The dim prospects for the US-led Indo-Pacific Economic Framework (IPEF) has raised questions about
sustained US economic commitment in the region, especially for its biggest ASEAN supporter, Indonesia.

During the sideline meeting at the November 2023 Asia-Pacific Economic Cooperation (APEC) Summit in San Francisco, the 14 IPEF leaders failed to conclude negotiations on the framework’s trade pillar. With the possibility that the IPEF will not meet its two-year deadline, the benefits that Indonesia seeks from the IPEF are unlikely to materialise anytime soon.

Indonesia’s support for the IPEF hinges on expectations of gaining access to the US market, amid the absence of a free trade agreement. US market access is especially lucrative for Indonesia’s valuable critical minerals that will accelerate the US green energy transition. Yet, the IPEF never promised market access or tariff reduction for Asian goods. As reiterated by the US Secretary of Commerce Gina Raimondo during the second IPEF negotiation, the framework ‘was never conceived to be a trade agreement’.

Not only is the IPEF devoid of market access benefits, but its commitment to sustainability is also questionable. The initiative faces opposition from US labour unions and Democratic Party senators for its lack of enforceable labour and environmental protections — areas that pose challenges for Indonesia.

Much like the fate of the Transnational Pacific Partnership (TPP) following the 2016 US presidential election, the IPEF might wither away if there is a change in leadership at the White House after the 2024 presidential election. According to former chief US trade representative negotiator for the TPP, Wendy Cutler, the chances of the IPEF continuing under a Republican Party US president are ‘slim to none’.

While the initiative does not offer US market access — what Indonesia needs the most — the IPEF still provides various benefits. Indonesia’s involvement in IPEF negotiations creates opportunities for deeper US economic engagement in other areas. Regardless of the future of the IPEF, partaking in IPEF negotiations will solidify Indonesia’s status as a reliable and inclusive trade partner — a testament to Indonesia’s global rise under its ‘free and active’ foreign policy.

’Since the IPEF was launched in 2022, Indonesia has sent a strong message that the country is open to deeper economic engagement with the United States. Ensuring the United States has a ‘safe space’ in Southeast Asia is crucial amid the current trends of ‘de-risking’ and ‘friendshoring’, where the United States prioritises ‘like-mindedness’ over pure economic benefit in deepening trade relations.

Support for the IPEF contributes to Indonesia’s like-mindedness in the eyes of the United States. This alignment was evident in ’November 2023 when Indonesian President Joko Widodo met US President Joe Biden and the leaders elevated Indonesia–United States relations to a comprehensive strategic partnership.

While the depth of the Indonesia­–United States comprehensive strategic partnership still falls behind that of Vietnam. Its current strength is mainly symbolic. Still, the new status has opened cooperation in other areas, including the development of carbon capture and storage, nickel processing for electric vehicle batteries and the possibility of a critical minerals agreement. This agreement would make Indonesia eligible for tax credits under the US Inflation Reduction Act of 2022. Indonesia’s deep engagement in the IPEF clean economy pillar negotiations can also open further cooperation in Indonesia’s new Just Energy Transition Partnership agreement.

IPEF reception solidifies Indonesia’s leadership as an emerging and inclusive economic force. After the consecutive successes of Indonesia’s 2022 G20 Presidency and 2023 ASEAN Chairmanship, it is vital to maintain Indonesia’s global reputation of being inclusive by accommodating US initiatives.

By doing so, Indonesia affirms its reliability as a neutral partner and the consistency of its ‘free and active’ foreign policy. Amid accusations that Indonesia is aligning too closely with China, especially after President Widodo attended the third Belt and Road Summit, support for the IPEF is necessary to position Indonesia in a strategic balance between the two largest economies.

The IPEF gives Indonesia a valuable economic diplomacy platform to elicit US support for more ambitious economic goals, including Indonesia’s accession to the OECD. Jakarta’s decision to join the ‘rich-country club’ instead of BRICS further shows the trajectory Indonesia wants to take — a deeper integration into global trade as a developed and sustainable economy. In such a trajectory, US support is indispensable.

Indonesia’s support is pivotal to ensuring the IPEF’s alignment with ASEAN values and initiatives. Through the first and second IPEF negotiations, Indonesian leaders and lead delegations consistently pushed for the IPEF to align itself with the ASEAN Outlook on the Indo-Pacific. Indonesia’s leadership in advocating inclusivity in the IPEF will be crucial to minimise geopolitical agendas in the initiative and potential repercussions from ASEAN partners during and after negotiations.

Indonesia’s involvement will help keep the IPEF in check by ensuring its complementarity to existing initiatives — including the ASEAN-facilitated Regional Comprehensive Economic Partnership — where support from non-IPEF ASEAN members is crucial. As a regional leader, Indonesia’s role is to ensure that IPEF negotiations and their outcomes will not worsen great power competition and further regional divides.

Regardless of its outcome, keeping the United States economically engaged through IPEF negotiations is in Indonesia’s interest. In the face of worsening economic fragmentation in the Indo-Pacific, Indonesia’s openness to US economic initiatives, even in modest forms, will demonstrate Indonesia’s reliability and leadership in building inclusive regions for trade and economic growth.

Arrizal Jaknanihan is Analytics Partnership Officer in the Ministry of National Development Planning/Bappenas, Republic of Indonesia. Arrizal is also a Master of International Relations candidate at The Australian National University.