar talks, and
vulnerable supply chains. Economic studies have generally
the Commerce Secretary is leading the remaining pillars.
found that trade liberalization supports economic growth,
All partners opted to participate in all four IPEF pillars,
and the economy-wide gains generally exceed the
except for India, which opted out of the trade pillar. As of
adjustment costs for certain sectors and regions. Some
November 2023, IPEF partners have announced agreements
observers argue that omitting traditional FTA provisions
in all pillars except for the trade pillar.
may limit IPEF’s economic significance, remove incentives
Some Members of Congress and stakeholders support IPEF
for countries to agree to provisions (e.g., labor standards)
as an opportunity for the United States to reassert a leading
sought by the United States, and disadvantage U.S. firms
role in establishing updated trade and economic rules with
abroad. U.S. officials counter that various aspects of IPEF
key partners, and to support broader strategic aims in the
center on facilitating trade and market access, such as
region. Others question IPEF’s durability and potential to
addressing nontariff barriers.
deepen economic linkages given the lack of commitments
on market access, notably on tariffs, a central component of
U.S.-IPEF Partner Trade Ties
past U.S. FTAs. At the same time, some stakeholders
IPEF partners, which collectively represent 40% of global
support IPEF’s targeted agenda and approach as innovative
GDP, are diverse in size and economic development. In
and relevant in addressing issues not typically covered in
2022, Japan, South Korea, and India were in the top 10 U.S.
FTAs, like supply chain resiliency. The Administration has
trading partners (goods and services), while U.S.-Vietnam
not committed to submit executive agreements resulting
trade has grown by more than 400% in the past decade. In
from IPEF for congressional approval. Given Congress’s
2022, IPEF partners accounted for 21% of U.S. goods trade
constitutional authority to regulate foreign commerce, the
and 17% of U.S. services trade. In 2021, IPEF partners
negotiating approach has raised concerns for Members in
accounted for 11% of U.S. direct investment abroad (stock)
both the House and Senate over Congress’s role in IPEF.
and 18% of foreign direct investment in the United States.
Context and Rationale for IPEF
Figure 1. U.S. Trade with IPEF Partners, 2022
IPEF appears to be the Administration’s response to urging
from policymakers and stakeholders for a more robust U.S.
economic and trade strategy in the Indo-Pacific region,
which many perceive as lagging behind its military
engagement. This view solidified after the U.S. withdrawal
from the Trans-Pacific Partnership (TPP) in 2017 and non-
membership in TPP’s successor, the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership
(CPTPP). Many have argued that such decisions have
limited the U.S. ability to shape regional rules and counter
China’s economic influence. Others supported U.S. TPP
withdrawal and are wary of the IPEF trade pillar as a
potential stepping-stone to rejoining. Although U.S.-Indo-
Pacific trade has steadily increased in the past decade,
countries have become even more reliant on trade with
China. In 2020, 14 Asian countries and China formed the

Regional Comprehensive Economic Partnership (RCEP);
Source: CRS, data from U.S. Bureau of Economic Analysis.
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Indo-Pacific Economic Framework for Prosperity (IPEF)
IPEF Structure and Outcomes
Issues for Congress
Unlike typical FTA talks, IPEF does not involve a “single
Members may seek to influence or enhance oversight over
undertaking,” i.e., partners may conclude agreements
IPEF via hearings, letters, and legislation on IPEF core
separately rather than waiting to finalize all elements of a
issues or negotiating procedures. Key issues may include:
comprehensive deal. IPEF commitments will not be subject
Congress’s Role? Pursuit of IPEF as executive agreements
to dispute settlement procedures akin to those in FTAs, but
raises questions for Congress’s role in trade policy.
involve select enforcement mechanisms, such as for labor.
Congress has typically set procedures and requirements for
Major outcomes of the latest IPEF ministerial include:
•
trade agreements in Trade Promotion Authority (TPA) and
IPEF Supply Chain Agreement—officially signed.
authorized and implemented FTAs through legislation. TPA
Lauded by partners as “the first of its kind,” the deal is
expired in 2021; the Biden Administration has not sought
to establish three new bodies to enhance collaboration
reauthorization. Some Members have asserted Congress’s
on building resilience in critical sectors; coordinate
authority over trade deals like IPEF even if the deals do not
responses to crises and supply chain disruptions; and
cut tariffs or require changes to U.S. law. These Members
promote labor rights in supply chains. The deal includes
urge robust consultation and transparency with Congress on
a mechanism for addressing allegations of “labor rights
how IPEF should be approved and implemented. Others
inconsistencies” at individual facilities in another IPEF
also question if future U.S. administrations will abide by
country. New initiatives announced separately (e.g.,
IPEF deals compared with deals approved by Congress.
IPEF Critical Minerals Dialogue) may supplement work
U.S. IPEF negotiators said their agencies have focused on
under the agreement. Observers have supported efforts
“relevant executive branch authorities,” including authority
to expand such regional cooperation, while raising
delegated by Congress to USTR “to defend and promote
questions over prospects for private sector involvement
U.S. interests through the negotiation of trade agreements.”
and how provisions will be effectively implemented.
•
Members might consider asserting Congress’s role in IPEF,
IPEF Clean Economy Agreement—“substantially
such as in P.L. 118-13, which set conditions for retroactive
concluded.” The deal seeks to support countries’ green
approval of the first agreement under the U.S.-Taiwan trade
energy transitions through enhanced cooperation on
initiative and requirements for future deals.
innovation and investments in clean energy and climate-
friendly technologies. Partners are to establish a new
New Model for Trade Engagement? USTR’s framing of
capital fund, administered by a private sector entity, to
IPEF as a potential new model for U.S. trade engagement—
pool resources and an annual investor forum to mobilize
also reflected in concurrent U.S. trade initiatives with
financing for “bankable climate projects.”
Taiwan and Latin American countries—presents issues for
• IPEF Fair Economy Agreement—“substantially
Congress, such as IPEF’s scope and comparison to past
concluded.” It aims to “level the playing field” through
U.S. FTAs; the need for and impact of tariff/market access
enhanced fairness, inclusiveness, transparency, rule of
provisions; and merits of cooperative versus binding
law, and accountability in the partners’ economies.
commitments. A related question is how IPEF builds on or
Efforts involve combatting corruption and tax evasion,
departs from USMCA precedents in areas like digital trade
and enhancing transparency and information exchange.
and labor. Some Members urge using USMCA as a model
The deal includes dedicated capacity-building measures.
for new U.S. trade deals, while others support new
• Agreement on the IPEF—“substantially concluded.”
approaches. The U.S. rethink of negotiating positions and
This overarching agreement creates an IPEF Council
uncertain prospects for an IPEF trade outcome could affect
and Joint Commission to meet annually and facilitate
whether IPEF serves as a template.
the collective operation of IPEF agreements, including
Complement or Counterpoint to Other Trade Deals?
the possibility of new members and/or agreements.
IPEF has advanced as other FTAs covering major Indo-
Countries were unable to reach an agreement in the trade
Pacific trading partners have entered into force without U.S.
pillar, which covers labor, environment, digital economy,
participation. These deals lower tariffs and trade barriers
agriculture, competition policy, regulatory practices, trade
and may consolidate regional supply chains through
facilitation, inclusivity, and economic cooperation/technical
common rules, excluding U.S. exporters from these
assistance. Several of these issues are typical chapters of
benefits. These FTAs may also conflict with U.S. standards
recent FTAs like the 2020 U.S.-Mexico-Canada Agreement
or FTA rules, potentially diminishing U.S. competitiveness.
(USMCA). Talks stalled amid differences over the digital
The relative significance of deals like CPTPP would grow
economy and labor provisions among IPEF partners as well
as their membership expands. Some experts see IPEF as
as among U.S. policymakers and stakeholders. Some
important to reasserting U.S. influence and ensuring U.S.
stakeholders have viewed digital trade in particular as a
priorities inform regional rules. Others view IPEF as a
promising area, given the groundwork laid in past and
constructive step but not a substitute to a comprehensive
ongoing negotiations. In November 2023, USTR reversed
trade deal. Congress may debate whether IPEF is an
longstanding support for certain digital trade rules and
effective alternative to other deals and/or whether the
paused IPEF digital trade talks, citing the need for “policy
United States should negotiate trade deals like CPTPP.
space” and internal consultations on sensitive areas like
data flows. The move prompted reactions of both support
Cathleen D. Cimino-Isaacs, Specialist in International
and frustration from Members. IPEF partners have stated
Trade and Finance
that they have already reached consensus on several areas
Kyla H. Kitamura, Analyst in International Trade and
under the trade pillar and will continue work on outstanding
Finance
issues. Some analysts remain skeptical of progress in 2024
Mark E. Manyin, Specialist in Asian Affairs
due to the political climate ahead of U.S. elections.
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Indo-Pacific Economic Framework for Prosperity (IPEF)

IF12373


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https://crsreports.congress.gov | IF12373 · VERSION 8 · UPDATED

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