IPEF: The IPEF Agreement - institutional low hanging fruit

In semi-exciting news for me, the text of the Agreement on the Indo-Pacific Economic Framework for Prosperity (or IPEF Agreement) was released a couple of weeks ago (along with two more IPEF ‘Pillars’).¹ While most people won’t find an agreement focused on institutional matters as interesting as the ‘substantive’ Pillars, I think there are a few things worth pointing out even if the audience interested in this post will be limited.

I’ve sketched out below three interesting technical points around what the IPEF Agreement does, before then suggesting three reasons it’s a useful addition to the IPEF endeavour.

First, the main purposes of the IPEF Agreement are to (a) create institutional bodies to help embed IPEF into the region’s economic architecture and (b) have these bodies oversee, coordinate, deconflict and reduce duplication across IPEF’s Pillars.

To this end, the IPEF Agreement creates:

1. The IPEF Council (Articles 2 and 3) - which is responsible for oversight of all of the IPEF agreements (the Trade Pillar and Pillars II through IV), and also for considering proposals to negotiate new IPEF agreements; and

2. The Joint Commission (Articles 4 and 5) - which is responsible for oversight of just Pillars II through IV (and any other agreements that the Joint Commission adds to the IPEF Agreement’s Annex - called ‘subject agreements’) but not IPEF’s Trade Pillar. It’s core function is to reduce duplication of and enable work across and between these ‘non-trade’ agreements.

Both of these are Ministerial-level bodies, while the bodies under Pillars II to IV are all senior official level only.

All parties to the IPEF Agreement are members of the IPEF Council (and Article 14 allows any State or separate customs territory to accede to the IPEF Agreement if they are party to at least one IPEF Pillar). Members of the Joint Commission must be a party to at least one of the ‘subject agreements’.

Second, as can be seen by the two body structure, the IPEF Agreement treats the ‘trade agreement’ and ‘other agreements’ separately. The yet to be finalised ‘IPEF Agreement on Trade’ (led by USTR) is to be managed by its own Trade Commission (to be established under that agreement), while the three IPEF ‘subject agreements’ (all led by Commerce) are overseen by the Joint Commission.

IPEF Agreement, Article 1 (amended).

This slightly clunky approach reminds me of US Commerce Secretary Raimondo’s comments that IPEF “was never conceived to be a trade agreement”.

Third, while recognising that the optional nature of each of the IPEF Pillars needs to be dealt with in how these bodies are run, the IPEF Agreement kicks the can down the road on resolving this issue. This will be dealt with when the rules of procedure for the IPEF Council and Joint Commission are negotiated :

IPEF Agreement, Article 6(a)

The issue here is that these bodies have oversight of multiple Pillars, but their membership may include parties that aren’t party to all of those Pillars. Most famously, India isn’t participating in the Trade Pillar just yet, but it will be on the IPEF Council. As such, some parties may not appreciate India considering a “matter affecting the…operation” of the Trade Pillar. The rules of procedure could, for example, require parties in this position to opt-out of decision-making that goes directly to the Pillars they aren’t party to, or at least they can’t break consensus on decisions on those Pillars.

While the potential for overlap is probably larger between the Trade Pillar and the other Pillars (as compared to between the other Pillars), the Joint Commission’s powers might mean that this issue could be more of a (still probably minor) problem for its work. The Joint Commission is empowered to “recommend” actions to bodies under its Pillars and “take any other action” related to its Pillars, while the IPEF Council’s powers are less explicitly set out. That said, all current IPEF participants have said they’ll join Pillars II, III and IV (notwithstanding the continued ambiguity around Vietnam’s signature on Pillar II), so there’s no immediate problem to be dealt with just yet.²

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Moving from the technical details to what the point of the IPEF Agreement is, there are least three reasons for putting this agreement in place:

1. As the text itself says, it will help coordinate and deconflict work across the IPEF agreements. The IPEF Agreement gives ministerial-level oversight to agreements that are distinct but are in some ways broadly scoped and potentially overlapping. It makes practical sense to have one overarching body overseeing how they operate (just as a traditional trade agreement would have an institutional chapter with a body providing similar cross-cutting oversight).³ This is especially so given the potential siloing that could take place with different agencies within each party potentially responsible for each pillar.

2. It explicitly recognises the possibility that new agreements, instruments or mechanisms can be negotiated under the auspices of IPEF (Article 3(1)(b)). The IPEF Agreement provides a formal mechanism for these to be proposed and agreed upon (i.e. the IPEF Council, which will make all decisions by ‘consensus’, see Article 3(3)). This makes it clear that any participant can propose a new IPEF Pillar, rather than leaving this all to the United States.

3. More abstractly, the IPEF Agreement helps IPEF to be a “durable structure for ongoing cooperation” by providing a more concrete ‘Framework’ to bind together the various Pillars. Of course, how durable and long-lasting IPEF is in reality will more depend upon what happens in November and what the next American administration decides to do with IPEF, than institutional bodies. But every little bit helps?

None of these benefits are that exciting compared to securing critical mineral supply chains, greening economies, and stopping corruption. But at the same time, the IPEF Agreement was really low-hanging fruit for the taking (lawyers cannot live on scrub alone). Institutions also are what will help keep an eye on whether the IPEF Pillars actually get implemented and how many of the intentions in their texts are being realised. So by elevating the institutional commitment (to Ministers meeting annually) and providing some processes around what IPEF is, the IPEF Agreement could be a boring but important part of IPEF succeeding.⁴

1. Full disclosure: I worked on IPEF while working for the Australia’s Department of Foreign Affairs and Trade. This post obviously does not disclose any confidences, etc, although this does mean I have my own biases.

2. As a note of comparison, the WTO Agreement, in Article IV:8, specifies that the bodies created by Plurilateral Trade Agreements are to “carry out the functions assigned to them under those Agreements and…operate within the institutional framework of the WTO” and need to “keep the General Council informed of their activities” (and see also, among provisions, Article IX:5, which says decisions under Plurilateral Trade Agreements are governed by the provisions of those agreements).

3. In some ways, IPEF’s division into separate ‘Pillars’ each of which are separate international agreements artificially raises the stakes on justifying each of them (including this IPEF Agreement). If, instead, this IPEF Agreement had come first and then each Pillar established as an Annex or ‘Pillar’, that may have been a bit more logical and allowed for more niche chapters/provisions/Pillars that add value without being headline concerns. Although then the criticisms of the IPEF Agreement being a nothing-burger would have likely been all the louder.

4. Assuming it survives November.