Progress Continues on IPEF Negotiations in Bali

Officials representing the 14 Indo-Pacific nations in the U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF) met for their second full negotiating round from March 15 to 19 in Bali, Indonesia. A month after the U.S. Department of Commerce held a special negotiating round in New Delhi, India, on Pillars II–IV of the framework, the Bali negotiating round saw text-based proposals tabled by U.S. negotiators on nearly all IPEF pillars and subtopics. A joint statement from the Office of the U.S. Trade Representative (USTR) and Department of Commerce at the end of the negotiating round indicated that while no new deliverables were announced, negotiators set the groundwork for an “aggressive” negotiating schedule in 2023 to finalize IPEF agreements.

Q1: What was the state of play for IPEF development going into the Bali negotiations?

A1: The Bali negotiating round came nearly three months after the last full negotiating round in Brisbane, Australia. Negotiations were split at Brisbane between discussions over text-based proposals tabled by the United States in certain pillars and subtopics: the trade facilitation, agriculture, services domestic regulation, and transparency and good regulatory practices subtopics of Pillar I (Trade); Pillar II (Supply Chains); and Pillar IV (Fair Economy). There were also detailed conceptual discussions on other issues—the environment, labor, digital economy, competition policy, and inclusivity subtopics of Pillar I (Trade) and Pillar III (Clean Economy). Texts tabled in Brisbane covered mainly “low-hanging fruit” issues where the United States had clear models for agreement language, such as similar chapters of the United States-Mexico-Canada Agreement (USMCA). Many observers saw the Brisbane negotiating round as a solid start to formal IPEF negotiations, but the lack of U.S. proposals on digital, labor, environment, and clean economy left some wanting more.

Two months later, the Department of Commerce led a special negotiating round among nearly 300 officials in New Delhi featuring text-based negotiations on Pillars II–IV, where U.S. proposals on the clean economy were seen for the first time. This negotiating round also highlighted India’s role in IPEF negotiations. Though India is not party to Pillar I (Trade) negotiations, its officials still highlighted their support for the framework and securing early harvest deliverables. U.S. commerce secretary Gina Raimondo also noted at the March 2023 launch of the U.S.-India Strategic Trade Dialogue that the United States would welcome India joining Pillar I (Trade).

Discussions among domestic stakeholders about IPEF have also progressed since the last negotiating round. The Biden administration made its first request to fund IPEF, asking Congress for $50 million to advance IPEF in the President’s Budget for FY 2024. Details remain scarce on what this pool of money will be used for, but this budget request is nested within a discretionary request for the U.S. Department of State and U.S. Agency for International Development. Congress also shifted from full Democratic Party to partial Republican Party control in January 2023. While bipartisan support for increased congressional involvement, and even approval, of IPEF has remained, congressional Republicans have increased their calls for the Biden administration to craft IPEF in the mold of a traditional free trade agreement.

Q2: Where did negotiators make progress on each of the pillars?

A2: The parties made some progress on several IPEF pillars and subtopics. The Bali negotiating round was the first round where parties tabled text on nearly all issues:

  • The USTR negotiators tabled text for the labor, environment, digital trade, and technical assistance subtopics of Pillar I (Trade) for the first time. Australian and New Zealander officials jointly tabled text on inclusivity. Negotiators continued to shape trade facilitation, agriculture, services domestic regulation, and transparency and good regulatory practices texts tabled in Brisbane.
  • Negotiators also continued to shape texts for Pillar II (Supply Chains), Pillar III (Clean Economy), and Pillar IV (Fair Economy) that were tabled in Brisbane and New Delhi.

New digital, labor, and environmental texts took center stage at Bali. Though texts tabled by the United States in all these areas remain confidential, reporting indicates that the U.S. digital proposal diverged from the prior U.S. digital trade language in the USMCA. As detailed in a January 2022 CSIS Economics Program and Scholl Chair in International Business brief, “Domestic Perspectives on IPEF’s Digital Economy Component,” core digital trade issues have become contentious among certain labor unions and civil society organizations. A new IPEF digital chapter could focus less on core digital trade rulemaking and more on worker protections, including a potential digital rapid-response mechanism.

IPEF partners responded to U.S. texts tabled in Brisbane and New Delhi with edits or proposals of their own. Notably, the only subtopic remaining where text has yet to be tabled is on the competition policy subtopic of Pillar I (Trade).

Q3: What are the likely next steps for IPEF negotiations?

A3: With negotiations fully under way on practically all IPEF pillars and subtopics, anticipation is growing for concluding IPEF agreements. Several senior U.S. officials have indicated their ambition to conclude all IPEF agreements this year, particularly before the Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting in San Francisco in November 2023. The USTR negotiators and Commerce Department have yet to announce a next full negotiating round, though it is expected to occur in the next one to two months. Sources expect Singapore to host a negotiating round in early May.

It is rumored that there could be an early harvest agreement on IPEF—likely on one or more of the Department of Commerce-led Pillars II–IV—reached at the May 2023 APEC Ministers Responsible for Trade Meeting in Detroit. Whether that comes to fruition remains to be seen.

Aidan Arasasingham is a research associate with the Economics Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Emily Benson is a senior fellow with the Scholl Chair in International Business at CSIS. Matthew P. Goodman is senior vice president for economics at CSIS. William A. Reinsch holds the Scholl Chair in International Business at CSIS.

Gregory Wood, CSIS Economics Program research intern, provided valuable research support

Aidan Arasasingham

Aidan Arasasingham

Former Research Associate, Economics Program
Emily Benson
Director, Project on Trade and Technology and Senior Fellow, Scholl Chair in International Business
Matthew P. Goodman

Matthew P. Goodman

Former Senior Vice President for Economics