Why Joe Biden’s Indo-Pacific economic plan won’t stop China’s rise

The US hopes to reshuffle the rules in Asia in its favour but few are interested in an exclusionary, self-serving framework with doubtful longevity that lacks market access facilities
As the world’s second-largest economy and centre of Asia’s industrial and supply chains, China is confident it can deal with any US strategic containment efforts

Liu Zongyi

Published: 3:30am, 27 May, 2022

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US President Joe Biden launched the Indo-Pacific Economic Framework (IPEF) this week in Tokyo, with Japanese Prime Minister Fumio Kishida and Indian Prime Minister Narendra Modi in attendance in person. The IPEF was the most important part of Biden’s agenda during his visit to East Asia.

It consists of four pillars. The first is so-called fairer, binding rules of a high standard in fields such as digital trade, labour and the environment. The second, resilience and security of supply chains in key industries such as chips, high-capacity batteries, medical products and critical minerals. Third, high standards of infrastructure, decarbonisation and green technology. And fourth, taxation and anti-corruption commitments.

The United States has not imposed stringent conditions for joining the IPEF, primarily to attract as many countries as possible. It is clear that the framework focuses on the formulation of standards and rules. With the rapid rise of Asian emerging economies such as China, Asia has now become the centre of gravity for the world economy.

Intra-Asian trade is eclipsing trade with the US; Asians are not only producers and exporters, but also consumers and importers. They are capital providers, including to one another, and not just recipients. The establishment of Asian economic integration mechanisms, such as the Regional Comprehensive Economic Partnership (RCEP), is making the Asia-Pacific more “Asian” and less “Pacific”. The situation is causing the US concern about being sidelined in Asia.

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Unlike the Trans-Pacific Partnership, the IPEF does not facilitate market access by removing tariff and non-tariff barriers to trade. Given the prevalence in the US of an anti-global mindset and populism, it is politically unacceptable for Democrats and Republicans to give Asian countries more market access.

Some strategists in the US believe that to lead Asia, America must rely more on another pillar of its economic leadership, namely that of being the rule maker and standard setter. That is, use its dominant position in the international system to reshuffle the cards, and impose new rules of the game in Asia that are in America’s favour.

If the US succeeds in building out the IPEF, it would achieve two goals at once. It would exclude China from Asia’s industrial and supply chains, and isolate it, especially from hi-tech fields of strategic significance, so the US could maintain its economic and strategic dominance over China.

It would also re-establish America’s core position in the global industrial and supply chains, and turn other Asia-Pacific countries into its economic vassals and colonies.

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In the final analysis, the IPEF serves US geopolitical interests. Those in American strategic circles believe this is a prescription to externalise its domestic contradictions and solve the polarisation between rich and poor, as well as the serious social divisions caused by uneven distribution.

The IPEF lacks market access facilities and carries a strong colour of exclusive geopolitical competition. This, coupled with doubts about whether Biden would be re-elected if he chose to run again, means only the US’ closest allies and a few other Asian countries are interested. Clearly, Japan, South Korea and Singapore hope to solidify their competitive advantage over China in the global industrial chain by joining the IPEF.

India is the key pillar of the US Indo-Pacific strategy. Indian media, quoting unnamed sources, reported that New Delhi and Washington had reached an understanding that the IPEF would be a “strategic move” to target China.

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India is evidently interested in the IPEF – especially the pillars of supply chain security and high standards of infrastructure – because its goal in participating in the US Indo-Pacific strategy is to counter China’s Belt and Road Initiative, promote the transfer of Asian industrial and supply chains to India, and replace China’s position in the global industrial and supply chains.

India especially hopes that the US, European Union, Japan and other countries will provide funding and technology because of its important role in balancing and containing China.

However, objectively speaking, it may take a long time for India to fully participate in the IPEF as it will be difficult for New Delhi to meet the framework’s high standards given the country’s current stage of development. If it tries to do so, it could end up an economic vassal of the US forever.

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For China, India’s participation in the IPEF could be advantageous, as it may effectively delay the full formation of the framework, given New Delhi’s “never make, always break” record in multilateral cooperation.

Global industrial divisions and the formation of Asia’s industrial and supply chains are the result of the interaction of many economic factors over decades, including the profit-seeking nature of capital, relative labour costs, Asian countries’ economic policies and the hardworking nature of Asian people.

The US has played an important role in this process, but it was not deliberately designed by American strategists. Now, American strategists mistakenly believe that China’s rapid economic development over the past 40 years is the result of US goodwill and help. And they think US intervention can stop China’s economic and social development.

Geopolitical conflicts and human interference will certainly affect China’s development. But as the world’s second-largest economy and the centre of Asia’s industrial and supply chains – and with the domestic market gradually improving and the RCEP officially in force – China is confident it can deal with any strategic containment efforts by the United States.

As long as the Chinese government avoids directional mistakes and remains open to the world, the US will not be able to stop China’s rise.

Liu Zongyi is a senior fellow and secretary general of the Centre for China and South Asia Studies at Shanghai Institute of International Studies