India Joins IPEF's Clean and Fair Economy Agreements to Boost Economic Collaboration

What’s in today’s article?

• Why in News?
• What is Indo-Pacific Economic Framework (IPEF)?
• Initiatives under IPEF
• India signs clean, fair economy agreements of IPEF

Why in News?

India has signed the US-led 14-member Indo-Pacific Economic Framework for Prosperity (IPEF) bloc’s agreements on a clean and fair economy.

The agreements were signed during PM Modi’s visit to the US. These are aimed at facilitating development, access, and deployment of clean energy and climate-friendly technologies. They also aim to strengthen anti-corruption measures and promote tax transparency within member countries.

What is Indo-Pacific Economic Framework (IPEF)?

• Background: Origin
  • US President Biden first spoke about the IPEF at the October 2021 East Asia Summit.
  • At this summit, he said that the United States will explore with partners the development of an Indo-Pacific economic framework.
  • This framework will define our shared objectives around:
    • trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonization and clean energy, infrastructure, worker standards, and other areas of shared interest.
    • The IPEF will not include market access commitments such as lowering tariff barriers, as the agreement is more of an administrative arrangement.
• About
  • Launched in Tokyo, in May 2023, IPEF aims to strengthen economic engagement among the member countries to advance growth, peace and prosperity in the region.
  • According to an insight paper on IPEF put out by the US Congressional Research Service, the IPEF is not a traditional trade agreement.
  • Rather, it would include different modules (four pillars) covering various aspects.
• Four Pillars of IPEF
  • Pillar I - Fair and resilient trade,
  • Pillar II - Supply chain resilience,
  • Pillar III – Clean economy (infrastructure and decarbonization), and
  • Pillar IV – Fair Economy (tax and anticorruption).
• Countries would have to sign up to all of the components within a module (pillar), but do not have to participate in all modules.
• Members
  • The IPEF has 14 partner countries including Australia, Brunei, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Vietnam and the US.
• Significance
  • The 14-nation IPEF bloc is seen as crucial as it accounts for about 40 per cent of the world’s GDP and 28 per cent of the world’s trade in goods and services.
  • It is seen as an economic and trade strategy backed by the US to counter China’s economic influence in the region.
• India and IPEF
  • In September 2022, India joined three pillars of the IPEF.
  • These are the supply chain, clean economy, and fair economy pillars of the IPEF.
  • However, it had decided to remain out of the trade pillar. India has an observer status on the trade pillar negotiations.

Initiatives under IPEF

• IPEF Upskilling Initiative
  • The IPEF Upskilling Initiative, launched in September 2022, aims to promote sustainable and inclusive economic growth by offering digital skills training, especially for women and girls in emerging and middle-income IPEF partner countries.
  • Over the past two years, 14 US companies and the Asia Foundation have provided 10.9 million upskilling opportunities under this initiative, with India benefiting from 4 million of these opportunities.
  • The initiative focuses on empowering women and girls by enhancing their digital skills for economic development.
• Critical Mineral Dialogue
  • The ongoing dialogue within the IPEF focuses on key areas such as comprehensive mapping of mineral resources, promoting trade by tracking trade flows within the region, and fostering technical collaboration for mineral recovery and recycling.
  • These initiatives aim to strengthen the critical mineral supply chain and ensure sustainable mining practices across IPEF partner countries.
• Tech Council
  • The initiative's main objectives are to coordinate and cooperate on key technologies among IPEF partners.
  • This will be done by sharing best practices and standards, strengthening digital infrastructure resilience, promoting investment, and fostering innovation through workforce development.
  • Current collaboration areas include cybersecurity, undersea cables, and artificial intelligence.
• Cooperative Work Program (CWP)
  • CWP aims to facilitate joint efforts among IPEF countries to advance the objectives of the Clean Economy Agreement.
  • So far, 8 CWP proposals have been announced in IPEF Ministerial meetings.
  • These proposals cover areas such as hydrogen supply chains, carbon markets, clean electricity, sustainable aviation fuel, just transition, emissions intensity accounting, small modular reactors, and India's proposal on e-waste urban mining.

India signs clean, fair economy agreements of IPEF

• About
  • India signed and exchanged the first-of-its-kind agreements focused on Clean Economy, Fair Economy, and the IPEF Overarching arrangement under IPEF.
• IPEF Clean Economy Agreement (Pillar-III)
  • The Agreement on Clean Economy aims to foster cooperation in clean energy and climate technologies to accelerate energy security, climate resilience, and greenhouse gas (GHG) emissions reduction.
  • It promotes technical cooperation, workforce development, capacity building, and research collaborations.
  • The agreement will also facilitate investments, project financing, and joint projects, with a focus on supporting MSMEs and integrating Indian companies into global value chains, especially in the Indo-Pacific.
  • These goals will be achieved through joint initiatives such as Cooperative Work Programmes, the IPEF Catalytic Capital Fund, and the IPEF Accelerator.
• IPEF Fair Economy Agreement (Pillar-IV)
  • The Agreement under the IPEF aims to create a more transparent and predictable trade and investment environment by enhancing anti-corruption efforts, including preventing bribery and improving tax transparency.
  • It focuses on boosting information sharing, facilitating asset recovery, and strengthening cross-border investigations and prosecutions.
  • These measures will support India's fight against corruption, money laundering, and terror financing.
  • The partners will also collaborate on Technical Assistance and Capacity Building (TACB) initiatives to effectively implement anti-corruption measures and improve the efficiency of tax administration.
• Overarching IPEF Agreement
  • The Overarching Agreement under the IPEF establishes a high-level Ministerial oversight mechanism to guide the implementation of various IPEF agreements.
  • It sets general goals, providing political oversight and long-term stability to the IPEF partnership.
  • This agreement aims to ensure the effective implementation of subject agreements (Pillars II-IV), enhancing India’s productive capacity, supply chain integration, and innovation in line with the Atmanirbhar Bharat initiative.

Q.1. What agreements did India sign under the IPEF?

India signed agreements focusing on clean economy, fair economy, and an overarching IPEF framework, aimed at enhancing clean energy access, climate resilience, and strengthening anti-corruption measures among member countries.

Q.2. What are the main objectives of the IPEF clean economy agreement?

The IPEF clean economy agreement seeks to promote cooperation in clean energy technologies, facilitate investments, support MSMEs, and integrate Indian companies into global value chains, ultimately aiming for enhanced energy security and reduced greenhouse gas emissions.

Source: India signs US-led IPEF bloc’s clean, fair economy agreements | PIB | Business Standard