Should Southeast Asia Try to Pick Up the Pieces On IPEF?

Headline: Potential US Exit from IPEF: What’s Next for Southeast Asia?

The future of the Indo-Pacific Economic Framework (IPEF) hangs in the balance as the United States faces the likelihood of withdrawing from this pivotal trade agreement. While uncertainty looms, the remaining Southeast Asian nations—Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—are exploring the potential of advancing the framework independently. This article delves into what this means for the region and the prospects that lie ahead.

US Withdrawal: A Predictable Move?

As Donald Trump prepares to assume the presidency again, his plans to withdraw the US from IPEF mirror his previous actions in 2017 when he abandoned the Trans-Pacific Partnership (TPP) on his first day in office. With ample evidence of Trump’s steadfast commitment to this course of action, the focus now shifts to what happens next for the IPEF in the absence of US participation.

Experts highlight that the US’s involvement in IPEF has been met with limited enthusiasm from its partners, primarily reflecting American priorities rather than those of Southeast Asia. President Biden’s vision for IPEF emphasizes a worker-centric trade policy, which diverges from traditional trade agreements aimed at reducing barriers and increasing market access. As a result, the seven Southeast Asian member nations see value in reconfiguring the framework moving forward.

The Nature of IPEF: Goals vs. Realities

IPEF consists of four main pillars: trade, clean economy, fair economy, and supply chains. However, despite these lofty ambitions, significant ambiguities remain, especially regarding its trade pillar. The absence of market access commitments desired by regional partners has led to frustrations, raising the question: why did Southeast Asian countries initially sign up?

Geopolitical dynamics play a crucial role in this decision. Nations in Southeast Asia often seek to balance influence between China and the US, as China’s economic presence has grown substantially over the years. Though IPEF has struggled to gain traction, its potential to foster digital trade, strengthen supply chains, and prioritize workforce development resonates with regional stakeholders.

Navigating a Post-US IPEF

While concerns have escalated regarding the effective operation of IPEF without US input, experts believe there remains a solid case for its continuation. The agreement’s promise to facilitate small and medium enterprises (SMEs) entering the digital marketplace positions it well for future success, even if the US withdraws. Therefore, Southeast Asian nations must reassess the framework’s objectives and explore modifications that cater more closely to their interests.

Internal discussions within IPEF should address:

• Labour and Environmental Provisions: Heightening flexibility to satisfy regional labor concerns is essential for broader acceptance.
• Digital Trade: Revisiting topics such as data localization and cross-border data flows can pave the way for better alignment with local priorities.

Learning from the TPP Experience

Drawing on the historical context of the TPP and CPTPP, Southeast Asian nations have a model to guide them through the restructuring phase of IPEF. Many of the provisions that initially proved contentious during the TPP negotiations were either suspended or modified, suggesting that a "post-US" IPEF could similarly evolve to accommodate the needs of its current members.

Furthermore, there’s a distinct possibility that the revised IPEF may attract new members, including the three ASEAN countries currently absent from the agreement—Laos, Cambodia, and Myanmar. The coveted inclusion of China also warrants consideration, as its participation could amplify the economic benefits for all supply chain actors involved.

The Future of IPEF: Opportunities Await

As Southeast Asia confronts the prospect of advancing IPEF sans the US, the journey ahead will necessitate careful navigation through both economic and geopolitical landscapes. Although the potential gains may seem modest in the short term, the outlook remains optimistic for a new agreement that reflects current challenges and realities.

For a region where the development of small and medium enterprises is paramount, forging a path towards a flexible, "living" agreement could usher in a new era of collaboration and trade. Ultimately, despite the hurdles experienced so far, the Southeast Asian nations’ commitment to adapting IPEF signals resilience amidst changing political tides.

In embracing the opportunity for transformational growth, Southeast Asian economies have the chance to build a cooperative framework better attuned to their priorities and objectives.

Engage With Us

What are your thoughts on the future of IPEF without US participation? Do you see potential for South East Asian nations to thrive in a restructured agreement? Share your insights in the comments below, and engage with our community to discuss the implications for regional trade and development.

For further reading on the Indo-Pacific Economic Framework and its impact on Southeast Asia, check out our related articles on the site.

Note: It is essential to stay informed about ongoing developments regarding IPEF and its member countries, as the evolving landscape will influence economic relations for years to come.

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