IPEF Releases Ministerial Statements Concerning the Pillars; India Skips Trade Pillar

We list the outcomes of the first in-person IPEF Ministerial conference, held on September 8-9, 2022. At the conference, 14 partner countries collectively developed consensus on subscribing to the respective pillars of cooperation. Out of the four pillars – trade, supply chain, clean economy, and fair economy – India has joined three pillars and opted out of the trade pillar. India has cited lack of clarity in focus areas like labor, environment, digital trade, and public procurement.

The Indo-Pacific Economic Framework (IPEF) recently concluded its first in-person Ministerial conference held on September 8-9, 2022 in Los Angeles, California. India’s Commerce Minister Piyush Goyal attended the conference and also conducted various bilateral dialogues with member countries, including the US.

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The Ministerial conference was deemed successful by the 14 member countries, including the US, India, Japan, South Korea, Philippines, Australia, New Zealand, Fiji, Indonesia, Brunei Darussalam, Malaysia, Singapore, Thailand, and Vietnam.

The partner countries were able to reach a consensus on ministerial statements for each of the four IPEF pillars namely:

• Trade
• Supply chain
• Clean economy
• Fair economy

Which partner countries have joined the respective pillars?

Highlights of IPEF Ministerial statements on different pillars

Pillar I – Trade

With the exception of India, all other 13 partner countries have agreed to join the trade pillar, aimed at seeking high-standard, inclusive, free, fair, and open trade commitments that build upon the rules-based multilateral trading system. The 13 countries have collectively agreed to develop such approaches to trade and technology that can fuel economic activities and generate investments; promote resilient, sustainable, and inclusive economic growth and development; and benefit workers, consumers, indigenous peoples, local communities, women, and micro, small, and medium-sized enterprises (MSMEs).

The countries party to the trade pillar have agreed to focus on devising provisions and initiatives with respect to following areas of cooperation in mind:

• Digital economy: Advancing inclusive digital trade by helping in adaption of tools in the digital economy; enhancing access to online information and use of the internet; addressing discriminatory practices; and advancing resilient and secure digital infrastructure and platforms. The IPEF countries identified following areas of focus:
  • Trusted and secure cross-border data flows
  • Inclusive, sustainable growth of the digital economy
  • Responsible development and use of emerging technologies
• Labor: Ensuring free and fair trade for promoting sustainable and inclusive growth. This will entail adopting and maintaining, and enforcing, national laws based on internationally-recognized labor rights, based on the International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work; encouraging corporate accountability in cases of national labor law violations; and cooperative mechanisms on emerging labor issues to support labor rights and workforce development, including with respect to workers in the digital economy.
• Environment: Ensure environmental protection through effective enforcement of respective environmental laws and strengthening environmental protection, while facilitating trade and investment in relevant clean technologies and environmental goods and services, and enhancing renewable energy, energy efficiency, and zero and low carbon sourcing; green investment and finance; circular economy approaches; promoting an environmentally sustainable digital economy; responsible business conduct; implementation of our respective obligations under multilateral environmental agreements; and enhanced environmental cooperation.
• Agriculture: Advancing food security and sustainable agricultural practices, including promoting the use of appropriate technologies to improve climate-smart, sustainable production practices. Further, in a manner consistent with World Trade Organization (WTO) Agreements, enhance food and agricultural supply chain resilience and connectivity; avoid unjustified measures that restrict food and agricultural imports; improve transparency of regulatory processes and procedures, avoid unjustified prohibitions or restrictions on food and agricultural exports; and promote the use of digital tools and other relevant means or arrangements to reduce compliance costs in international food supply chains.
• Trade facilitation: Harnessing international best practices with respect to facilitating trade, including effective implementation of the WTO’s Agreement on Trade Facilitation; facilitating trade through simplified customs procedures and clearance while maintaining customs control; digitalization of trade facilitation measures; addressing logistics and transportation issues, including, in particular, maritime issues, as appropriate; and promoting transparency.
• Transparency and good regulatory practices: Promoting, supporting, and improving transparency in policymaking; allowing an opportunity for public feedback by stakeholders on proposed new or amended regulatory measures; improving accessibility of information, including online, about existing laws and regulatory processes; promoting internal coordination in regulatory development; and taking account of available information, science, and evidence-based policymaking.
• Technical assistance and economic cooperation: Supporting technical and economic cooperation, including existing bilateral and regional trade-related technical assistance and capacity building.
• Inclusivity: Expanding meaningful access to, and participation in, the regional economy for all segments of society, including indigenous peoples, minorities, women, people with disabilities, rural populations, and local communities.
• Competition policy: Adopting or maintaining competition and consumer protection laws to ensure open, fair, transparent, and competitive markets, including digital markets, and cooperating on competition and consumer protection enforcement and policy issues.

Why has India decided to skip joining trade pillar?

Citing concerns around lack of clarity on the nature as well as potential benefits of binding commitments under this pillar, especially in digital trade and labor, public procurement and environment, India has opted out of the pillar. India has clarified its stance that it shall continue to closely engage with the trade talks as an observer in the IPEF and pursue negotiations with other partner countries with an “open mind”.

India also expressed apprehensions about making haste while being party to the pillar while its own policy concerning digitalization and user privacy are under formulation.

Few Asian geopolitical watchers are touting India’s move as a balancing act vis-à-vis the US on one hand and China and Russia on the other.

Pillar II – Supply chain

In the supply chain pillar, the partner countries will seek to coordinate actions to mitigate and prevent future supply chain disruptions and secure critical sectors and key products for the manufacturers. Further, the IPEF partners will identify sole sources and choke points in critical supply chains, and make collaborative efforts to address them by promoting and supporting investments in new physical and digital infrastructure. Partner countries have also agreed to make use of use data to improve supply chain logistics to further supply chain resilience.

The member countries have decided to focus on following areas:

• Establish an information-sharing and crisis-response mechanism in case of supply chain vulnerabilities
• Strengthen supply chain and logistics including land, air, waterway, maritime and port infrastructure, in close cooperation with the private sector
• Establish criteria to identify goods and sectors critical to national security, health and economic resilience.
• Increase resilience and investment in critical goods and sectors
• Improve supply chain transparency by developing tools and measures to advance transparency with the aid of private sector
• Enhance role of workers to create increased number of skilled workforce through training initiatives

Pillar III – Clean economy

In this pillar, the partner countries seek to increase investment opportunities, spur innovation in realizing the potential of abundant clean energy resources of the region as well assess its substantial carbon sequestration potential.

The partner countries intend to advance cooperation in clean energy and climate-friendly technologies, as well as promote usage of low and zero-emission good and services. The partners countries aim to stimulate transition to a cleaner economy with the active participation of stakeholders, including the private sector, workers, and local communities.

The main areas of focus, as per this pillar, will be:

• Ensuring energy security and enabling smooth transition to clean energy
• Reduce greenhouse gas (GHG) emissions in the priority sectors through support policies, incentive framework and infrastructure investment.
• Develop solutions to enhance cooperation with respect to sustainable use of land, water and ocean resources.
• Devise and facilitate adoption of innovative technologies to reduce GHG emissions.
• Provide incentives, technical cooperation, and ensure workforce development to enable transition to clean energy.

Pillar IV – Fair economy

In this pillar, the IPEF partner countries intend to provide a level playing field for businesses and workers in the Indo-Pacific region, by preventing and combatting corruption, curbing tax evasion, and enhancing transparency.

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This fair economy pillar aims to ensure inclusiveness, the rule of law, accountability and transparency. By innovating and strengthening shared approaches to implementing anticorruption and tax measures, the countries will seek to improve the investment climate and boost flows of commerce, trade, and investments in the region.

The primary areas of cooperation under this pillar will be:

• Institute anti-corruption measures by effectively implementing and accelerating the progress of United Nations Convention against Corruption (UNCAC), standards of Financial Action Task Force (FATF), and OECD Bribery Convention, where applicable.
• Tax transparency by exchanging information as well as make collective efforts to improve tax administration in the region. The IPEF countries have also agreed to support G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS)’s two pillar solution to address tax challenges arising out of digitalization of economy.

Ensure cooperation, inclusive collaboration and transparency among respective authorities of the partner countries. It also aims to increase engagement with concerned stakeholders, such as civil society, industry associations, business enterprises, academia, non-governmental organizations (NGOs) etc. 

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