In an effort to reduce the dependence on China, and meet future supply chain crises, 14 participant countries in the Indo-Pacific Economic Framework (IPEF), including the United States (US) and India, have made a deal on supply chain resilience and diversification through information-sharing and coordinated crisis response.
The agreement involves sharing information and coordinating responses during crises.
The supply chain pillar is aimed at ensuring that the countries, which are part of IPEF, cooperate to deal with situations, such as shortage of raw material to manufacture vaccines or medicines, as was the case during Covid, “including unnecessary restrictions and impediments to trade”.
During the recent in-person ministerial meeting of the Indo-Pacific Economic Framework (IPEF) nations held in Detroit, the participating countries reached an agreement to establish an IPEF supply chain council, supply chain crisis response network, and labour rights advisory network. The group issued a statement highlighting these developments.
Additionally, the meeting discussed the advancements made in the trade, clean economy, and fair economy aspects of the framework. As part of the clean economy initiative, interested member countries have committed to establishing a regional hydrogen initiative.
While remaining an observer in the trade pillar, India has joined three of the four pillars of IPEF. At the ministerial, minister for Industry and Commerce, Piyush Goyal represented New Delhi virtually. Goyal tweeted, “Reiterated India’s commitment towards building resilient supply chains and a clean & fair economy to spur further growth in the region.”
In an announcement, US Commerce Secretary Gina Raimondo expressed her satisfaction in revealing that the Indo-Pacific Economic Framework (IPEF) had made significant progress in negotiating a unique and unprecedented supply chain agreement.
The deal has to be translated into a final text and then is subject to the domestic approval processes in each country. Besides the US and India, IPEF members include Australia, Brunei, Fiji, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam.
In a statement, IPEF members said that the deal on supply chains aimed to increase the “resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity of their supply chains” through both collaborative activities and individual actions by each state.
According to a statement issued by the members of IPEF, the agreement regarding supply chains aims to enhance various aspects of their supply chains, including resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity. This objective will be achieved through collaborative efforts as well as individual actions undertaken by each participating country.
The members of IPEF clarified the goals of the agreement, stating that it aims to establish a framework for enhancing the collective understanding of major supply chain risks.
Announcing the deal, US commerce secretary Gina Raimondo tweeted that she was glad to announce that IPEF had substantially concluded negotiations on a “first-of-its-kind” supply chain agreement. “It’s a big deal — and the first time there will be an international agreement on supply chains that brings together 14 partners across the Indo-Pacific.”
The deal has to be translated into a final text and then is subject to the domestic approval processes in each country. Besides the US and India, IPEF members include Australia, Brunei, Fiji, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam.
In a statement, IPEF members said that the deal on supply chains aimed to increase the “resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity of their supply chains” through both collaborative activities and individual actions by each state.
It will facilitate cooperation, mobilise investments and promote regulatory transparency in sectors “critical to national security, public health and safety, or the prevention of significant or widespread economic disruptions”; respect, promote and realise, “in good faith”, labour rights in the supply chains of partner countries; ensure availability of adequate skilled workforce in critical sectors and identify opportunities for technical assistance.
The statement suggests that IPEF members have agreed to do so by respecting market principles, minimising market distortions, including unnecessary restrictions and impediments to trade, and protecting the confidential information of businesses.
The agreement will enable cooperation, mobilise investments, and encourage regulatory transparency in sectors deemed crucial for national security, public health and safety, or the prevention of substantial economic disruptions. It also aims to uphold, promote, and sincerely implement labour rights within the supply chains of partner countries.
Additionally, it focuses on ensuring the availability of a skilled workforce in critical sectors and identifying opportunities for technical assistance.
In order to meet these objectives, the grouping has agreed to set up three institutions.
IPEF supply chain council will provide a mechanism work for members to work together to develop “sector-specific action plans for critical sectors and key goods” to enhance resilience, “including through diversification of sources, infrastructure and workforce development, enhanced logistics connectivity, business matching, joint research and development, and trade facilitation”.
IPEF supply chain crisis response network will serve as an “emergency communication channel” for members to seek support during disruptions and facilitate information-sharing. And the IPEF labour rights advisory board will be a multi-stakeholder body supporting the promotion of labour rights in supply chains, sustainable trade and investment and facilitation of opportunities for investments in labour-friendly businesses. It is noteworthy that the labour-related body is merely advisory in nature and does not entail hard and specific commitments from members.
On the clean economy, IPEF members said they are exploring ways to meet their climate goals and will cooperate on “research, development, commercialization, availability, accessibility, and deployment of clean energy and climate-friendly technologies, and facilitate investment towards climate-related projects in the region”.
The grouping said it will do so by connecting markets through policies and standards, “ensuring that energy is sustainable, resilient, reliable, and affordable, and promoting low-and zero-emission goods and services”. To deliver concrete benefits, IPEF members are currently, according to a statement, identifying and developing initiatives to advance cooperation in areas critical to realise their “unique pathways towards net-zero emission economies”. Among these initiatives, interested IPEF members have agreed on a “regional hydrogen initiative to encourage widespread deployment of low-carbon and renewable hydrogen and its derivatives”.
In terms of the fair economy pillar, IPEF welcomed progress on “effectively implementing and accelerating progress on anti-corruption measures and tax initiatives, including through enhanced cooperation on capacity building and technical assistance”.
While India isn’t a part of the trade pillar, the other IPEF members affirmed their commitment to “craft high-standard, inclusive, free, fair, and open trade commitments that build upon the rules-based multilateral trading system”.
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