제 23 호 APEC vs. IPEF: Shift from Asia-Pacific Strategy to Indo-Pacific Strategy
Kicker: World
APEC vs. IPEF:
Shift from Asia-Pacific Strategy to Indo-Pacific Strategy
by Si-ho Park, Reporter
In line with recent changes in the international situation, the importance of the Asia-Pacific strategy is gradually changing to the Indo-Pacific strategy. This change is based on various political and diplomatic causes, and this is well seen in the shift from APEC to IPEF. Then, let's find out together what the difference between these two economic cooperation organizations is and what the exact cause will be.
APEC vs. IPEF: What Are They?
The Asia-Pacific Economic Cooperation (APEC) is a regional economic forum established in 1989 to leverage the growing interdependence of the Asia-Pacific. APEC's 21 members aim to create greater prosperity for the people of the region by promoting balanced, inclusive, sustainable, innovative, and secure growth and by accelerating regional economic integration.
APEC has 21 members. The word 'economies' describes APEC members because the APEC cooperative process is predominantly concerned with trade and economic issues, with members engaging with one another as economic entities.
APEC ensures that goods, services, investments, and people move easily across borders. Members facilitate this trade through faster customs procedures at borders; more favorable business climates behind the border; and aligning regulations and standards across the region. For example, APEC's initiatives to synchronize regulatory systems are key to integrating the Asia-Pacific economy. In such cases, a product can be more easily exported with just one set of common standards across all economies.
The Indo-Pacific Economic Framework for Prosperity (IPEF) is an economic framework launched by the United States in May 2022, with Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam.
This framework will advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for our economies. Through this initiative, the IPEF partners aim to contribute to cooperation, stability, prosperity, development, and peace within the region. This framework will offer tangible benefits that fuel economic activity and investment, promote sustainable and inclusive economic growth, and benefit workers and consumers across the region. The 14 IPEF partners represent 40 percent of global GDP and 28 percent of international goods and services trade.
The launch began discussions of future negotiations on the following pillars: (1) Trade; (2) Supply Chains; (3) Clean Energy, Decarbonization, and Infrastructure; and (4) Tax and Anti-Corruption. The IPEF is designed to be flexible, meaning that IPEF partners are not required to join all four pillars.
APEC vs. IPEF: What Are the Differences?
Both APEC and IPEF are designed to promote economic cooperation in the Asia-Pacific region. However, APEC was created in the late 1980s to coordinate competition and conflict over each country's economic interests and to share growth and prosperity through regional economic cooperation, whereas IPEF began in the 2020s with a feeling of the need to maintain the U.S. influence and lead a new economic cooperation system in the Indo-Pacific region while China's economic influence is expanding. Furthermore, with global supply chains unstable due to the COVID-19 pandemic and the war in Ukraine, the IPEF was created based on the need for cooperation to stabilize the regional supply chain.
APEC promotes the expansion of trade and investment in the region as a principle of economic cooperation and expands cooperation in trade, investment, technology, infrastructure, and the environment. However, as the IPEF was established more recently, it seeks to lead a new system of economic cooperation. The IPEF's main goal is to establish a comprehensive economic cooperation system for new trade issues that have not been addressed by the existing multilateral trading system, such as stabilizing supply chains, high-tech industries, digital trade, and energy. It also aims to check China's influence in the Indo-Pacific region based on this economic alliance system.
From Asia-Pacific Strategy to Indo-Pacific Strategy
The global value chain has changed with time. After 1949, an alliance-oriented value chain was pursued to block the Soviet Union. However, after the collapse of the Soviet Union, a global value chain was established based on the logic of efficiency. At that time, the international economy was separated from ideology and political systems, and active investment was made between the United States and China. However, as China's hegemony has recently grown, and has damaged the free market by technology takeover etc., the United States is starting to impose sanctions on this aspect. Thus, the U.S. began to pursue the "trust value chain" to prevent China's influence from expanding further. The United States established the IPEF to form regional alliances, deviating from the Asia-Pacific strategy to counter China's military and economic threats. Through this, the United States seeks to weaken the existing China-led agreement and come up with joint countermeasures with allies and strategic partners.
In other words, the IPEF was established following the restructuring of the supply chain in the United States, which is changing from free trade to friend-shoring based on the U.S.-China trade conflict. “Friend-shoring” refers to the practice of shifting trade and supply chain networks towards countries that are geopolitics allies, sharing similar political values, economic policies, and security interests. The U.S. wants to localize strategic supplies in response to COVID-19 and strengthen the supply chain in the U.S. related to infrastructure through the Invest in America Act. Through the IPEF, the U.S. is trying to reorganize its global supply chain and expand its influence.
In line with these changes, the U.S.-China trade conflict is intensifying, and the polarization of alliances is becoming more pronounced even within Asia. Here are two questions that would drive your deep thinking. How will the importance of Asia change in the future? How should Korea cope with these changes in the international situation and economic consultative body? For Korea to gain a stronger position amid change, we would have to play a major role in the IPEF, increase its influence in the Indo-Pacific region, and make efforts to become a global hub.
Sources:
https://ustr.gov/trade-agreements/agreements-under-negotiation/indo-pacific-economic-framework-prosperity-ipef
https://www.linkedin.com/pulse/rise-friend-shoring-new-era-trade-recipe-fragmentation-santosh-g-y4ncc#:~:text=Friend%2Dshoring%20refers%20to%20the,economic%20policies%2C%20and%20security%20interests.
