Indo-Pacific Economic Framework for Prosperity participants next month should outline how developing country members will be able to meet the anticipated high standards of the arrangement, which could pave the way for expanded membership, according to US-ASEAN Business Council President and CEO Ted Osius.
After a months-long scoping exercise, the U.S. next month is expected to host a ministerial in Los Angeles to mark the formal launch of IPEF negotiations. Participants likely will issue ministerial statements outlining which issues each of the four IPEF pillars will cover, as well as which of the 14 parties will take part in which pillars. A country can take part in any or all of the pillars but must take on all the commitments of each one it joins. The four pillars cover trade, supply chain resiliency, decarbonization and clean infrastructure, and tax and anticorruption.
ASEAN countries make up half of IPEF’s prospective membership, with Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam set to take part. In an interview with Inside U.S. Trade, Osius said he hopes the scoping statements expected to be issued next month will lay out pathways for how participants in each pillar can meet the envisioned high standards, pathways that eventually could lead other less-developed countries to join.
Osius believes the seven participating ASEAN nations could subscribe to each of IPEF’s four pillars if those pathways are clearly defined.
“I think there’s potential for the ASEAN nations to join all four pillars,” he said. “I hope that will be the case because I think there are opportunities for greater tradeoffs, a greater set of appealing incentives if they’re part of all four pillars. But that only happens if there are clear pathways defined for each of the pillars, including in what ways member economies can be supported if they’re going to participate in a particular pillar. Some ASEAN nations are less developed than others and they’re going to need either more time or a pathway to be able to reach the high standards that I hope will be features of IPEF.”
Others also have called for transition periods for some members. At a virtual IPEF ministerial in July, Malaysian Trade Minister Mohamed Azmin Ali said he “highlighted the imperative of the inclusion of transition periods and other reasonable flexibilities” that would “pave commencement of the negotiations, thereby translating the Framework into [an] actionable plan.”
Osius said that “In the future, I hope that there will be pathways even for the least-developed economies of ASEAN. I’m thinking specifically of Cambodia and Laos. If there are ultimately pathways for them to join, that would be better for the economic architecture of the region.”
The seven ASEAN nations that were asked to join IPEF were selected because they will be able to meet the high standards the U.S. will be aiming for in the framework, Osius said. “The aspiration from the beginning was a very high-standard economic framework and a high-standard set of rules for each of the four pillars,” he said. “The seven that were approached, I think the understanding was that they could meet those high standards.”
But some suspect the U.S. had ulterior motives in its exclusion of Cambodia and Laos.
Center for Strategic and International Studies adjunct fellow Charles Dunst claims both countries were omitted from IPEF because of “a sense that both Cambodia and Laos are already Chinese client states, and therefore simply were not worth an IPEF invite,” he said in an Aug. 1 blog post.
Cambodia’s relationship with China is clearly a concern for U.S. officials. Secretary of State Antony Blinken brought it up with Cambodia Prime Minister Hun Sen when the two met earlier this month. “The Secretary asked the Prime Minister to be fully transparent about activities by the People’s Republic of China at Ream Naval Base, emphasizing that an exclusive presence would risk damaging Cambodia’s sovereignty, regional security, and ASEAN unity,” according to an Aug. 4 State Department readout of the meeting.
During his trip, Blinken told reporters he expects other countries to join IPEF.
When asked how IPEF could impact ASEAN countries’ relationship with China, Osius emphasized that members want to have options, which IPEF provides. “It’s important for them strategically and economically to have options and not be dominated by any one country or economy,” he said. “By initiating IPEF, the United States has presented the ASEAN countries with options and they welcome that.”
But while Osius hopes that IPEF’s membership could broaden, he doesn’t expect it in the near term because the parties are aiming to quickly agree on outcomes -- and reconciling the views of 14 members already promises to be a difficult task.
“What I hope for is that the door remains open and that there are pathways for Cambodia and Laos to be able to join IPEF. The reality is that it’s going to be hard to get all 14 nations in the same place,” he said. “They want to see some early fruits of their labors and with 14 members that’s going to be a challenge.”
A major selling point of IPEF for developing countries is access to U.S. private-sector financing that could help them obtain new technologies, including those that can aid in transitioning to clean economies, Osius said.
“That’s a pretty big set of incentives right there and it was clearly enough to get them to sign up, for the discussions at least,” he said. According to Osius, access to private-sector investment is especially important in the context of the clean infrastructure and supply chain pillars.
Osius recalled a roundtable the business council hosted in May, on the sidelines of a U.S.-ASEAN special summit, that included U.S. Trade Representative Katherine Tai, Commerce Secretary Gina Raimondo and Special Presidential Envoy for Climate John Kerry. In discussing the energy transition process, Kerry said countries will need financing for new technologies, which will come from the private sector.
“When you think about the energy transition, being part of IPEF helps these countries attract the private investment and bring in the technology to be able to have the kind of clean energy projects that these countries seek,” Osius said. “When it comes to supply chains, I think the IPEF’s supply chain pillar will allow these countries to be trusted suppliers for the United States and for other IPEF members.”
Participation in IPEF is a signal to U.S. companies, he said. “For the ASEAN nations that have joined, what they see, in addition to being able to help write the rules of the road for trade, is they’re signaling to American companies, investors that they value increased economic engagement with the United States,” Osius continued. “And that’s a really good signal for the private sector.”
IPEF could better define transparency, friend-shoring and trusted partnerships -- topics often cited by U.S. officials as potential benefits of the framework. “There are many examples where when governments engage and say, ‘Here are the rules, here is what we want to accomplish,’ [and] it makes it easier for the private sector to then go do what it needs to do to shore up supply chains,” Osius said. “Clarity about the rules and expectations will help that process, will facilitate that process.” -- Brett Fortnam (bfortnam@iwpnews.com)
