Julien Chaisse is professor of law at City University of Hong Kong and president of the Asia-Pacific FDI Network. X: @jchaisse @FdiAsia 

The Indo-Pacific Economic Framework (IPEF) stands at a critical juncture, with its future hinging on the outcome of November’s US presidential election. 

Launched by the Biden administration in 2022 as part of its efforts to curb China’s influence in the region, the framework comprises 14 member nations including the likes of Japan, India and Australia. IPEF falls short of being a free trade agreement. But that doesn’t undermine its significance. Its focus is to strengthen critical supply chains such as semiconductors and clean energy, promote inclusive economic growth, and forge closer ties across the region. 

It has achieved important milestones this year. The framework’s supply chain agreement entered into force in February, and was followed by the first meetings of its supply chain council. In June, members held their first clean economy forum which brought together policy-makers, investors and developers who collectively identified $23bn worth of sustainable investment opportunities across the region. 

However, November’s US election introduces a critical variable to its future. The incoming president’s trade policies have the power to either advance IPEF, or potentially dismantle it. 

Harris-Trump showdown

If Donald Trump returns to office, there is a significant risk of a repeat of his withdrawal from the Trans-Pacific Partnership. Even if he doesn’t withdraw, his approach to trade — characterised by protectionism — could mean IPEF  loses its momentum, eroding trust among Indo-Pacific nations. This could push some closer to China in seeking economic stability​, particularly given the economic force of the Belt and Road initiative. 

Meanwhile, a Kamala Harris presidency is expected to continue and perhaps expand Biden’s multilateral approach. Trade policies focused on collaboration, sustainability and strengthening alliances could reinforce US commitment to IPEF. That stability would strengthen the framework’s ability to attract and retain foreign direct investment (FDI) across the region. 

Indeed, the IPEF’s contribution to a clear and predictable regulatory environment — by harmonising regulations and promoting transparency — is key to facilitating FDI into and among its members. Investors are more inclined to commit capital to regions where rulebooks align to these principles and support long-term growth. Any political instability in the US that disrupts these efforts could deter FDI, prompting investors to reassess risks.

A matter of US leadership

While the IPEF has made noteworthy progress over its first two years, its future success largely hinges on the US’s ongoing leadership of the framework. If the next White House favours multilateralism and economic co-operation, the IPEF could become a cornerstone of Indo-Pacific economic integration, countering China’s influence and attracting substantial FDI.

The stakes, however, are substantial. If the US falters in its commitment, Indo-Pacific countries may increasingly align with other economic powers, including China. Should the IPEF collapse, it would not merely be a lost opportunity for economic co-operation, it could signify a broader decline in US influence across one of the world’s most dynamic regions. The implications of the upcoming election obviously extend far beyond US borders. And in the Indo Pacific, it could affect trade and investment for years to come.

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This article first appeared in the October/November 2024 print edition of fDi Intelligence