[CTC] IPEF members eye incentive-based, self-enforcing commitments

[Arthur Stamoulis]

IPEF members eye incentive-based, self-enforcing commitments
Inside US Trade, September 13, 2022 at 12:33 PM
 
LOS ANGELES -- Members of the Indo-Pacific Economic Framework for Prosperity agree on a need to pursue binding commitments, ministers told Inside U.S. Trade last week, but those commitments likely will differ from those in other trade arrangements as countries consider self-enforcing and incentive-based rules.
 
Philippine Trade and Industry Vice Minister Ceferino Rodolfo is one of the proponents of an incentive-based approach rather than the punitive system enshrined in traditional trade agreements. Rodolfo told Inside U.S. Trade that “binding commitments” could mean IPEF-compliant countries are the ones allowed to participate in regional supply chains. Conversely, countries that aren’t living up to IPEF provisions would be left out.
 
“The penalty [is] you can be out of that system,” he said. “So we’re not talking about market access. That’s the beauty of this parallel approach.”
 
Korean Trade Minister Duk-geun Ahn told Inside U.S. Trade is expected to be the catalyst for more reliable supply chains and better business environments. “When we embrace these commitments we will know that the IPEF-induced supply chain mechanisms or industry ecosystems among us will become very important platforms to provide safer business environment,” he said. “So that is probably why members try to build a new trade order under IPEF.”
 
The incentive-based approach makes the most sense for pillar four, according to Ahn. That pillar, titled “fair economy, covers tax and anticorruption. By living up to commitments outlined in pillar four, countries will be creating a better regulatory environment, which should spur much-needed foreign investment in developing countries, he said.
 
“They know that if they can embrace [a better] regulatory environment, then their place will become a very important place to attract more investment, which is critically important today to developing economies,” he said.
 
Ahn and Australian Trade Minister Don Farrell described IPEF’s enforcement mechanism as unlike any before seen in a trade agreement. “Look, it’s a new way of thinking in terms of agreements,” Farrell said. “It hasn’t been done before. I guess time will tell just how those issues … might finally be resolved.”
 
“Normally we stipulate with a dispute settlement provision with legal litigation as a possibility,” Ahn added. “But IPEF I think will not have any such provisions. Instead [they will] probably be self-enforcing with the motivation and incentives for members to embrace these commitments.”
 
An incentive-based approach also will allow some IPEF members to move forward with pilot projects faster than others that may not be ready for higher commitments, Rodolfo continued, calling it part of “the beauty of this parallel approach.”
 
The specifics of any enforcement approach still must be worked out, Deputy U.S. Trade Representative Sarah Bianchi told reporters on Friday. “I think that’s something we’re really going to have to work through with these countries as we go forward,” she said. “I mean certainly we will have certain provisions that will be ‘shalls’ and really setting standards and trying to keep it high.”
 
“I think working through enforceable mechanisms is obviously a conversation we will have to continue to have,” she continued. “One of the things again we’re really optimistic about is how people have understood the need for binding commitments and ‘shalls’ and ‘wills’ and I think we feel good about the posture that countries are coming to this with.”
 
Farrell emphasized the voluntary nature of IPEF participation to underline that countries are not being forced to take on any commitments. “Nobody’s a conscript here,” he said. “Everybody’s a volunteer. From Australia’s point of view if we make a commitment to do things under this agreement we intend to honor those commitments and we sort of expect other countries to do the same.” -- Brett Fortnam (bfortnam at iwpnews.com <mailto:bfortnam at iwpnews.com>)
 
Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826




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