Biden Administration Plans for an Indo-Pacific Economic Framework

Biden Administration Plans for an Indo-Pacific Economic Framework

INSIGHTi

Biden Administration Plans for an Indo-
Pacific Economic Framework
Updated February 25, 2022
During the East Asia Summit in October 2021, President Biden announced plans for a U.S.-led Indo-
Pacific Economic Framework (IPEF). In November, Secretary Raimondo and USTR Tai, who are to co-
lead the initiative, held exploratory talks with Japan, Malaysia, Singapore, and South Korea during
overseas visits, but no official negotiations have been launched yet. Questions remain over an IPEF’s
scope, potential participants, and the congressional role. In February 2022, the Biden Administration
released its broader Indo-Pacific strategy, which said the IPEF would be launched “in early 2022.”
An IPEF would be the Administration’s first major trade and economic initiative in the region. Some
Members of Congress, several business associations, and U.S. allies, such as Australia and Japan, have
called for a more active U.S. trade policy in the Indo-Pacific, including U.S. leadership in regional trade
agreements. Some stakeholders have recommended a prioritization of digital trade issues in particular.
U.S. officials state that they do not envision the IPEF will take the form of a “traditional trade
agreement.” In early February, a USTR official said the initiative will include different modules covering
“fair and resilient trade, supply chain resilience, infrastructure and decarbonization, and tax and
anticorruption.” Countries will have to sign up to all of the components within a module, but will not
have to participate in all modules. The “fair and resilient trade” module will be led by USTR and include
digital, labor, and environment issues, with some binding commitments, but the IPEF will not include
market access commitments. The USTR official stated that congressional consultation will be critical but
the agreement is envisioned as “more of an Administrative arrangement.”
Seeking agreements that do not require congressional approval would limit the scope of potential IPEF
commitments given Congress’ constitutional authority to regulate U.S. foreign commerce. Trade
Promotion Authority (TPA), which establishes U.S. trade negotiating objectives and allows for expedited
congressional consideration of trade agreements under specific criteria, expired in July 2021, potentially
complicating any congressional consideration of new trade initiatives that may require changes to U.S.
law. Several U.S. business associations recently urged the Administration to conclude IPEF modules this
year, and include binding commitments, such as on market access, and provisions for future expansion of
commitments and participants. Other stakeholders identified specific commitments they support and
urged the Administration to seek formal legislative approval to ensure the IPEF is “binding and durable.”
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Relationship to Other Regional Agreements and the U.S. Indo-Pacific
Strategy
Since President Trump withdrew the United States’ signature from the proposed 12-nation Trans-Pacific
Partnership (TPP) in 2017, many observers have asserted that the United States lacks an economic and
trade strategy sufficient to counter China’s increasing economic influence in the Indo-Pacific. These
stakeholders argue that the U.S. absence from TPP’s successor agreement and other regional agreements
limits the U.S. ability to shape trade rules in the region and keep pace with technological developments.
In contrast, China and 14 other Asian countries are participating in the Regional Comprehensive
Economic Partnership (RCEP) trade agreement (effective since early 2022). China and other countries
also have formally requested to accede to the TPP’s successor arrangement, the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP), and China has requested to join the
Digital Economic Partnership Agreement (DEPA) with Chile, New Zealand, and Singapore. The EU also
continues to advance new trade agreements in the region.
Biden Administration officials have stated that the Administration is not currently interested in joining
CPTPP, saying other arrangements are better suited to address the region’s current economic challenges.
A number of observers, however, argue that without binding new trade rules, including on market access,
the IPEF is unlikely to match China’s initiatives, meaning the United States may “remain on the
sidelines,” potentially impairing the Administration’s ability to promote its vision of a “free and open
Indo-Pacific, where countries follow the rules, cooperate whenever they can, and resolve their differences
peacefully.” Thus far, the Administration’s steps toward enacting its vision have been predominantly
diplomatic and military in nature; some analysts argue that security issues are likely to remain the
Administration’s focus in the region, including potentially through the IPEF.
Options to Advance Digital Trade
The Administration’s announcement of the IPEF follows months of speculation regarding a potential U.S.
digital trade pact in the region. In August, Ambassador Tai noted that digital trade “is an area that we are
actively working with our partners to establish rules.” Many Members have expressed support for a
digital trade agreement, including during a recent hearing. By lowering barriers to digitally-enabled trade
and establishing nondiscriminatory trade rules, digital trade agreements may help U.S. companies
compete more effectively in the international marketplace, while also expanding U.S. access to
international products that rely on digital technologies. A U.S.-led regional digital agreement could help
to establish U.S. leadership on a rapidly developing trade policy issue, which may be of particular
concern given China’s more active engagement in regional trade negotiations and differing priorities.
Some observers argue that U.S. participation in existing regional digital pacts, such as DEPA, also could
advance U.S. interests; Canada and South Korea are currently in the DEPA accession process.
U.S. commitments in the U.S.-Mexico-Canada Agreement (USMCA) digital trade chapter and in the
standalone U.S.-Japan Digital Trade Agreement build on existing CPTPP provisions governing digital
trade, which the United States helped craft. They provide for nondiscrimination, consumer protection,
privacy, and cross-border data flows, and prohibit forced technology transfer, data localization
requirements, and customs duties on digital trade, among other obligations. The agreement with Japan
could be a template for an Indo-Pacific agreement on digital trade. It did not require congressional
approval in part because it was limited in nature, omitting dispute settlement procedures and raising
questions about enforceability. The USMCA model is more binding and comprehensive.
Questions for Congress
Potential questions Congress may have regarding plans for an Indo-Pacific Economic Framework include:

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 What role should Congress play in the negotiation and consideration of an IPEF and other
regional trade initiatives? What regional and other multilateral trade commitments would
best serve U.S. economic and strategic interests in the region?
 What types of enforcement mechanisms would an IPEF include and how would its
commitments and enforceability compare to CPTPP and U.S. free trade agreements?
What are the tradeoffs of these approaches and should they be pursued in tandem?
 How does the expiration of U.S. Trade Promotion Authority (TPA) affect the
Administration’s approach to scoping, negotiating, and enacting an IPEF and trade
agreements?

Author Information

Brock R. Williams, Coordinator
Mark E. Manyin
Specialist in International Trade and Finance
Specialist in Asian Affairs

Rachel F. Fefer

Analyst in International Trade and Finance

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