IPEF versus Rcep

The IPEF has military ramifications, but the Rcep does not

The Quadrilateral Security Dialogue or the Quad countries — India, the US, Japan and Australia — had a Summit meeting in Tokyo on May 24. The US had suggested an Indo-Pacific Economic Framework (IPEF) grouping of countries earlier, and the US President announced the formation of a 14-nation IPEF in Tokyo on May 23. 

Specifically, the IPEF includes the four Quad countries plus South Korea, New Zealand, Fiji and seven out of the 10 members of the Association of South-East Asian Nations (Asean). The stated objectives of the IPEF are to promote trade, clean energy, infrastructure and strengthen supply chains. For reasons relating to substantial economic dependence on China, three smaller economies among Asean member countries — namely, Laos, Cambodia and Myanmar — have stayed out of the IPEF. 

By contrast, the Regional Comprehensive Economic Partnership (Rcep) includes all 10 Asean nations plus Japan, South Korea, Australia, New Zealand and China but not the US. The 15-member states signed the plurilateral free trade agreement called Rcep in November 2020. The stated purpose of Rcep, despite the territorial and other differences between member countries such as Japan and Australia with China, is to promote trade in the Asia-Pacific region. India participated in multiple rounds of Rcep discussions but after considerable dithering opted out of this grouping. 

Illustration: Binay Sinha

The Quad formation has security issues at its core. With the creation of the IPEF, the US intention appears to be to dilute China’s economic heft in the Indo-Pacific region. China’s influence in Asia and Oceania has grown hugely over time due to its substantial-to-overwhelming trade and investment ties with Asean nations as well as Japan, South Korea, Australia and New Zealand. The table, which lists the numbers on bilateral trade in goods, demonstrates the huge inter-independence between China and its trading partners not just in the Indo-Pacific region but also with the US and Russia. The table also provides India’s trade numbers with the same set of countries, which are pitifully low by comparison. 

The major Asean economies would perforce continue to maintain close economic ties with China while also doing a tango with the US, as they have done in the past. Concurrently, given the high average per capita income of member countries, the self-perception of the Asean grouping would be averse to the IPEF diluting their centrality in South-East Asia in any way.

The G20 is a high visibility, but little else nowadays, global grouping of which India is a member. The G20 includes the G7, India, other large and/or major economies plus Russia and China. With the ongoing Ukraine war in its sixth month, the differences between the US and West-Europe with Russia-China appear to be too wide for the G20 to achieve anything of systemic significance. India is also a member of groups such as Brics (Brazil, Russia, India, China and South Africa), Shanghai Cooperation Organization (SCO) whose eight members are China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India and Pakistan. Iran and Afghanistan are among the countries that are awaiting admission as SCO members. These groupings meet at official, ministerial and heads of government levels. Additionally, there is a Russia-India-China trilateral, which meets at the level of foreign ministers. 

The listing of the above-mentioned plurilateral groups is to illustrate that India is a member of bodies that exclude the US and other developed countries of the West but include Russia and China. Significantly, India-Russia trade is lower than its trade with most Asean countries. However, India’s defence and crucially-sensitive technology inter-dependence with Russia is well-documented. India increased its oil imports from Russia in recent months, much to the contrived domestic politics-driven chagrin of the UK, but that is a sideshow. It is with becoming a founding member of the IPEF that India has indicated that it is willing to participate in a grouping which is meant to contain China. 

What has changed for India to take this view? For one, the ongoing military stalemate with China with about 50,000 Chinese troops and an equal number on the Indian side confronting each other along the freezing heights of the India-China border in Ladakh. The logistical and other difficulties under which the Indian armed forces are standing guard in Ladakh are not empathised with even by the upper income classes in India and rarely commented upon in detail by the media or think-tanks in Western or Asean nations. This is as expected since most countries feel the need to be careful about Chinese sensitivities about the India-China military standoff in Ladakh and border-related issues between the two highest-population countries. Other matters of continuing concern for China ever since the early 1950s are comparisons between one-party communist China with the plurality of democratic India despite the latter’s much smaller economy. Additionally, India’s defiance, exemplified by greater public acknowledgement than in the past of the presence of His Holiness the Dalai Lama in India. 

Keeping its trading interests in mind, Japan has been practical and has become a member of Rcep and IPEF. India too should have been a member of Rcep. Plurilateral groupings that are trade-related or strategic can be useful. However, multi-country formations cannot overcome failures in implementing sound policies relating to a nation’s economy or defence. Shortcomings on the ground have often afflicted India and that needs to change. 

j.bhagwati@gmail.com. The writer is a former Indian ambassador, World Bank treasury specialist and currently distinguished fellow at the Centre for Social and Economic Progress