By Amb. Robert Holleyman. This Op-Ed was first published in The Straits Times on 30 May 2022
Negotiations for the Indo-Pacific Economic Framework for Prosperity agreement, known colloquially as the IPEF, kicked off during US President Joe Biden’s visit to Japan on May 23.
There were 13 initial negotiating parties: Singapore, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, Brunei, India, Japan, South Korea, New Zealand, Australia and the United States.
The framework holds the promise of significantly strengthening economic cooperation among the participants in the areas of clean energy, supply chains and, perhaps most importantly, digital trade.
For a number of reasons, the IPEF is the right trade deal at the right time.
Digital trade in the Indo-Pacific has exploded in recent years: The online industry in the region is expected to reach US$1 trillion (S$1.37 trillion) by 2030 as the massive youth population increases its use of smartphones and the Internet.
Since the beginning of the Covid-19 pandemic alone, the Indo-Pacific region has added 60 million new Internet users, reaching 440 million in total.
Yet, there is no uniform, regionwide mechanism for facilitating cross-border data flows or ensuring privacy, threatening economic growth in the region and the opportunities of its people.
Singapore Prime Minister Lee Hsien Loong said regarding digital trade during a recent conversation at the US Council on Foreign Relations: “You need a framework, you need mutual understanding, you need the rules…”
Yet, despite a number of local efforts, no such regionwide framework exists. The US famously withdrew from the Trans-Pacific Partnership in 2017, which would have instituted “gold standard” provisions governing international data flows between most South-east Asian countries.
By the time its successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, came online in 2018, a number of its Internet provisions were being superseded by new needs and developments in the digital space.
Singapore has spearheaded a number of digital initiatives in recent years – the Digital Economy Partnership Agreement, and the Singapore-Australia Digital Economy Agreement most notably but, despite containing cutting-edge provisions, the efforts remain exclusive, with the benefits limited to only a few countries.
Yet there is hope that the IPEF, with the support of the US, can change that.
“We are trying to encourage the US to think about such an understanding between us and the United States,” PM Lee went on.
“That is one of the things which I hope you (the Americans) will be able to do in some form in the Indo-Pacific Economic Framework.”
All evidence suggests that this is exactly what the Biden administration has in mind.
The White House fact sheet of the framework states immediately and in no uncertain language that the trade pillar of the IPEF will “pursue high-standard rules of the road in the digital economy, including standards on cross-border data flows and data localisation… while addressing issues such as online privacy and discriminatory and unethical use of artificial intelligence”.
Rather than deal with digital trade as an ancillary issue, the IPEF places it front and centre as the primary trade issue.
U.S. Role in Global Trade
In recent decades, the US has stepped back from its historical leadership role in international trade: The last truly original trade deal ratified by the US Congress in Asia – the US-Korea Free Trade Agreement – was signed in 2007 and came into force in 2012.
Meanwhile, according to the World Trade Organisation, the number of regional trade agreements in the world from 2007 to last year increased from 164 to 354. The US, the architect of much of today’s rules-based trading system, has in recent decades largely watched as the rules of modern trade were crafted around it.
America’s inactivity in trade is largely due to domestic political concerns. Mr Biden understands this well: Democrats frequently shun trade agreements because of environmental and labour rights concerns and call for greater domestic investments.
Republicans under former president Donald Trump became protectionist and isolationist. The TPP languished in the face of congressional scepticism and inaction from February 2016 until Jan 23, 2017, when Mr. Trump withdrew from the unratified agreement.
In formulating the structure of the IPEF, Mr Biden took current political realities into account, settling on the current framework structure, which does not require congressional approval, unlike a traditional trade deal.
Yet, despite the political constraints at home, the Biden administration’s goals, particularly regarding digital trade, for the IPEF are surprisingly comprehensive, innovative and impactful.
Not only will the IPEF likely build on the high-standard, rigorous digital standards struck in the US-Japan Digital Trade Agreement and the US-Mexico-Canada Agreement, but the inclusion of seven Asean countries in the IPEF negotiations also strongly suggests that the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules (CBPRs) will feature prominently in discussions of data flow standardisation.
CBPR promotion to the participating economies would promote data flows between countries and increase economic growth while simultaneously advancing stronger personal privacy protections.
The White House already previously announced the Global CBPR Forum, which seeks to globalise the CBPR system, and of which Singapore is a proud joint founder.
Having one regionwide rigorous standard to supervise data flows while thoroughly auditing member countries’ compliance will not only increase digital trade, but also allow for regulatory alignment, promote shared values among participants such as transparency and interoperability, and increase economic growth for all.
The IPEF is, quite simply, the right agreement at the right time.
The Biden administration is advancing an ambitious and comprehensive framework in the IndoPacific that can simultaneously weather the political environment at home, help provide positive economic engagement in the region, and strengthen growth opportunities for entrepreneurs and small businesses.
Given the choice between doing nothing and doing something, the Biden administration is choosing to do something – and the IPEF has the potential to be something significant indeed.
Robert Holleyman is president and CEO of Crowell & Moring International and a partner in Crowell & Moring’s International Trade, and Privacy and Security Groups. He served as deputy United States trade representative from 2014 to 2017.