Editorial

Tread with caution

Updated on: May 30, 2022

U.S. President Joe Biden delivers remarks along with India's Prime Minister Narendra Modi and Japan's Prime Minister Fumio Kishida during the Indo-Pacific Economic Framework for Prosperity (IPEF) launch event at Izumi Garden Gallery in Tokyo, Japan, May 23, 2022. REUTERS/Jonathan Ernst | Photo Credit: Jonathan Ernst

IPEF is meant to boost US’ digital and economic heft. India should be careful to protect its interests

The Indo-Pacific Economic Framework (IPEF) for Prosperity, launched in Tokyo with 13 members including India on board, is US’ attempt to win back the ground it has ceded to China after dumping the Trans Pacific Partnership (TPP) in 2017. What is striking about IPEF — positioned as a rival to the China-led RCEP, from which India exited in 2019 — is that it is not a trade pact. It is one that, according to the White House release, “will enable the US and our allies to decide on rules of the road” in key sunrise areas, such as data sharing, e-commerce, AI and clean energy. Free trade pacts, entailing tariff sacrifices by the US, are unlikely to go down well with the US people and legislators — hence, the sales pitch is to set the rules for a group of countries that accounts for 40 per cent of the world’s GDP, so that “American workers, small businessmen and ranchers can compete”. The second aspect of IPEF is less surprising for a world that is struggling to cope with post-Covid supply disruptions — setting up an alternative supply chain that bypasses China, rivalling the Belt and Road Initiative. Linked to the insistence on standard rules for data sharing is the emphasis on dealing with tax avoidance and bribery — with echoes of the minimum global tax deal signed last November to plug offshore tax havens. There is the trademark Western emphasis on labour and environment standards, which are often used as non-tariff barriers. The IPEF syncs with the US’ business strengths in the new economy space, but the gains for India and other countries — who need market access — are not clear. In the medium term, India could perhaps be a bigger part of global supply chains, once its production linked incentive schemes show results. But for now there are clear red flags in the joint statement that must be recognised, while India proceeds on the negotiations to leverage its market size, financial robustness and clean energy achievements.

The IPEF is a reminder that India must have a clear data protection law. What’s effectively in operation are the Reserve Bank of India’s 2018 guidelines spelling out localisation of payments data. The Joint Parliamentary Committee’s observations on the proposed law on data protection and localisation are ambiguous. It does not make a distinction between personal and non-personal data. A robust law with data localisation provisions are a must. Meanwhile, the US-India Business Council and the USTR have opposed India’s privacy bill and RBI’s guidelines, respectively. India’s recent strictures on Virtual Private Networks have been opposed by US companies. US-based social media giants too push the envelope on data access, with no norms akin to those in the EU in place. For too long has India been a fence-sitter here, even as it negotiates trade and economic deals with the EU, US and others. IPEF is a wake-up call.

The IPEF statement comes against the backdrop of US becoming India’s largest trade partner, overtaking China, in 2021-22. However, as India moves away from Chinese dependence in its industrial imports, it can emerge as a hub for technologies such as semi-conductors, with the support of IPEF. How it negotiates this transition without compromising its economic and strategic interests is the key.

Published on May 30, 2022
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