No meat on the bone

IPEF as a tool to rebuild US economic leadership in Southeast Asia faces challenges

On May 23, 2022, US President Joe Biden announced the launch of the "Indo-Pacific Economic Framework for Prosperity "in Tokyo, Japan. The IPEF focuses on four key pillars to deepen economic engagement in the region and establish "a connected, resilient, clean and fair economy". Seven members of the Association of Southeast Asian Nations－Indonesia, Singapore, Thailand, Vietnam, Brunei, Malaysia and the Philippines－have put themselves forward as founding members of the IPEF.

Since the second half of 2021, the Biden administration has launched a series of diplomatic activities in Southeast Asia. Biden invited the leaders of the ASEAN countries to the United States to attend the US-ASEAN Special Summit on May 12-13, where he proposed upgrading bilateral relations to a comprehensive strategic partnership later this year.

The IPEF is an important tool to rebuild US credibility in Southeast Asia. The Biden administration is trying to take advantage of this framework to reshape the economic landscape in this region where China has strong economic influence, echoing efforts by successive US administrations to dominate the region's economic development process.

During the Cold War, the United States tried to promote the recovery and expansion of trade between Southeast Asian countries and Western countries to build economic ties in a bid to contain the Soviet Union's intervention in the Asian economy. Entering the 21st century, the George W. Bush administration made selective engagements with Southeast Asia out of the need to counter terrorism. The United States launched the Enterprise for ASEAN Initiative, and put forward the concept of Free Trade Area of the Asia-Pacific. In order to advance its proposed rebalancing of the US to the Asia Pacific, the Barack Obama administration implemented all-round engagement. In 2008, the US announced its participation in the negotiations for the Trans-Pacific Partnership Agreement and increasingly dominated the negotiation process to prevent Asia from forming a regional trade bloc that excluded it. After Donald Trump took office, he subverted the previous administration's China policy, defined China as a "strategic competitor", promoted the decoupling of Southeast Asian countries' economies from China, and launched the "Blue Dot Network", intending to compete with the Belt and Road Initiative.

Looking back on the history of the US' attempts to shape economic influence in Southeast Asia, there are three features that are readily apparent. First, the US tends to solve leadership challenges in multilateral fields through cultivating bilateral relations. Second, the US adopts long-distance leadership through fortifying alliances. Third, the US likes to take advantage of economic issues to address security concerns. In this way, the US forms a unique set of competition patterns in the region.

When the Biden administration took office in 2021, it emphasized the "return of the United States" by downplaying protectionism in the economic field, promoting the IPEF in Southeast Asia, and launching a geo-economic dislocation competition with China. Compared with China's "hard core" contribution in the economic field, the IPEF adopts a "refined" competition strategy, focusing on the digital economy; it emphasizes the "quality" of investment to dwarf the "quantity" of Chinese investment; it pays attention to "software" assistance, and sets up rules and barriers.

However, given the IPEF's lack of market access commitments, Southeast Asian countries are cautiously welcoming the IPEF, with a flexible attitude toward their participation. In addition, with the US mid-term elections approaching, the IPEF may become a tool to serve domestic politics and interparty competition. Domestic fiscal problems will also limit the US' commitment of resources to Southeast Asia. At the end of 2021, the total US debt was nearly $30 trillion. The inflation in the US was as high as 7.5 percent in 2021. Facing its own severe "debt crisis", the related projects promoted by the US in Southeast Asia can only be shelved. For example, the US has repeatedly pledged to support ASEAN connectivity, but the actual investment scale and the number of projects are very limited.

The IPEF appears to be an alternative aimed at countering the Belt and Road Initiative, which has gained some influence in Southeast Asian countries. However, it is unlikely that most Southeast Asian countries will clearly fall in favor of the United States. They tend to wait and see, and will not give up China, their largest trading partner. In addition, the Regional Comprehensive Economic Partnership provides regional countries with opportunities for trade cooperation that are more attractive than the IPEF. Therefore, China should uphold an inclusive and open attitude to carry out diplomatic and trade cooperation with Southeast Asian countries and make full use of its industrial advantages to carry out innovative cooperation, especially in the fields of the digital economy and clean energy.

The author is a postdoctoral fellow of the Institute of Area Studies at Peking University.

Contact the editor at editor@chinawatch.cn