At a Wilson Center event on the Indo-Pacific Economic Framework (IPEF) last week, when asked about the enforceability of the IPEF, Commerce Secretary Gina Raimondo said the following:
There is something to the fact that this is not a trade agreement. It's more flexible. It's responsive to a few specific needs: supply chain, decarbonization, infrastructure, digital, and so it allows us to move fast.
Is it enforceable? I would say yes and no. It's not a traditional trade agreement. You know, it's not enforceable insofar as the tariffs don't come back up if there's non-compliance.
But it is enforceable because countries that don't follow the rules or live up to their commitments don't receive the benefits. So if there's a country who is not following, as according to the agreement, then they won't receive the benefits. We have, for example, we've set up an IPEF Supply Chain Council. Every country has an appointed person to that Council. That's a way to facilitate commerce, a way to deal with issues, a way to share data, a way to predict supply chain problems before they happen. All incredibly valuable to all of our economies. You want to be part of that club.
So this is more of an incentive. We want to provide an incentive to participate. And in that respect, it's enforceable, because if you don't participate, you don't get the benefit. But it is true, there's no legal enforceability per se.
I have a couple questions about this.
First, I understand that without tariff concessions as part of an agreement, you can't withdraw tariff concessions for the purposes of enforcement. But the bigger enforcement issue is, without an adjudication process, how do you determine if there is non-compliance? Will this just be a unilateral judgment that any IPEF party can make about another party's action or inaction? If so, that seems like it takes us away from a rule-based international economic system and moves us toward a power-based system. (To be clear, this won't be an issue if a government, for whatever reason, declares it is not complying. However, if the rules are vague, as they often are, and there is disagreement about whether there is compliance, it could be a problem.)
Second, how well does a power-based system work these days? What will the reaction of IPEF parties be to this kind of unilateral judgment?
And finally, also related to the issue of effectiveness, what exactly are the benefits of IPEF? What is it that parties are getting out of it? Why do they want to be in it, and why do they worry about getting kicked out? I have a vague sense, taking into account what Raimondo said above, that there will be some government financing and private sector business that goes to the parties, but it's unclear to me exactly what this will look like in practice. It would be great if someone could document this a bit more than it has been so far. For what it's worth, a Commerce Department press release describes the IPEF Supply Chain Council as follows:
The IPEF Supply Chain Council: The proposed Agreement would establish a mechanism for the IPEF partners to work collaboratively to develop sector-specific action plans for critical sectors and key goods to enhance the resilience of IPEF partner’s supply chains, including through diversification of sources, infrastructure and workforce development, enhanced logistics connectivity, business matching, joint research and development, and trade facilitation.
ADDED:
I want to throw out one more point here: Enforcement without a formal adjudication process is likely to result in a system with little transparency. How will the public know what governments are pushing each other to do in terms of compliance? These sorts of actions benefit greatly from public scrutiny, and it seems like that will be lacking in the IPEF as currently envisioned.
