US President Joe Biden (R) here reviewing a guard of honor 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 has stayed out of a China-centric agreement made up of Southeast Asian nations in 2020.
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Two years after pulling out of the China-centric Free Trade Agreement in Southeast Asia, India is embracing the opportunity to become a founding member of another group — the one led by the United States.
New Delhi’s move to solidify its alliance with Washington comes amid news that the United States has overtaken China to become India’s largest trading partner in the fiscal year ending March 2022.
With the exception of India and the United States, all other countries involved in launching the IPEF are part of a competing bloc, Regional Comprehensive Economic Partnership. RCEP includes China, which is The largest trading partner of most members of the Convention.
Indian External Affairs Minister Subrahmanam Jaishankar later reiterated India’s commitment to the IPEF. At a conference in India with Southeast Asian countries last week, he said India is building infrastructure for closer links with Southeast Asia via Myanmar and Bangladesh, which would fit in with the new framework.
“[Connectivity] Not only will it build on the partnerships we have with ASEAN and Japan, it will make a difference in the Indo-Pacific economic framework that is now being prepared.”
‘Countries in [Indo-Pacific] The region can beat geography and rewrite recent history if the politics and economics are right.”
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 has stayed away from President Xi Jinping’s signature initiative due to the ongoing border dispute. Besides, a major component of the Belt and Road Initiative passes through the Pakistani-controlled areas of Kashmir. India claims that all of Kashmir belongs to it.
India’s early enthusiasm for the IPEF is a turnaround in the direction of the South Asian giant, which chose to stay out of the China-centric RCEP that launched earlier this year. The RCEP includes Japan, South Korea, Australia, New Zealand and the ten Southeast Asian countries, making it the largest free trade agreement in the world.
“One of the main flaws in the RCEP was the inclusion of China,” the former chief economic adviser to the Indian government, Arvind Virmani, told CNBC. “China agrees to everything on paper, but has no reluctance to evade rules in practice. IPEF is very attractive to India because it includes East and Southeast Asian countries but excludes China,” he said.
China, which last week criticized the forum as a “doomed” effort, again dismissed on Monday.
“How can it be called inclusive if it intentionally excludes China, the largest market in the region and in the world?” Chinese Foreign Minister Wang Yi asked. Wang made the comment during a visit to Fiji, which became the latest member to join the IPEF last week.
Although the IPEF is not designed as a commercial charter, Trading One of its four corners. Other pillars are supply chain resilience; Clean energy, decarbonization, infrastructure, and finally tax and anti-corruption.
“India would benefit from engaging in a multilateral framework that would mean some standardization across sectors,” former Indian government industry minister Rajan Katoch told CNBC from Bhopal, a city in central India.
“I hope it leads to something (on trade) because that will put pressure on the Indian system to be more open. India is a very protectionist country, in my view, given the capabilities that its people have,” Katoch said, adding that the IPEF could empower India. of pressure to move the supply lines of some products to India.
But strategic calculations can outweigh economic considerations. “It has become a very fragmented world and you have a foot in that camp… you want to see that too,” Katoch said.
India’s aversion to an agreement that includes China is rooted in geopolitical considerations. Tensions on India’s Himalayan border with China erupted into a bloody conflict two years ago. Tens of thousands of soldiers from both sides are still deployed on the border.
Katuch said that while lowering barriers to US markets is not currently on the table at this point, that could eventually change through negotiations.
“Can [negotiations could result in] Some reduction in barriers or some encouragement to move the supply chain to India. “I think that’s the way,” 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 Strong enough to stand up to the emerging superpower, India is a key component of the United States’ Indo-Pacific strategy to contain China. This strategic convergence could lead to concessions on both sides.
Joshua B. said: Meltzer, Senior Fellow in the Global Economics and Development Program at the Brookings Institution, wrote in a recent analysis: “The idea of the Indo-Pacific is hollow without Indian involvement.” He added that India may be more accepting of the IPEF than the RCEP as it does not make any demands for lower tariffs.
“The IPEF also comes at a time when India has made clear its strategic concerns regarding China. Increased alignment between China and Russia may also lead to India seeking closer relations with the United States,” Meltzer said.
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