Even as the jury is still out on the prospects and viability of India joining the Indo-Pacific Economic Framework (IPEF) trade talks for long-term benefits, Commerce and Industry Minister Piyush Goyal set to represent India at the IPEF Leaders’ Meeting and the Partnership for Global Infrastructure and Investment (PGII)-IPEF Investor Forum meeting as well as the Asia-Pacific Economic Cooperation (APEC) in San Francisco from 13-16 November 2023.
The IPEF seeks to strengthen economic engagement among partner countries with the goal of advancing growth, peace, and prosperity in the region and its importance is not just as the third in-person convergence of partner nations but also because of the expectations regarding the likely significant updates on the progress of negotiations. Prime Minister Narendra Modi attended the IPEF launch event along with other partner countries of the Indo-Pacific region on 23 May 2022 in Tokyo. In the first-ever in-person Ministerial meeting in September 2022, pillar-wise ministerial statements were issued outlining the broad contours of text-based negotiations. The framework is structured around four pillars relating to Trade (Pillar I); Supply Chains (Pillar II); Clean Economy (Pillar III); and Fair Economy (Pillar IV). In December 2022, negotiations on all four Pillar Agreements were launched and in May 2023, negotiations on the Pillar-II Agreement were substantially concluded.
While India is committed to a free, open, inclusive Indo Pacific Region and working towards deepening economic cooperation amidst a framework that allows flexibility to partner countries to associate with pillars based on their respective priorities, there is growing opinion on the merits of India staying out of the Trade Pillar as gains were few in terms of tariff concessions. With the Government now inclined to the thought that there is no harm, India is opportunely positioned to join the trade pillar.
The IPEF is highly significant for India, argues Amitendu Palit, Senior Research Fellow of the Institute of South Asian Studies, Singapore. It gives India the opportunity of contributing to economic rulemaking in the Indo-Pacific region. As an opportunity to participate in the rule-making process and working closely with the United States and the other major IPEF members (Japan, Korea, Australia, and Singapore), India can align its domestic regulations to those of the region, opines Palit. Further, the IPEF negotiations are expected to conclude soon. Given the delays it is facing in concluding other ongoing free trade agreements, India should focus on strong results from the IPEF. It should also join IPEF trade talks for long-term benefits. With many of the IPEF’s rules set to eventually become templates for wider global adoption, Indian regulations, which are already aligned with those of the IPEF, will then be in sync with many other economies. This suggests Palit, will facilitate closer integration of the Indian economy with global business and enterprise.
There has been significant progress in other pillars of the IPEF framework. In the second Ministerial Meeting in Detroit in May 2023 attended virtually by the Commerce Minister, negotiations under the Supply Chains (Pillar-II) were substantially concluded. Partner countries are seeking to make supply chains more resilient, robust, and well-integrated through crisis response measures; cooperation for mitigation of disruptions to better ensure business continuity, improved logistics and connectivity; and promoting investments, particularly in critical sectors and production of key goods. India had urged for expeditious implementation of all the action-oriented cooperative and collaborative elements identified as part of this Agreement. Under the Clean Economy (Pillar-III), IPEF partners are aiming to advance cooperation on research, development, commercialization, availability, accessibility, deployment of clean energy and climate-friendly technologies, facilitate investment towards climate-related projects in the region and a regional hydrogen initiative to encourage widespread deployment of renewable and low-carbon hydrogen and its derivatives in the region. India has stated its interest in the Pillar focus to be centered on action-oriented elements, such as mobilization of low-cost long-tenure climate finance and enhanced access to clean energy technologies. Under the Fair Economy (Pillar-IV), IPEF partners are working toward the development of the text of an agreement that will strengthen the implementation of effective anti-corruption and tax measures to boost commerce, trade, and investment among IPEF economies.
On the sidelines of the IPEF, Goyal will also hold bilateral meetings with US Commerce Secretary Gina Raimondo, USTR Katherine Tai, and representatives from various sectors and industries.These meetings will focus on addressing trade barriers,
promoting investments, and fostering greater cooperation in areas such as technology and innovation. One of the key focus of the visit will be the joint event, co-chaired with Gina Raimondo on “India-USA Innovation Handshake Initiative”, with the aim to lift and connect the two sides’ dynamic startup ecosystems, address specific regulatory hurdles to cooperation, and promote further innovation and job growth, particularly in emerging technologies.
Experts point out that several issues remain unresolved. There is the issue of restoration of GSP benefits to domestic exporters. The Trump Government revoked the Generalized System of Preferences (GSP) from India in 2019 which allows eligible developing countries to export duty-free goods to the US. About 1,900 Indian products from sectors such as chemicals and engineering were getting duty-free access to the US market under the GSP, introduced in 1976.
The investors roundtable along with one-to-one meetings with CEOs is another opportunity for the Commerce and Industry Minister to interact with and undertake focused discussions with American companies looking to invest or expand in India across sectors like electronics (including semiconductor), technology, and FinTech.