India sees second chance to pivot to Pacific in IPEF

US President Joe Biden (R) seen here reviewing an honor guard with Japanese Prime Minister Fumio Kishida in Tokyo released an economic framework during his visit to Japan last week. The IPEF came as a lifeline for India, which had remained outside a China-centric pact of Southeast Asian nations in 2020.

Swimming pool | Getty Images News | Getty Images

Two years after quitting a China-centric free trade pact in Southeast Asia, India is seizing the chance to become a founding member of another grouping – this one led by the US

The launch of the US-led Indo-Pacific Economic Framework in Tokyo during President Joe Biden’s first official trip to Asia last week gives India a chance to make its own Pacific pivot.

New Delhi’s move to cement its alliance with Washington comes as the United States overtook China to become India’s biggest trading partner in the fiscal year ending March 2022.

With the exception of India and the United States, all other countries participating in the IPEF launch are part of a rival bloc, the regional comprehensive economic partnership. RCEP includes China, which is the largest trading partner of most pact members.

Indian External Affairs Minister Subrahmanyam Jaishankar later affirmed India’s commitment to IPEF. During a conference in India with Southeast Asian countries last week, he said India was building infrastructure to forge closer ties with Southeast Asia through Myanmar and the Bangladesh, which would fit under the new framework.

“[Connectivity] will not only build on the partnerships we have with ASEAN and Japan, but will actually make a difference in the Indo-Pacific economic framework that is currently being developed,” Jaishankar said.

Country in the [Indo-Pacific] the region can overcome geography and almost rewrite history if it adopts the right policies and economics.

Subrahmanyam Jaishankar

foreign minister of india

“The countries of [Indo-Pacific] the region can overcome geography and rewrite quasi-history if it adopts the right policies and economics,” he noted.

Both Bangladesh and Myanmar are part of the Belt and Road Initiative under which China has invested billions of dollars in infrastructure projects across continents. India stayed out of President Xi Jinping’s signature initiative due to an ongoing border dispute. In addition, a key element of the BRI passes through areas of Kashmir under Pakistani control. India claims all of Kashmir as its own.

Outside China

India’s initial fervor for IPEF is a turnaround for the South Asian giant, which opted to stay out of the China-centric RCEP that kicked off earlier this year. RCEP includes Japan, South Korea, Australia, New Zealand and the 10 Southeast Asian countries, making it the largest free trade pact in the world.

“A major flaw of RCEP was the inclusion of China,” former Indian government chief economic adviser Arvind Virmani told CNBC. “China accepts everything on paper but has no qualms about bending the rules in practice. IPEF is very attractive to India as it includes East and Southeast Asian countries but excludes China,” he said.

China, which last week criticized the IPEF as a “doomed” effort, rejected it again on Monday.

“How can it be called inclusive if it deliberately excludes China, the biggest market in the region and the world?” asked Chinese Foreign Minister Wang Yi. Wang made the comment during a visit to Fiji, which became the newest member to join IPEF last week.

Although the IPEF is not designed as a trade pact, trade is one of its four pillars. The other pillars are supply chain resilience; clean energy, decarbonization and infrastructure and finally, taxation and the fight against corruption.

“India will gain from signing a multilateral framework, which will mean some standardization across all sectors,” a former Indian government industry secretary, Rajan Katoch, told CNBC from central India’s Bhopal. ‘India.

“I hope it will lead to something (on trade) because it will put pressure on the Indian system to be more open. India is too protectionist, in my opinion, given the capabilities of its people “, said Katoch, adding that the IPEF could allow India to push supply lines for certain products to be moved to India.

But strategic calculations could trump economic considerations. “It’s becoming a very segmented world and you have one foot in that camp…you want that to be seen as well,” Katoch said.

India-China tension

India’s aversion to a pact that includes China has geopolitical considerations at its root. Tensions on India’s Himalayan border with China erupted into a bloody conflict two years ago. Tens of thousands of troops from both sides are still deployed at the border.

Katoch said while lowering barriers to U.S. markets is not currently on the table at this stage, that could eventually change through negotiations.

Maybe [negotiations could result in] some reduction in barriers or some encouragement to relocate the supply chain to India. I guess that’s how it would be,” he said.

But India’s importance to the United States is more strategic than economic. As the only Asian country that shares a disputed land border with China and is Strong enough to stand up to the emerging superpower, India is a key part of the United States’ Indo-Pacific strategy to contain China. This strategic confluence can lead to concessions on both sides.

The very notion of Indo-Pacific is hollow without Indian participation.

Joshua P. Meltzer

senior researcher, Brookings Institution

“The very notion of an Indo-Pacific is hollow without Indian participation,” said Joshua P. Meltzer, senior fellow in the global economy and development program at the Brookings Institution, in a recent analysis. He added that India might be more accepting of IPEF than RCEP as it is not asking for any drop in tariffs.

“IPEF also comes at a time when India has clarified its strategic concerns with China. The growing China-Russia alignment could also lead India to seek even closer relations with the United States. United,” Meltzer said.

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