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Home›World Trade Organization›Excluding Taiwan from the Indo-Pacific economic framework is a mistake

Excluding Taiwan from the Indo-Pacific economic framework is a mistake

By Tracie Murphy
May 29, 2022
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On Monday, President Biden officially spear the Indo-Pacific Economic Framework (IPEF). The administration likes to say that the IPEF is not a “traditional free trade agreement”. It is not, if by “traditional” you mean it opens markets with enforceable binding commitments. So what is IPEF? The answer largely depends on whether the United States continues to exclude Taiwan from membership.

First, the background. IPEF debuted with 13 members including USA, Australia, Brunei, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore , Thailand and Vietnam. Other countries are free to join later. The agreement is based on four “key pillars”: (1) trade; (2) supply chains; (3) clean energy, decarbonization and infrastructure; and (4) taxation and the fight against corruption.

IPEF will be à la carte, meaning that members will be able to choose which pillars to enroll in. India, for example, would not be interested in the trade pillar. That’s really saying something, because the EPI will not include legally enforceable market access commitments. This is where things get interesting.

A White House presser says “the fact that it is not a traditional free trade agreement is a feature of IPEF and not a bug”. There is no talk of how the IPEF goes deeper and deeper than the World Trade Organization (WTO), or even how it compares to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). The Biden administration is not interested in these measuring sticks. They are too “traditionalist”.

A slew of business groups, and many members of Congress, think Biden is wrong. They call on the administration to support enforceable market access commitments. The National Milk Producers and the US Dairy Export Council, for example, insist that crossovers are the only way to “level the playing field” with competitors who have “successfully negotiated deals across the region”. Not a few members of the Accommodation and Senate I agree.

Why are there no enforceable market access commitments? One theory is that it allows Biden to pass the IPEF by executive order. Some in Congress to disagree. But it also poses a problem for him: namely, how to incentivize countries to join the IPEF without the prospect of “WTO plus” market access in the United States?

The answer, for now, seems to be to exclude Taiwan, which makes it easier for countries worried about offending Beijing to join. It is a mistake.

To understand why, let’s take a step back. If India does not join the Trade Pillar, each of IPEF’s U.S. partners belongs either the CPTPP or the Regional and Global Economic Partnership (RCEP). China applied to the first and leads the second. This means that in terms of trade flows, the IPEF, without enforceable market access commitments, can hardly be expected to isolate China. In fact, given the CPTPP and RCEP, the IPEF risks being dismissed as more noise than signal.

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If the IPEF is not based on “WTO plus” provisions, there is only one way to overcome this signal-to-noise problem: invite Taiwan to join. My preference would be for IPEF to do both, but let’s focus on Taiwan.

Like China, Taiwan has applied to join the CPTPP. Malaysia and Vietnam will not leave the CPTPP or the RCEP if Taiwan is part of the IPEF. Let’s stop talking about IPEF in a vacuum. Queues to join the CPTPP and RCEP are long and growing. IPEF won’t change that. To attract attention in a region that has the CPTPP and the RCEP, the IPEF, which does not compare itself on binding commitments, really only has one card to play: let Taiwan in.

Marc L. Busch is the Karl F. Landegger Professor of International Commercial Diplomacy at Georgetown University’s Walsh School of Foreign Service. Follow him on Twitter @marclbusch.

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