With the scheduled seven rounds of Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations drawing to a close this month, New Delhi continues to be skeptical of joining the trade pillar citing the lack of “tangible benefits”, said a senior government official with direct knowledge of the matter.
The trade pillar is one of the most crucial parts of IPEF that seeks commitment on sensitive areas as agriculture, digital trade and labour and could require changes in domestic regulation. However, in a setback to the Washington-driven IPEF that seeks to counter China’s dominance in the region, an agreement on the trade pillar was not reached in the last round in San Francisco.
IPEF was launched jointly by the US and other partner countries of the Indo-Pacific region on May 23 last year in Tokyo and is structured around four key negotiating subjects or pillars relating to trade, supply chains, clean economy and fair economy (issues like tax and anti-corruption). But unlike traditional trade deals, IPEF does not deal with market access.
“On pillar 2,3,4 there was a positive intent from all member countries because supply chain resilience and green energy transition is a common endeavor. On the trade pillar, there are questions. Benefits are not clear and that is probably why the trade pillar has not been closed. Because members are finding it difficult to take commitments without any clear tangible benefit. That has been the reason for the delay,” the official said.
“When we had started negotiations last year, seven rounds were scheduled to take place to complete talks on all four pillars. Trade pillar is a significant and aspiration pillar and has as many as 10 chapters. There has been progress but members could not announce the closure of the trade pillar. We had not planned any negotiations after November,” the official said.
On the contentious issues of export restriction, the official said that sensitivity of each country has been taken care which helped in the signing of three pillars but no consensus over commitment on export restriction is likely.
The IPEF agreement refers to avoiding restrictions on food and agriculture imports or exports. However, India has been extensively using such restrictions to arrest food prices. India has banned wheat exports, imposed restrictions on rice and sugar exports in the run up to the general elections next year.
“For instance, phase down of coal power. It was something that developed countries wanted but it is a sensitivity for India and it was finally dropped. We are committing to increase our share of renewable energy. But as far as export restriction is concerned. It is a sovereign policy space which each country wants to protect. It is not easy for any country to commit to this. Any discussion around export restriction will need to be caveated with certain safeguard which is important for national security and food security. I don’t think there could be any consensus on export restriction in IPEF,” the official reiterated.
Ajay Srivastava, a former Indian Trade Services officer and co-founder global trade research initiative (GTRI), said that India’s decision to stay out of the Trade pillar, which focuses on digital trade, labor, and other sectors, aligns with its broader strategy of retaining regulatory autonomy. The standards under discussion, primarily aligned with Organisation for Economic Co-operation and Development (OECD) economies, pose a challenge for India in terms of domestic rule alignment.
“The trade pillar is not about market access for goods or services but about changing the domestic regulatory regime for digital trade, labour and other sectors. Most standards under discussion are already being applied in the US and other OECD economies. India must make domestic rules/standards fast or risk being pushed in IPEF and in FTA negotiations with the EU, the UK, etc,” Srivastava said.
Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, the US and Vietnam are members of the IPEF. Together they account for 40 per cent of the world’s economic output and 28 per cent of trade.