Incremental Progress Made in Fourth IPEF Round, Still a Ways to Go

Representatives from the 14 Indo-Pacific countries gathered in Busan, South Korea, from July 9–15, 2023, for the fourth in-person negotiating round for the Indo-Pacific Economic Framework for Prosperity (IPEF). Press releases from the U.S. Department of Commerce and U.S. Trade Representative note progress on negotiations toward high-standard outcomes under Pillars I (Trade), III (Clean Economy), and IV (Fair Economy). Officials also advanced the legal review of the proposed IPEF Supply Chain Agreement (Pillar II). The press release and any news coming out of the recent negotiating round lacked details and was overshadowed by the announcement of the United Kingdom’s official entrance into the Comprehensive and Progressive Agreements for Trans-Pacific Partnership (CPTPP).

Q1: What was the state of play on IPEF going into the Busan negotiations?

A1: This year has seen a flurry of in-person negotiating rounds, listening tours, and ministerials. IPEF partners released a joint consensus on Supply Chain Pillar negotiations in May 2023 after the second in-person ministerial meeting held in Detroit, a key issue for the IPEF partners. The consensus included commitments to seek a collective framework, improve crisis cooperation, promote labor rights, and capacity building, among others. To extend its momentum from these negotiations, Department of Commerce chief IPEF negotiator Sharon Yuan stated prior to Busan that members would be working simultaneously on domestic “pre-implementation” of the supply chain agreement for the Busan negotiating round. Any progress of pre-implementation is likely only in its most initial stages.

Q2: What have key stakeholders done in terms of progress on IPEF pillars prior to Busan?

A2: Government leaders have weighed in on their hopes for progress in each pillar, much of which still looks like a work in progress after Busan.

South Korea’s trade ministry announced on July 9, 2023, that an “international supply chain seminar” would be included in the Busan negotiations. The IPEF supply chains agreement outlines a “series of trainings and symposiums on issues related to supply chain monitoring and operations” alongside “experts from each of the IPEF markets.” Yuan stated IPEF partners “need to identify representatives” of the IPEF Supply Chain Council, IPEF Supply Chain Crisis Response Network, and IPEF Labor Rights Advisory Board to materialize the three new bodies.

During the Department of Commerce’s virtual IPEF ministerial on June 29, 2023, Secretary Gina Raimondo announced financing opportunities that will be available to IPEF members that “become a party to the IPEF clean economy agreement.” To provide further support for this pillar, in late June 2023, the U.S. International Development Finance Corporation (DFC) approved $300 million in financing for sustainable infrastructure projects, including in IPEF countries in which the DFC can invest. This financing is set to mobilize $900 million of equity capital through global infrastructure investment manager I Squared Capital; for every dollar of DFC financing, I Squared Capital will commit an additional $3 from the funds it manages. I Squared Capital typically invests in energy, utilities, transport, and telecom projects in North America, Europe, and Asia. It has experience in lower-income countries in South America, but this will be its first real foray into such countries in Southeast Asia and the Pacific Islands.

Q3: What were the outcomes of the Busan negotiating round?

A3: While IPEF members did not report any final outcomes from the Busan negotiations, the Office of the U.S. Trade Representative (USTR) and Department of Commerce stated in a readout that “IPEF partners continued to make progress on negotiations towards high-standard outcomes under Pillars I (Trade), III (Clean Economy), and IV (Fair Economy).” The readout added that the fourth round of negotiations “advanced the legal review of the proposed IPEF Supply Chain Agreement (Pillar II).”

After completing legal review of the “substantially concluded” supply chains agreement, IPEF countries will implement the provisions into their domestic processes. India’s Ministry of Commerce and Industry has drafted a “cabinet note” on standby for approval to sign the supply chains agreement.

Q4: What are the likely next steps for IPEF negotiations?

A4: IPEF partners are working toward final agreements on Pillars I, II, and IV for the informal deadline set during the November 2023 Asia-Pacific Economic Cooperation Summit. Fiji’s permanent secretary for trade Shaheen Ali tweeted on the Busan negotiations, stating that partner countries were “one step closer to the November 2023 timeline to complete Clean Economy, Fair Economy and Trade Chapters.”

The next negotiating round will take place in September 2023 in Thailand.

Q5: Will IPEF reach the November deadline for final agreements?

A5: The November deadline is an informal one and that caveat is likely welcomed by the negotiators. There is still a long way to go to solidify agreements in each pillar, particularly on digital trade. For example, Australian Ambassador to the United States Kevin Rudd argued that constructing “an effectively balanced digital trade set of rules which the IPEF economies can work with” is critical to ongoing IPEF negotiations. Specifically, Rudd stated that standards of digital trade need to enable data flows and minimize data localization while maintaining privacy protection.

Additionally, several countries in Southeast Asia support Indonesia’s call to include critical minerals market access in the negotiations. A U.S. official told a trade publication during the May Detroit round said that Ambassador Katherine Tai discussed critical minerals in the context of “supply chain resilience” and “not a new IPEF-led critical minerals pact.” Southeast Asia’s press on critical mineral market access is unlikely to be addressed directly going forward but will almost certainly continue to be raised.

Erin Murphy is deputy director and senior fellow with the Economics Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Aidan Arasasingham is a former research associate with the CSIS Economics Program.

Dorothy Kim, CSIS Economics Program research intern, provided valuable research support.