IPEF and the Durability of Policy Initiatives

The next half-year will be an eventful one for U.S. economic policy in the Indo-Pacific region. Beyond likely new restrictions on technology flows to China, the Biden administration will be sprinting to reach deals in its Indo-Pacific Economic Framework (IPEF) and preparing to host the Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting in San Francisco in mid-November. The outcomes in both forums will be a test of Washington’s staying power in a region where U.S.-preferred economic rules and norms are being fiercely contested.

As I have said before, IPEF holds promise in bringing together 13 regional trading partners with the United States to discuss vital issues in today’s economy, from digital trade to supply chain resilience to sustainable infrastructure. The initiative could usefully contribute to developing rules and norms on those issues that could—and should—eventually be folded into a formal regional trade arrangement that includes the United States. But serious doubts remain about the credibility and durability of IPEF. This commentary is focused on the latter of these concerns.

Durability is an inherent problem with executive policy initiatives like IPEF. With administrations changing every four or eight years, the incentive for any incoming administration is to launch shiny new initiatives and disavow whatever the last crew did. Even where solid executive agreements are negotiated during an administration, the responsible officials move on, priorities change, and enforcement flags.

There are four main ways for governments to make international policy initiatives (economic or otherwise) durable. The first is to negotiate a treaty or formal international agreement that is approved by legislatures in all the signatory countries. This embeds the commitments in domestic law and establishes formal mechanisms for oversight and enforcement. In the United States, involvement of Congress is also key to reaching robust deals in the first place, since only Congress has the constitutional authority to provide substantial incentives—tariff cuts, domestic legal changes, or funding—for other countries to offer deep and lasting economic concessions to the United States.

In the trade arena, agreements like the United States-Mexico-Canada Agreement (USMCA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are examples of durable, binding deals. USMCA, which entered into force in July 2020, will provide the United States and its North American partners rights and obligations, as well as a robust enforcement mechanism, for many years to come. CPTPP is also a far-reaching, durable arrangement among its 11 original parties, and its economic and strategic significance continues to grow without U.S. participation. The United Kingdom’s signing of the protocol of accession to CPTPP this month has given London its first permanent seat at the table in Indo-Pacific economic affairs since at least 1997. The United States, by contrast, will enjoy none of these lasting benefits as long as it stays out of a formal trade arrangement in the Indo-Pacific.

In the absence of treaties, a second way to ensure the durability of foreign policy initiatives is to hold annual summits of leaders or senior political officials. These regular gatherings create what is known in the U.S. government as an “action-forcing event,” driving bureaucratic action on policy priorities between summits and giving sustained political impetus to the initiative.

A third route to durability is establishment of a secretariat, whether an institution in Geneva or a less formal body that meets regularly and has some permanent staffing. Secretariats can play an enforcement role, set voluntary standards, or simply provide a platform to share best practices. Examples of secretariats in the economic realm include the World Trade Organization (WTO), Organization for Economic Cooperation and Development (OECD), and Financial Stability Board (FSB).

Established as a foreign ministers’ forum in 1989 and elevated to leaders’ level in 1993, APEC is a permanent organization with both a secretariat in Singapore and annual summits. As host in 2023, the United States has set the theme “Creating a Resilient and Sustainable Future for All” and aspires to “build a more interconnected, innovative, and inclusive APEC region.” While expectations for substantial policy outcomes at the November leaders’ meeting should be kept low (not least because Russia is a member of the group), APEC plays a valuable—and durable—role in bringing together officials at both the senior political and working levels from 21 economies throughout the year to promote economic integration in the Indo-Pacific region.

A fourth way to ensure that a policy initiative can live on even in the absence of formal agreements, summits, or secretariats is via dedicated, multiyear funding, whether to support development assistance initiatives or help “crowd in” private investment. One of the most powerful, longstanding examples of the former is the President’s Emergency Plan for AIDS Relief (PEPFAR), which has spent over $100 billion over the past 20 addressing a dire health challenge in the developing world and has hugely boosted the United States’ reputation in Africa. The G7’s Partnership for Global Infrastructure and Investment (PGII) is the latest is a series of U.S.-led initiatives designed to catalyze private investment in infrastructure through targeted government funding that helps mitigate risks.

To date IPEF incorporates none of these four mechanisms to ensure durability. The Biden administration has been explicit that it does not intend to negotiate a traditional trade agreement through IPEF. Nor has it signaled an intention to continue IPEF past the end of this year, whether via senior meetings or a secretariat. And as of yet, the administration has not asked Congress for dedicated funding to support ongoing IPEF initiatives.

Earlier this spring IPEF negotiators reached a credible agreement on supply chain resilience, and similar outcomes in other areas of the initiative can be expected by November. But without one or more of the durability mechanisms discussed here, I fear that IPEF will go the way of other high-profile executive initiatives and run out of steam in a year or two. I am reminded of a similar endeavor I was involved with early in my government career, the U.S.-Japan Structural Impediments Initiative (SII), a thoughtful, intensely negotiated executive arrangement pursued by the first Bush administration from 1989–1991 that ended with a number of meaningful commitments—and was all but forgotten even before the end of the Bush 41 term.

Again, IPEF’s greatest promise is as an incubator for new or revised provisions of a formal trade agreement in the Indo-Pacific region—updated chapters on labor, environment, and digital standards, and new ones on supply chain resilience and economic coercion, for example—that the United States could and should join. Keeping IPEF alive until early 2025 when the next administration—Biden or otherwise—might return to formal trade negotiations should be a priority. This could be done by announcing an additional year of negotiations, having APEC leaders in San Francisco mandate a progress report at their 2024 meeting in Peru, and seeking dedicated funds for IPEF initiative from Congress.

China’s influence in the Indo-Pacific region is growing, and formal trade agreements are being negotiated without U.S. participation that will have a lasting impact on economic rules and norms in the region and beyond. If it wants to see its preferred rules and norms prevail—and its broader influence sustained—Washington needs to pursue a more credible, durable economic strategy in the Indo-Pacific than IPEF as it is currently formulated.

Matthew P. Goodman is senior vice president and directs the Economics Program at the Center for Strategic and International Studies in Washington, D.C.

Matthew P. Goodman

Matthew P. Goodman

Former Senior Vice President for Economics