As US Speaker of the House, Nancy Pelosi, embarked on her multi-stop Asian tour last week, all eyes have been fixed on Taiwan, with the fall out and barrage of commentary still unfolding. The visit to Taipei has arguably overshadowed the broader significance of the delegation’s visit to the region.
Speaker Pelosi’s visit to Taiwan comes at a particularly politically sensitive time as China gears up for its important Party Congress. Occurring only once every five years, this instalment will see President Xi Jinping seek an unprecedented third term – it’s therefore unsurprising that Beijing is taking a stronger stance than normal towards Taiwan. At the same time, the US is quickly approaching mid-term elections back home, and the Biden administration is up against intense pressure to not capitulate to China. While the geopolitical ramifications of the delegation’s Taiwan agenda are debated, the wider implications of the Asia trip, which includes stops in Singapore, Malaysia, South Korea, and Japan, are being overlooked. The trip comes on the back of a series of visits from senior US leaders to the region this year, including Vice President Harris and Secretary of State Antony Blinken (who kicked off a second trip to Southeast Asia over the weekend), alongside several high-profile initiatives focused on strengthening US-ASEAN relations. Speaker Pelosi’s visit cast a spotlight on the intensifying US-China rivalry – not just from a security standpoint, but a broader if less-high profile economic policy perspective as well.
ASEAN’s Growing Relevance
This recent flurry of U.S. engagement in Southeast Asia in particular points to the significance of the region’s role in the evolving global balance of power. With a population of 589 million, Southeast Asia has entered its ‘digital decade,’ with the region’s digital economy projected to reach USD $1 trillion by 2030[i], and is expected to be the biggest contributor to global growth in the next three decades.[ii] Against this backdrop, Beijing has taken advantage of the vacuum left by US abstention from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) under Trump, applying to join the agreement and serving as a driving force behind the recently enacted In the past few months, the Biden administration has made a point to turn US attention and efforts back East, and in . The framework, which includes traditional US allies like Japan, Australia, and New Zealand, as well as seven ASEAN countries (Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, and Brunei), and India – a holdout from the CPTPP and RCEP. The framework is largely seen as an attempt to challenge RCEP, and while the advent of IPEF sends a strong signal that the US is again focused on engaging in economic statecraft throughout the region, the jury is out on whether it can offer a substantive counter proposition.
The primary criticism of IPEF is that at the end of the day, it is simply an “initiative” and not a formal trade deal. It does not make concessions on tariffs, and therefore does not provide signatories with increased market access to America. Instead, the framework seeks to promote four key tenets: connected trade, especially digital, through higher standards and rules; making resilient supply chain networks; tackling climate change through clean energy; and fair trade, e.g., targeting corruption in business. What this all means in practice, however, remains to be ironed out. Analysts and Asian leaders alike had hoped that IPEF would have a bit more “teeth” and offer a true alternative to China’s growing clout in the region. But while IPEF may at this stage only be a largely symbolic proposal, it would be unfair to discount its significance entirely.
An Evolving Value Proposition
Taken on its own, the framework is limited in its ability to provide market access to signatory countries, but in a region where commercial and strategic interests are inseparable, the framework can at least be applauded in its strategic considerations of regional governments. Nancy Pelosi’s rumored and eventual visit to Taiwan has put those considerations into sharp relief – the reaction from Southeast Asian nations have been particularly cautionary, emphasizing the need to defuse tensions. While the US is the top investor in Southeast Asia, China stands as the largest trading partner for most countries in the region. Asian economies simply cannot and will not choose between the US and China, and IPEF is sensitive to this new reality. The vagueness of the framework helps bring multiple partners to the table who may otherwise avoid locking into something that risks upsetting Beijing, arguably taking a more long-term, pragmatic approach to engaging with the region. As Singapore’s Prime Minister Lee Hsien Loong commented on the framework, “In terms of investment and trade, there is not much substance yet…but looking at it from another angle, it has its own value. It is, after all, a fresh start.” Of course, a more substantive IPEF with tangible commitments is important – no one would argue that the missed opportunity would be massive if the U.S. isn’t able to catch up – or at least gain some distance – to the economic and strategic momentum that China has gathered in the region. The framework, when stripped down to a simple goal however, provides a forum to do exactly that. There is value in having a seat at the table, especially at a time when international norms and standards are still being actively shaped on shared priority issues such as digital trade and climate change. By participating, IPEF provides an opportunity for its members to be perceived as more attractive to American investment, technology transfers/knowledge sharing, and creates much-needed momentum for deeper collaboration on regulatory harmonization and aligning on best practices.
The uptick in senior, US government visits to the region underscores that IPEF, while perhaps toothless, is not just lip service. There is a real recognition by the US that it needs to step up its game in Southeast Asia, and such initiatives reflect a clear impetus to not only strengthen government-to-government relations but also demonstrate where industry can add value in shaping and advancing a shared agenda, ensuring that China happens beyond the Biden administration remains to be seen, but if nothing else, we should be paying attention to just how much consideration Southeast Asia is getting these days.
[i] e-Conomy SEA Report 2021: Southeast Asia enters its “digital decade” as the internet economy is expected to reach US$1 trillion in Gross Merchandise Value (GMV) by 2030 | Bain & Company
[ii] https://www.whitehouse.gov/briefing-room/press-briefings/2022/05/23/on-the-record-press-call-on-the-launch-of-the-indo-pacific-economic-framework/
Conclusion
While still vague and limited, IPEF marks a strategic shift in US engagement with Southeast Asia, reflecting the region’s growing geopolitical and economic importance amid intensifying US-China rivalry.
