India Joins IPEF Agreements on a Clean and Fair Economy

Context:

India has officially signed onto the Indo-Pacific Economic Framework for Prosperity (IPEF), led by the US and comprising 14 members, aimed at promoting a clean and fair economy. The signing took place during Prime Minister Narendra Modi’s recent visit to the US. The agreements under the IPEF focus on enhancing the development, access, and deployment of clean energy and climate-friendly technologies. Additionally, these agreements emphasize strengthening anti-corruption efforts and advancing tax transparency among the member countries, marking a significant step towards sustainable economic collaboration in the Indo-Pacific region.

Relevance:

GS II: International Relations

Dimensions of the Article:

1. Overview of IPEF Agreements
2. Indo-Pacific Economic Framework (IPEF)

Overview of IPEF Agreements:

• Significance:
  • India signed groundbreaking agreements focused on promoting the Clean Economy and Fair Economy under the Indo-Pacific Economic Framework (IPEF).
  • Additionally, an Overarching Agreement was signed to oversee the effective implementation of these agreements.

IPEF Clean Economy Agreement (Pillar-III):

• Objective:
  • Aims to promote cooperation in clean energy and climate technologies to enhance energy security, climate resilience, and reduce greenhouse gas (GHG) emissions.
• Areas of Focus:
  • Technical cooperation, workforce development, capacity building, and collaborative research.
  • Facilitates investment, project financing, and joint ventures, particularly supporting MSMEs and integrating Indian companies into global value chains in the Indo-Pacific region.
• Initiatives:
  • Joint efforts will be supported through Cooperative Work Programmes, the IPEF Catalytic Capital Fund, and the IPEF Accelerator.

IPEF Fair Economy Agreement (Pillar-IV):

• Objective:
  • Aims to create a more transparent and predictable trade and investment environment by enhancing anti-corruption measures, including preventing bribery and improving tax transparency.
• Key Actions:
  • Focus on information sharing, facilitating asset recovery, and strengthening cross-border investigations and prosecutions.
  • Supports India’s efforts in combating corruption, money laundering, and terror financing.
• Collaboration:
  • Partners will work together on Technical Assistance and Capacity Building (TACB) initiatives to improve tax administration efficiency and implement anti-corruption measures.

Overarching IPEF Agreement:

• Oversight Mechanism:
  • Establishes a high-level Ministerial oversight mechanism to monitor the implementation of the various IPEF agreements.
• Goals:
  • Provides political oversight and ensures long-term stability of the IPEF partnership.
  • Aims to facilitate the effective implementation of agreements under Pillars II-IV, enhancing India’s productive capacity, supply chain integration, and innovation in alignment with the Atmanirbhar Bharat initiative.

Indo-Pacific Economic Framework (IPEF):

• Inception:
  • First proposed by US President Joe Biden during the October 2021 East Asia Summit.
  • Aimed at developing an Indo-Pacific economic framework in partnership with countries in the region.
• Focus Areas:
  • Trade facilitation, digital economy and technology standards, supply chain resiliency, decarbonization, clean energy, infrastructure, and worker standards.
  • No Market Access: It does not include traditional market access commitments, such as tariff reductions. Instead, it functions more as an administrative arrangement.

Overview of IPEF:

• Launch:
  • Officially launched in Tokyo, May 2023 to strengthen economic ties and promote growth, peace, and prosperity in the Indo-Pacific.
• Non-Traditional Agreement:
  • Unlike traditional trade agreements, the IPEF is structured into different modules or pillars addressing various economic aspects.

Four Pillars of IPEF:

1. Pillar I: Fair and Resilient Trade.
2. Pillar II: Supply Chain Resilience.
3. Pillar III: Clean Economy (infrastructure and decarbonization).
4. Pillar IV: Fair Economy (tax and anti-corruption).

• Participation: Countries are required to sign up for all the components within a pillar but are not obliged to participate in every module.

IPEF Members:

• Total Members: 14 countries, including Australia, Brunei, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Vietnam, and the United States.

Significance of IPEF:

• Economic Impact:
  • The IPEF bloc represents approximately 40% of global GDP and 28% of the world’s trade in goods and services.
• Geopolitical Strategy:
  • Viewed as a US-backed strategy to counter China’s economic influence in the Indo-Pacific region.

India’s Involvement in IPEF:

• India’s Participation:
  • In September 2022, India joined three of the four pillars: Supply Chain, Clean Economy, and Fair Economy.
• Exclusion from Trade Pillar:
  • India opted out of the Trade Pillar but maintains observer status during negotiations in this area.

-Source: The Hindu, PIB