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Important Editorial Summary for UPSC Exam

15Jul
2023

The I2U2 Business Forum, West Asia institutional moment (GS Paper 2, International Relation)

The I2U2 Business Forum, West Asia institutional moment (GS Paper 2, International Relation)

Context:

  • The I2U2 Business Forum holds great significance as a step towards establishing a private sector-driven institutional arrangement that could potentially expand regionally through consensus-building.

 

I2U2 Business Forum:

  • The I2U2 Business Forum, inaugurated in Abu Dhabi on 22 February, brought together the member countries of the minilateral partnership known as the I2U2 Group: India, Israel, the United Arab Emirates (UAE), and the United States (US).
  • The group, established in 2022, aimed to foster economic collaboration in various sectors such as technology, energy, transportation, space, and water and food security.
  • This partnership emerged amidst evolving geopolitical dynamics in West Asia, including the normalisation of relations between Israel and the UAE and the involvement of India as a significant regional player.
  • Looking ahead, the I2U2 is expected to transform into a security vehicle for the broader West Asia region, responding to major geopolitical shifts.

 

Objectives:

  • The I2U2 Business Forum facilitates dialogue between governments and private sector representatives of the I2U2 group, promoting business cooperation opportunities.
  • The inaugural session discussed potential partnerships, such as a US$2-billion investment in integrated agricultural facilities in India and the development of a 300-megawatt wind and solar hybrid power plant in Gujarat.
  • The I2U2 Business Forum aims to transform the I2U2 into a platform for cross-regional geopolitical and economic integration in the Middle East, South Asia, or the broader regional landscape, West Asia. By bringing together member states and their private sector representatives, the Forum provides an opportunity to align the objectives of dynamic regional economies.
  • Unlike traditional multilateral trade agreements focused on regulations and market access, the Forum supports the geoeconomic objectives of the I2U2 Group by facilitating dialogue between policymakers and private sector representatives, as well as mobilising private capital and expertise to enhance collaborative efforts.
  • These geoeconomic objectives are highly ambitious, considering the historical challenges associated with bilateral and multilateral economic cooperation amidst geopolitical tensions.

 

Undermining China:

  • Like the US’ China policy, there has been a significant bipartisan shift in trade policy, propelled by former President Trump and continued by President Biden.
  • This shift involves a preference for industrial sectors and a reluctance to embrace free trade, instead favouring a labour-driven approach. It represents the prevailing direction of the US’ trade approach and is anticipated to persist after the 2024 presidential elections.
  • The era of granting access to the US market in exchange for alignment with American foreign policy is fading. The I2U2 Business Forum is no exception to this shift.
  • US aims to showcase the benefits of US-led trade partnerships while simultaneously undermining China’s appeal as an economic partner to actors in West Asia.

 

Replicating the IPEF in West Asia:

  • The I2U2 Business Forum cannot be compared to traditional trade agreements. It is closer in nature to the Indo-Pacific Economic Framework (IPEF), which aims to strengthen trade and technology cooperation between the US and a number of Asian economies (including India), rather than negotiate market access between states.
  • The IPEF is dedicated to promoting resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness among the US and its Pacific partners.
  • It is comprised of several member states, including the US, Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.
  • The Framework rests upon four fundamental pillars: connected economy, resilient economy, clean economy, and fair economy.
  • Future negotiations will focus on trade, supply chains, clean energy, decarbonization, infrastructure, and tax and anti-corruption measures.
  • The IPEF offers partners the flexibility to select and engage in the pillars of their interest rather than mandating participation in all four.

 

Expansion:

  • The inclusion of more nations namely Egypt and Saudi Arabia; into I2U2 Business Forum will be a crucial element of its capacity to transform the economic landscape of West Asia.
  • There are already historical initiatives in the Middle East that can serve as inspiration for cross-regional economic integration within an expanding I2U2 format.
  • One notable example is the Qualifying Industrial Zones (QIZ) established by the US to promote manufacturing operations in Egypt, Jordan, and Israel.
  • These zones were designed to enhance economic interdependence and strengthen political relations beyond the security arrangements of their peace agreements.

 

India as an economic anchor in West Asia:

  • India’s participation in multilateral economic frameworks is calculated, as illustrated by it’s decision to opt out of the IPEF’s trade pillar. The concern lies in potentially binding commitments in environment and labour issues that concern trade.
  • Alternatively, in West Asia, India may be ready for an IPEF-like model that provides India with an increased degree of leadership in the format and, in turn, a greater ability to ensure compatibility with Delhi’s strategic and economic objectives.
  • The I2U2 could be the platform that India could use to lead the region economically and cement itself as an economic anchor in West Asia.

 

Conclusion:

  • The initial focus of establishing a West Asian regional framework should be to prioritise economic integration. Although this process may require a significant amount of time, it is crucial, to begin with the I2U2 Business Forum.
  • The Forum can play a key role in initiating the process by highlighting the significance of adopting market-friendly policies that attract investment, skilled professionals, and advanced technologies to the region.
  • Its objective should be to encourage institutional frameworks and business networks that gradually lead to economic integration, promoting regional interdependence.
  • In the long term, the I2U2 Business Forum has the potential to expand its membership to include other regional powers and adopt an incremental approach that effectively represents the interests of its member states and facilitates meaningful collaboration.