Why India joined this framework?

• India’s trade in this region is growing rapidly, with overseas investments being directed towards the East, e.g., the Comprehensive Economic Partnership Agreements with Japan, South Korea, and Singapore, and the Free Trade Agreements with ASEAN (Association of Southeast Asian Nations) and Thailand.
• India has been active in championing a Free and Open Indo-Pacific.
• The US, Australia, and the members of the ASEAN have all expressed a common view that India plays a greater role in the region.
• India, along with its Quad partners, is upping its game in the Indo-Pacific
• India’s view is to work with other like-minded countries in the Indo-Pacific region to cooperatively manage a rules-based multipolar regional order and prevent any single power from dominating the region or its waterways.
  The US-led Indo-Pacific Economic Framework for Prosperity (IPEF) is strategically important for India.
• It will enhance India’s economic engagement in the region, which was dented after India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP) agreement.
• The IPEF will help control the damage caused by the RCEP withdrawal as all the IPEF members save India and the US are signatories to the RCEP.
• Building resilient supply chains is one of the motives of the IPEF.
• India can consider members as alternative sources for its raw materials requirements.
• This could reduce India’s overdependence on China for these inputs.
• The IPEF can also support India’s renewed love for free trade agreements.
• IPEF membership is a testimony to India’s aggressive stance on bilateral and regional trade engagements.
• However, India needs to be cautious of what is achieved through this framework.
• There may be some slips that may affect India’s economic interests.

When idea of Quad was first mooted?

• The idea of Quad was first mooted by Japanese Prime Minister Shinzo Abe in 2007. However, the idea couldn’t move ahead with Australia pulling out of it, apparently due to Chinese pressure.
• In2017, India, Australia, the US, and Japan, came together and formed this “quadrilateral” coalition.
• It is the grouping of four democracies –India, Australia, the US, and Japan.
• All four nations find a common ground of being democratic nations and also support the common interest of unhindered maritime trade and security.
• The Quad is billed as four democracies with a shared objective to ensure and support a “free, open and prosperous” Indo-Pacific region.

• India’s trade in this region is growing rapidly, with overseas investments being directed towards the East, e.g., the Comprehensive Economic Partnership Agreements with Japan, South Korea, and Singapore, and the Free Trade Agreements with ASEAN (Association of Southeast Asian Nations) and Thailand.
• India has been active in championing a Free and Open Indo-Pacific. The US, Australia, and the members of the ASEAN have all expressed a common view that India plays a greater role in the region.
• India, along with its Quad partners, is upping its game in the Indo-Pacific.
• India’s view is to work with other like-minded countries in the Indo-Pacific region to cooperatively manage a rules-based multipolar regional order and prevent any single power from dominating the region or its waterways.

Where IEPF is different from RCEP and CPTPP?

• RCEP-  RCEP is the world's largest Free Trade Agreement (FTA) and was signed by all 10 Association of Southeast Asian Nations is a regional organization (ASEAN) members and key partners including China, South Korea, Japan, Australia and New Zealand at the 4th RCEP leaders’ summit in November 2020.
• It could be some time before any country sees the benefits, because six ASEAN nations and three other nations have to ratify it before it takes effect.
• Ratification will likely be tricky in national parliaments, owing to both anti-trade and anti-China sentiments among the countries.
• Recently, Singapore became the first RCEP participating country (RPC) to complete the official ratification process and deposit its ratification instrument.

• Eliminate Tariffs: It is expected to eliminate a range of tariffs on imports within 20 years and also includes provisions on intellectual property, telecommunications, financial services, e-commerce and professional services.
• Equality: Under RCEP, parts from any member nation would be treated equally, which might give companies in RCEP countries an incentive to look within the trade region for suppliers.
• Businesses with global supply chains might face tariffs even within an FTA because their products contain components that are made elsewhere.
• Increased Global Income: The deal could increase global national income by USD 186 billion annually by 2030 and add 0.2% to the economy of its member states.
• However, some analysts think the deal is likely to benefit China, Japan and South Korea more than other member states.
• India’s Stand: India withdrew from the RCEP largely because of concerns it would open it up to Chinese goods amid an already wide trade imbalance with China, and the failure of the agreement to adequately open up to services.

• The CPTPP is a Free Trade Agreement (FTA) between 11 countries around the Pacific Rim which are :
• Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and Japan.
• After the US withdrew from negotiations of Trans-Pacific Partnership (TPP), the remaining 11 participants scrambled to amend the text of the agreement, and the newly renamed CPTPP was signed in March 2018.
• It came into force in December 2018.

Significance:

• Removes Tariffs: The CPTPP removes 99% of tariffs on goods and services, just like the original TPP did.
• Broad Coverage: The CPTPP covers a broad range of goods and services. These include financial services, telecommunications, and food safety standards.
• Reduces Environmental Abuses: All countries agreed to cut down on wildlife trafficking. That helps elephants, rhinoceroses, and marine species the most.
• It prevents environmental abuses, such as unsustainable logging and fishing. Countries that don't comply will face trade penalties.

• India did not join CPTPP as it seeks to place greater labor and environmental standards on its other partners and CPTPP draft includes narrowly detailed qualifications on standards for investment protection, provisions to protect the host state’s right to regulate, and the imposition of detailed transparency requirements.

Who is chief architect of IEPF?

• The Indo-Pacific Economic Framework, launched by United States President Joe Biden.

India and IEPF

• India is committed to a free, open, and inclusive Indo-Pacific region and believes that deepening economic engagement among partners is crucial for continued growth, peace, and prosperity.
• India is keen to collaborate with partner countries under the IPEF and work towards advancing regional economic connectivity, integration and boosting trade and investment within the region.
• India (Lothal, the world’s oldest commercial port) has been a major centre in the trade flows of the Indo-Pacific region for centuries.
• India’s main concern is on the issue of data localization for which a Bill that envisages a framework for localising Indian data and the establishment of a Data Protection Authority has been introduced.

Challenges

• Common Grounds for Countries: U.S. officials have made it clear that IPEF is not a Free Trade Agreement; nor will it discuss tariff reductions or increasing market access, raising questions about its utility.
• The four pillars also lend themselves to some confusion, drawing into question whether there is enough common ground among the 13 countries (that are part of very different economic arrangements) to set standards together, or be open to issues that vary for each country.
• India’s Traditional Positions: Progress in some of the areas identified under the IPEF may involve many departures from India’s traditional positions.
• It should not be the case that India’s negotiators simply accept what is demanded by advanced-country participants.
• Taxation: Tax provisions are another element of the IPEF that could pose problems. There is a tendency to take taxation as a sovereign function and therefore not subject it to negotiation.
• Unheard Views of Businesses: The views of Indian businesses that are potentially competitive globally are often not heard. The voices that are heard are of businesses that are afraid of competition and happy to lobby for protectionism to survive.
• Indian business also needs to be mobilised in support of the new integration.
• Complex Negotiation Process: Trade negotiations involve multiple ministries, which then engage in cumbersome inter-ministerial consultations. The negotiations are too complex to be handled by individual ministries acting in silos inevitably burdened by precedence.
• Credibility of IPEF: Given the fact that the U.S.’s previous initiatives (the Blue Dot Network and the Build Back Better World (B3W) Initiative) have made little headway in changing the region’s infrastructural needs, the IPEF faces a credibility challenge.
• Establishing Common Standards: The immediate focus should be on establishing the common standards, which could form the basis of deeper integration in the future.
• Such standards will cover labour rights, environmental standards, protection of intellectual property rights and rules covering the digital economy.
• Balancing Self-Reliance and Globalisation: The government has repeatedly clarified that ‘Atmanirbharta’ (self-reliance) does not mean isolation and protectionism.
• Also, India has always expressed its desire to attract foreign investment and become part of global supply chains.
• This is the right approach and building reliable supply chains is an explicit part of the IPEF agenda.
• Managing Taxation Issue: India should initiate an internal review of its tax administration, involving experts and the Department of Revenue to come up with suitable changes.
• This would add to India’s attractiveness as a trading partner and as a destination for investment, especially in new supply chains.
• Addressing Tech-related Issues: Digital trade and e-commerce is another critical area included under the IPEF. Given India’s comparative advantage in software development and application, it would be highly desirable to evolve an agreed set of rules that could be applied across like-minded countries.
• There are many contentious issues here such as issues of transparency, requirements of fair competition and the ownership & localization of personal data.
• A constructive role must be played in evolving a global consensus.
• Simplifying Trade Negotiations: Considering the complex trade negotiation process, there is a need for an empowered trade negotiator to consult with concerned ministries and report to the Prime Minister and key ministers with an assessment of pros and cons.
• The NITI Aayog should be mobilised to conduct broad consultations and elicit the opinions of stakeholders, including state governments.

• The IPEF appears to be an alternative to the Trans-Pacific Partnership (TPP), which the US quit in 2017 under its former president, Donald Trump.
• The IPEF will seek to ensure greater economic engagement (beyond tariffs and market strategy) between countries with respect to the Indo-Pacific region.
• The objective would be to establish a platform that would see separate negotiations among participants on varying issues of interest, taking into account their individual demands and needs.
• It is also being seen as an economic pivot away from China, even though an official in the US presidential office recently said that the goal is not to make China feel isolated.
• The Americans have a strategic interest in anything that involves the Chinese, therefore their interest in the Indo-Pacific, a region that consists of approximately half the population and economic output of the world.
• Additionally, the other three QUAD nations – India, Australia, and Japan – are equally worried about China's growing influence in the region.
• PM Modi said that the IPEF is a declaration of a collective desire to make the Indo-Pacific region an engine of global economic growth.
• "India has historically been at the centre of trade flows in the Indo-Pacific region, having the world's oldest commercial port at Lohtal in Gujarat," the Prime Minister said.
• He further called for finding common and creative solutions to tackle economic challenges of the Indo-Pacific region.
• Expressing India's commitment towards working with all Indo-Pacific countries for an IPEF which is both inclusive and flexible, he further said that the foundation of resilient supply chains must be 3T's: Trust, Transparency, and Timeliness.
• Noting that India is committed to a free, open, and inclusive Indo-Pacific region and believes that deepening economic engagement among partners is crucial for continued growth, peace, and prosperity, PM Modi also said that India is keen to collaborate with partner countries under the IPEF and work towards advancing regional economic connectivity, integration, and boosting trade and investment within the region.

China’s Reaction

• Naturally, China has expressed its displeasure with the potential framework ahead of the QUAD meeting in Tokyo.
• Foreign Minister Wang Yi, speaking to reporters in Guangzhou after his talks on Sunday with newly appointed Pakistani Foreign Minister Bilawal Bhutto Zardari, said that the IPEF was "concocted by the United States under the banner of 'freedom and openness'" and Washington was "keen to gang up with 'small circles' and change China's neighbourhood environment.
• He called the framework "a political tool for the US to maintain regional economic hegemony and deliberately exclude specific countries," and asserted that "attempts to create camps, a NATO or Cold War in the Asia-Pacific will not succeed."

AUKUS

• The US has announced a new trilateral security partnership for the Indo-Pacific, between Australia, the UK and the US (AUKUS).
• The major highlight of this arrangement is the sharing of US nuclear submarine technology to Australia.
• Focusing on Indo-Pacific: The security grouping AUKUS will focus on advancing strategic interests in the Indo-Pacific region.
• Though the US has explicitly denied that the grouping is targeted against China, its Indo-pacific orientation makes it an alliance against China’s assertive actions in the South China Sea.
• The three countries alongside Canada and New Zealand already share extensive intelligence through the Five Eyes alliance.
• Transferring Nuclear Submarines to Australia: As part of this initiative, Australia will acquire nuclear-powered submarines with help from the UK and the US.
• This step is significant because the US has only shared nuclear submarine technology once before, and it started in 1958 with Great Britain.
• Nuclear submarines that are quieter than their conventional counterparts but also more capable of being deployed for longer periods and needing to surface less frequently.
• Alongside India’s stated intent to acquire more nuclear-powered submarines, it will amount to a step-change increase in the Quad’s undersea and anti-submarine warfare capabilities.
• Quad is a grouping of India, USA, Australia and Japan.
• Australia is now set to join an elite group of only six countries – India, the US, the UK, France, Russia and China – that operate nuclear-powered submarines. It will also be the only country to have such submarines without having a civilian nuclear power industry.
• Multi-Sectoral Cooperation: AUKUS will also involve a new architecture of meetings and engagements between the three countries, as well as cooperation across emerging technologies (applied AI, quantum technologies and undersea capabilities).

 Five Eyes alliance

• The Five Eyes alliance is an intelligence-sharing arrangement between five English-speaking democracies: the US, UK, Canada, Australia and New Zealand.
• The alliance was created during the Cold War (1946-1991) that was fought between the United States and the Soviet Union, as well as their respective allies.
• The alliance was needed to share sensitive information regarding their adversaries on all possible fronts available.
• It is often described as the world's most successful intelligence alliance.