Two and a half years have passed since the launch of the Indo-Pacific Economic Framework for Prosperity (IPEF), a U.S.-led initiative to strengthen trade ties and economic engagement with Indo-Pacific nations, as a commercial competitive alternative framework to help counterbalancing China’s economic relations in the region. Representing 14 member states including seven ASEAN nations (Brunei, Indonesia, Malaysia, Philippines, Thailand and Vietnam), if the bloc were a free trade area in the traditional sense, on paper it would account for 40% of global GDP and 28% of global goods and services trade. Since its inauguration, the IPEF as an alternative to existing preferential trade agreements like the RCEP and CPTPP, has experienced a mix of successes and setbacks. With a potential change in trade policies with the upcoming U.S. administration on the horizon, it is crucial to assess its progress, current standing, and future prospects.
Key Progress to Date
Over the past two and a half years, IPEF has achieved some notable milestones, particularly in three of its four pillars: Supply Chains, Clean Economy, and Fair Economy.
Supply Chains
The Supply Chain Agreement entered into force in February 2024, led to the establishment of three bodies: The Supply Chain Council, tasked with policy alignment and supply chain coordination in critical sectors, the Crisis Response Network, aimed at addressing supply chain disruptions, and the Labor Rights Advisory Board, dedicated to protecting and promoting workers’ rights.
Member states have also made individual commitments under this agreement. The U.S., for instance, announced plans to launch the IPEF STEM Exchange Program and outlined a strategy for the Department of Commerce to lead up to ten trade missions to IPEF markets over the next five years in order to foster supply chain diversification and resilience.
Clean Economy
The Clean Economy Agreement, signed in June 2024, has also yielded some significant outcomes, in the form of public-private sectors investments in green energy and infrastructures. The inaugural investor forum held in June highlighted 69 sustainable infrastructure projects valued at over $23 billion, with $6 billion of these projects investment ready. This forum also promotes private-sector participation with ambitious projects announced such as 25 billion USD planned capital investment for Indo-Pacific infrastructure projects and establishment of the Catalytic Capital Fund, aiming to mobilize up to $3.3 billion in private investment.
This progress is especially relevant given the rising importance of clean energy investments globally, which accounted for $2 trillion out of $3 trillion in global energy investments. With the Asia-Pacific region requiring $88.7 trillion in investments to meet Paris Agreement goals, the IPEF positions itself as the critical platform for driving clean energy industry. This conducive environment to green energy investment has also been complemented by individual member states’ commitments, such as India pledging $4 billion toward green energy investments, and Vietnam implementing a Direct Power Purchase Agreement (DPPA) to attract renewable energy projects.
Fair Economy
The Fair Economy Agreement has also delivered positive initiatives, such as establishing the Technical Assistance and Capacity Building (TACB) program. This initiative supports IPEF partners in areas such as anti-corruption, tax administration, and labor rights protection. Member countries have also made complementary commitments to fight against the corruption in trade, jointly setting up a regional anti-corruption network.
Challenges and Limitations
While progress has been made across three pillars, the Trade Pillar—covering labor, environment, digital economy, agriculture, competition policy, regulatory practices, trade facilitation, inclusivity, and economic cooperation—remains underdeveloped. No agreement has been reached amidst divisions among member states on rules for cross-border data transfer, localization, and labor standards. The challenges also extended to the US domestic political environment. As highlighted in the CSIS’s report, while there has been strong domestic consensus on the need for the digital trade inclusion and promotion under IPEF, there remains a lack of comprehensive federal legislation that addresses concerns from domestic stakeholders, including business communities, political parties, and labor groups, regarding trade regulation provisions.
The IPEF also lacks sufficient trade incentives for member states, as it does not offer increased market access like traditional free trade agreements. This limitation has geopolitical implications, particularly in the critical minerals sector, where countries like the Philippines, Indonesia, and South Korea seek U.S. market access to reduce reliance on China. The absence of such incentives undermines U.S. efforts to counter China's influence in Indo-Pacific region and risks pushing neutral countries, such as Indonesia, closer to China.
The IPEF's non-binding framework lack enforcement and dispute resolution mechanisms, raising concerns about long-term compliance among member states. U.S. leadership in IPEF also faces uncertainty amidst potential policy changes under a Trump administration in 2025, which previously withdrew from the Trans-Pacific Partnership and had expressed intentions to withdraw from IPEF once in power. These challenges are also reflected in shifting regional sentiment toward the IPEF. According to a survey conducted by the ISEAS-Yusof Ishak Institute, positive sentiment among Southeast Asian respondents has declined from 46.5% in 2023 to 40.4% in 2024. Furthermore, 44.8% of respondents expressed increasing uncertainty about the IPEF's impact and effectiveness.
Navigating Uncertainty and Future Prospect
Despite these challenges, Indo-Pacific member states are taking proactive measures to navigate uncertain times. While progress in areas like digital trade under the Indo-Pacific Economic Framework (IPEF) has been stalled, member countries are making it up through various alternative bilateral, regional and plurilateral trade initiatives. These include regional efforts like ASEAN’s Digital Economy Framework Agreement (DEFA), set to be concluded in 2025 and, is projected to generate up to $2 trillion in economic value by 2030. There have also been notable bilateral agreements among the members such as the Singapore-Australia Digital Economy Agreement (SADEA) and the Korea-Singapore Digital Partnership Agreement (KSDPA). In addition, Indonesia has formally applied to join the CPTPP, the ASEAN-Canada FTA negotiations are continuing, and the EU is resuming FTA negotiations with the Philippines and Thailand.
China has also been playing increasing roles in building digital trade ties with ASEAN member states with the recent incorporation of green and digital economies into the upgraded China-ASEAN Free Trade Area 3.0, scheduled for signing this year. Meanwhile, ASEAN members like Indonesia and Thailand are exploring alternative platforms applying for memberships to the Organization for Economic Co-operation and Development (OECD) and BRICS to address uncertainties, particularly amid concerns about a potential decline in U.S. engagement in the region.
The relative decline of the IPEF’s significance for trade can be felt considering the growth of the competing regional agreements. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which recently welcomed the UK as a member, and the Regional Comprehensive Economic Partnership (RCEP), which may expand to include economies like Chile and Hong Kong, present robust alternatives that could overshadow IPEF in the absence of tangible progress, especially in the trade pillar.
However, despite these shortcomings and uncertainties around U.S. leadership in trade pillar, IPEF is expected to continue progressing in other pillars with countries such as South Korea and Japan already taking significant initiatives especially in areas such as supply chain resilience. The evolving trade landscape with potential shifting approaches by the upcoming U.S. administration further underscores the need for the U.S. private sector to play a larger role in sustaining trade momentum through consistent investments in the region.
