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Regional economic alliances set to intensify China-US rivalry in Asia

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The U.S. and China have been competing for dominance in the Asia-Pacific region. gettyimagesbank
The U.S. and China have been competing for dominance in the Asia-Pacific region. gettyimagesbank

Middle powers facing challenges as Indo-Pacific Economic Framework readies to kick off

By Kim Bo-eun

HONG KONG ― The U.S.-China rivalry has escalated over the years and is set to intensify with the launch of multiple trade groupings in Asia.

The U.S. is preparing to launch the Indo-Pacific Economic (IPEF) Framework, which is widely seen as an effort to counter China's influence in the Asia-Pacific region. The economic potential of the region is considered massive, with a young population and growing middle class. But stronger ties with countries in Asia go beyond economic benefits and involve geopolitical security dynamics.

Washington is not part of key regional trade blocs such as the Beijing-led Regional Comprehensive Economic Partnership (RCEP) or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), formerly the Trans-Pacific Partnership (TPP), which the U.S. pulled out of during the Donald Trump administration.

RCEP is the world's largest trading bloc, with 15 member states centering on the Association of Southeast Asian Nations (ASEAN) and including major non-ASEAN economies such as China, Japan, South Korea and Australia.

The partnership, first discussed at an ASEAN Summit in November 2011, was signed in November 2020 and a free trade agreement under RCEP went into effect in January this year.

The RCEP is noted for its composition of developed economies and developing countries, which are expected to create synergy, as technology is merged with abundant natural resources.

Aside from economic benefits from slashing tariffs on imports, the partnership seeks to set up trade rules for member states.

Meanwhile, the CPTPP has 11 signatories but spans a greater region as it includes economies in North and South America bordering the Pacific as well as countries in the Asia Pacific. The U.S. had initially been a member of the preceding organization, TPP, which was signed in 2016. The Barack Obama administration had intended for its membership in TPP to increase U.S. influence in the region and benefit from the free flow of goods and services in what was meant to be a single market.

But the TPP did not go into effect due to the departure of the U.S. in 2017. The U.S. left the TPP immediately after Trump's election, amid nationalistic sentiment focusing on protecting American jobs.

The CPTPP became the superseding agreement, and since it was signed in March 2018 and went into effect in December of the same year, more economies have applied for membership. The U.K. has applied, as have China and Taiwan. Korea also plans to apply. Japan, as the leading economy in the bloc, has shown support for the U.K.'s membership. A new country's entry requires the approval of all 11 members. But Japan and Australia have been less welcoming toward China.

What is IPEF?

Set to launch in the coming weeks, the IPEF is seen as reflecting the U.S.' ambition to solidify ties with key economies in the Asia Pacific to build a supply chain that excludes China.

The White House in October last year cited President Joe Biden as stating at the East Asia Summit, "The U.S. will explore with partners the development of an Indo-Pacific economic framework that will define our shared objectives around trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonization and clean energy, infrastructure, worker standards, and other areas of shared interest."

U.S. Secretary of Commerce Gina Raimondo and U.S. Trade Representative Katherine Tai visited countries in the Asia Pacific in the following months, to secure their participation in the framework.

"The United States has deep and abiding interests in the Indo-Pacific region, which accounts for roughly half the world's population, economic output, and trade, and where there is a fierce competition over whose economic rules and norms will prevail," William Alan Reinsch, the Center of Strategic & International Studies (CSIS)' Senior Advisor and Scholl Chair in International Business, stated in a report.

"It is unsurprising to see more economic groupings developing against the backdrop of the U.S.-China rivalry," Yonsei University Professor Sung Tae-yoon said.

Details have yet to be made public, but the IPEF differs from a traditional trade bloc based on free trade agreements, and seeks to establish trade rules, including ones on digital trade covering data protection to rules on cutting carbon emissions. Member countries can opt to participate in parts of the framework.

The U.S. expects allies such as Japan, South Korea and Australia as well as key countries in Southeast Asia to take part in the initiative. While the initiative is named "Indo-Pacific," it is unclear whether India will take part, based on reasons including its stance on trade. Negotiations are expected to kick off in the coming months, aiming to set up a basis for the initiative by 2023.

The U.S. and China have attempted to secure the support of middle powers to increase their influence in the region. Japan and Australia have sided with the former, while the decision of others have been less clear.

Some experts said these economies should not feel obligated to choose one over the other. "For these countries, it is important to take an open stance toward both sides," Sung said.

Governments of economies in the region have claimed that the IPEF does not offer crucial incentives for participation, such as greater access to the U.S. market. And with the IPEF set to be based on a presidential executive order, it could be discarded by the next administrations as it is not a senate-ratified treaty. It is also unclear whether countries with deep trade relations with China will be willing to take part in the anti-Beijing coalition.

"The IPEF holds promise, but it will need to be well engineered and managed if it is to advance U.S. economic and strategic interests, become a credible alternative to other regional initiatives, and be seen by allies and partners as a durable U.S. commitment to the region," the report co-authored by CSIS Senior Vice President for Economics Matthew Goodman said.

Kim Bo-eun

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