During Prime Minister Narendra Modi’s visit to the US, India signed the Fair Economy and Clean Economy agreements negotiated under the aegis of the Indo-Pacific Economic Framework (IPEF), a US-led initiative, launched in 2022, to create a regional framework for deeper economic integration in the Indo-Pacific region. India also signed the IPEF’s overarching agreement. Apart from the US and India, the IPEF has 14 members including Australia, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam. Although one of the pillars of IPEF is trade, it is not a typical trade agreement aiming at tariff liberalisation. However, this does not mean trade is not central to the IPEF. The difference is in terms of vision. IPEF aims to boost trade, not through binding market access commitments but by using the tools of regulatory coherence and promoting linkages of trade with non-trade issues like labour.
The other three pillars of IPEF are supply chains, fair economy, and clean economy. Since countries can choose their pillars, India has opted out of the trade pillar while accepting the other three. India and other countries signed the Supply Chains Agreement last year. The other two agreements under the Fair Economy and Clean Economy pillars were signed on June 6, 2024. However, India could not sign them due to the general elections. The Fair Economy Agreement aims to boost economic governance in the Indo-Pacific region through steps like combating corruption and bringing about greater transparency in domestic tax regimes. The Clean Economy Agreement pushes the IPEF countries on energy transition including by fostering domestic and foreign investment in climate-friendly technologies.
While there are several interesting aspects of these agreements, one noteworthy feature, especially from India’s perspective, pertains to the inclusion of labor rights. The significance of this issue stems from the fact that, unlike the US, India has historically opposed the inclusion of labor issues in economic treaties because of the belief that such treaties should not be used to police a country’s labor law compliance. Also, the concern is that the developed world would use labor regulations as a smokescreen for protectionism. However, as Amitendu Palit and Biswajit Dhar observe, India’s recent trade treaty practice indicates that New Delhi seems to be shedding its inhibitions on any trade-labor linkage. This is evident from IPEF’s supply chains agreement. One of the agreement’s objectives is to promote supply chains in which labor rights are respected. It mandates IPEF countries to promote and respect labor rights set out in the International Labor Organization’s (ILO) declaration, which includes freedom of association and the effective recognition of the right to collective bargaining. India so far has ratified only six of the 10 ILO’s fundamental conventions. The conventions not ratified include the ILO Fundamental Conventions on Freedom of Association and Protection of the Right to Organize, 1948, and the Right to Organize and Collective Bargaining, 1949.
Similar labor rights are also present in the free economy and clean economy agreements and India’s free trade agreement (FTA) with the European Free Trade Association (EFTA) signed earlier this year. While the IPEF agreements do not contain any binding adversarial dispute settlement mechanism, they do have other means to police the compliance of a country’s labor law obligations. For example, Article 8 of the supply chains agreement talks of creating an IPEF Labor Rights Advisory Board that has the mandate to identify labor rights concerns posing challenges to the resilience of the supply chains. Article 9 of the agreement provides for addressing labor rights inconsistencies in IPEF member countries through a reporting mechanism. Likewise, Article 24 of the fair economy agreement provides that if an IPEF member country has concerns about the implementation of any provision of this agreement including labor rights by another country, it can request consultations. If consultations don’t yield a satisfactory result, the matter may be referred to an ad hoc committee comprising other IPEF countries.
India, through the IPEF, has accepted international law allowing other countries to review its labor law compliance as part of international economic agreements. This is a significant departure from India’s stand of opposing trade-labor linkage. It also weakens India’s stand on these issues in its other FTA negotiations, notably with the UK and the EU. Given the history of trade-labor linkage, the US is going to use the IPEF to accomplish this goal.
Prabhash Ranjan is a professor at the Jindal Global Law School, and director, Center forInternational Investment and Trade Laws, OP Jindal Global University.The views expressed are personal
