The Indo-Pacific Economic Framework for Prosperity (IPEF) is envisioned to advance economic growth, resilience, sustainability, inclusiveness, and fairness in the Asia-Pacific economies.
The Indo-Pacific Economic Framework for Prosperity (IPEF) aims to address the economic challenges and opportunities in the region by creating a more integrated and inclusive economy, and by promoting sustainable development. The framework provides New Zealand with a broader engagement in decarbonization, environmental and digital standards, which could create new opportunities for growth at home and abroad.
The IPEF is envisioned to advance economic growth, resilience, sustainability, inclusiveness, and fairness in the Asia Pacific economies. It is designed to promote regional trade and investment by supporting infrastructure development, strengthening supply chains, and fostering innovation. The USA, Australia, India, New Zealand, Fiji, and nine East Asian countries (Brunei, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Thailand, and Vietnam) are the founding members of IPEF, which accounted for approximately 40 percent of global Gross Domestic Product (GDP) in 2021.
What does it mean for New Zealand?
The four pillars of the IPEF are Trade, Supply Chains, Clean Economy, and Fair Economy. All four pillars of the IPEF align well with New Zealand’s interests and sustainable development. The Indo-Pacific region is one of the most economically dynamic and strategically important regions in the world and, by joining IPEF, New Zealand will have access to a much larger market, allowing it to expand its exports and business opportunities. New Zealand’s main trading partners are China, the USA, Australia, Japan, Korea, Singapore, Thailand, Indonesia, Malaysia, and India. New Zealand’s total merchandise trade collectively with IPEF countries was valued at approximately $76 billion in 2022 (12 months ended November 2022), which is about 48 percent of our total trade. The value of New Zealand’s exports to these markets was approximately $33 billion, while imports were valued at approximately $43 billion (Table 1).
Moreover, the IPEF aims to promote greater economic integration through improved infrastructure and trade facilitation, which could lead to increased foreign investment. The IPEF aims to promote the development of the digital economy and innovation in the region. This would benefit New Zealand by supporting the growth of technology-based industries and encouraging the use of digital technologies in various sectors, which could lead to increased productivity, efficiency, and competitiveness. The IPEF initiative on clean energy and decarbonisation align with our commitment to a net-zero economy by 2050.
Joining the IPEF provides New Zealand with a platform to enhance political and strategic engagement with the region, and promote our values and interests in the region.
However, the IPEF is a broad and dynamic initiative, and the potential benefits for New Zealand will depend on the specific initiatives and programmes that New Zealand joins, and how they are implemented. Challenges to the IPEF include the region’s complexity, different cultural, social, and economic development levels, and the rise of protectionism. It is also worth mentioning that the IPEF does not aim to eliminate tariffs, meaning the framework may not lead to a traditional free trade agreement.
Table 1. New Zealand’s bilateral merchandise trade in 2022 (12 months ended in November 2022)
|Partners||Exports (NZ$ million)||Imports (NZ$ million)|
|United States of America||7,626||7,280|
|Republic of Korea||2,616||5,579|
|NZ merchandise trade||71,918||86,550|
Source: Statistics New Zealand (2022)
What has happened so far?
The first round of IPEF negotiations was held in Brisbane, Australia, in December 2022. Most of the discussions were related to trade and sustainable development, trade facilitation, agriculture, the digital economy, and the labour market. The second pillar of the IPEF, a resilient supply chain, was a core of the negotiations and a substantive first review of the text proposed by the USA. While there was no draft text for the third pillar (clean economy), the discussion was fast-paced and gave countries a sense of real ambition for the clean economy pillar. There was a greater engagement in pillar four discussions. These involved a first read-through of the USA’s zero draft text, demonstrating IPEF partners’ commitment to working together on anti-corruption, tax, and associated capacity building for the benefit of the Indo-Pacific region and beyond.
- Environment: New Zealand submitted a proposal on environmental protection and discussed how this policy could meaningfully contribute to environmental protection and sustainability regionally.
- Trade facilitation: There was positive engagement and discussion on all Articles in the proposed draft text, with the USA outlining the rationale and intent of the Articles
- Labour: There was a conceptual discussion on the potential elements of a labour chapter within the trade pillar of the agreement. Text-based discussions are expected to commence at the next round
- Digital economy: While the text has not yet been proposed, the parties actively discussed possible elements of the digital chapter. New Zealand spoke to its experience in recent trade negotiations, and the importance of protecting the rights and interests of diverse communities
- Agriculture: There was good engagement on text proposed by the USA covering a range of non-tariff measure issues. Sustainable agriculture was also a key topic of interest.