This is a post by law professor Petros Mavroidis
Is IPEF an Avatar of Things to Come (Or Just a Digression)?
Petros C. Mavroidis
- What is IPEF?
The IPEF (Indo-Pacific Economic Framework) sounds like the APEC, three adjectives and a noun that denotes moderate commitment. It covers labor-, environmental- (including clean energy and de-carbonization) and digital standards; supply-chain resilience; tax and anti-corruption provisions.
Sometimes, mistakenly, IPEF is portrayed as a request by US to its Pacific partners to adhere to its standards, with no market access guarantees offered in return. This is wrong. Adhering to the IPEF standards is insurance policy against market exclusion: the US, by today’s WTO legal framework, can lawfully exclude from its market in the name of non-discrimination anyone who does not meet say its labor and/or environmental standards.
What matters though, is not what IPEF does, as much as it is what the IPEF signals.
- IPEF like TPP (Biden like Obama)
IPEF conforms Obama’s policy in two ways: pivot to Asia, and excluding China. One might legitimately wonder why not simply re-join the CPTPP, the successor to TPP. The response lies probably in what follows.
- IPEF unlike TPP
Mutz (2021) provided additional confirmation that the pre-existing fault lines across political parties in the US regarding trade policy, have been fading: Destler (2005), Irwin (2017), Nelson (2019) had reached similar conclusions. Romney and Obama in 2012 engaged in China bashing; Clinton and Trump dwelled on who dislikes trade most. In light of the prevailing agreement in US society that trade should be viewed in terms of competition and not cooperation (as per Mutz’s terminology), then the president who reduces the potential bite of trade agreements scores big with the US voters. Trade talk after all, is disruptive.
IPEF is not expressed in terms of legally binding language. It is one more expression of the various initiatives of USTR Katherine Tai, framed in terms of “engagement instead of dispute adjudication”. But maybe it is too early to sound definitive on this score. The IPEF opts for variable geometry, the inner circle (IPEF+) being reserved for those who can and are willing to integrate further, faster (maybe the three ‘Five Eyes’ of the Pacific region, Australia, Canada, New Zealand, and the likes of Japan and Korea), while the outer circle (IPEF) will be reserved to the remaining invitees. The conditions for moving from the outer to the inner circle have yet to be detailed. It could be that binding language combined with dispute adjudication is reserved for the inner circle.
- IPEF, the World, and the World Trade Organization
Irwin et al. (2008) and Steil (2013) made a persuasive case to the effect that those defending national security interests were holding the pen in the last stages of the GATT negotiation. Even though the GATT did not serve the “containment” objective that Kennan (1951) had advocated towards the Soviet Union as it opened up to Soviet bloc countries, it did so in measured manner. The underlying thinking for opening the door to some small Soviet satellites was, as Hoekman and Kostecki (2009), and Zeiler (1999) have noted that, by realizing gains from participation, they would adhere to liberal markets and weaken the Soviet alliance. For a moment, when history ended briefly with the fall of the Berlin wall, this seemed to be the winning strategy. But history returned, and the WTO looks less and less sustainable as is. It is in urgent need for reform.
But who will invest in the reform? Kindleberger (1973), and Keohane (1980) would argue that only a hegemon, the undisputed hegemon that is. There is not much empirical basis for that, but there is even less of a reason to believe that a cartel of heterogenous players would agree to similar down-payment. IPEF, if at all, confirms this view. The US, one of the two modern superpowers, has recently undertaken two major initiatives in the trade sphere, both regional (TPP, IPEF), and none of them multilateral (revive the WTO). The superpower that put together the GATT and its successor the WTO, has turned its back to it. The most recent US initiative (IPEF) is antithetical to the spirit of binding language and compulsory third-party adjudication permeating the WTO. If TPP could be seen as correction for the negotiation with China that never happened, as we argued in Mavroidis and Sapir (2021), the IPEF is a signal to the world as it is to the US domestic constituency that the identity of trading partners matters. It remains to be seen whether we are headed towards IPEF-type initiatives next to, or in lieu of the WTO. This is probably why it should be taken with the seriousness that it deserves.
References
Destler, I. M. 2005. American Trade Politics, 4th Edition, Institute of International Economics:
Washington, D.C.
Hoekman, Bernard M., and Michel Kostecki. 2009. The Political Economy of the World Trading System, Oxford University Press: Oxford, United Kingdom.
Irwin, Douglas A. 2017. Clashing Over Commerce, Chicago University Press: Chicago, Illinois.
Irwin, Douglas A, Petros C. Mavroidis, and Alan O. Sykes. 2008. The Genesis of the GATT: Cambridge University Press: New York City, New York.
Kennan, George F. 1951. American Diplomacy, 1900–1950, University of Chicago Press: Chicago,
Illinois.
Keohane, Robert O. 1980. The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967-1977, pp. 124-156 in Ole R. Holsti, Randolph M. Siverson, and Alexander ae. George (eds.) Change in the International System, Westview Press: Boulder, Colorado.
Kindleberger, Charles P. 1973. The World in Depression: 1929-1939, University of California Press: Berkeley, California.
Mavroidis, Petros C. and André Sapir. 2021. China and the WTO, Why Multilateralism Still Matters, Princeton University Press: Princeton, New Jersey.
Mutz, Diana C. 2021. Winners and Losers, Princeton University Press: Princeton, New Jersey.
Nelson, Douglas. 2019. Facing Up to Trump Administration Mercantilism: the 2018 WTO Trade Policy Review of the United States, The World Economy, 42: 3430-3437.
Steil, Benn. 2013. The Battle of Bretton Woods, Princeton University Press: Princeton, New Jersey.
Zeiler, Thomas W. 1999. Free Trade, Free World, The University of North Carolina: Chapel Hill, North
Carolina.