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14 IPEF nations forge stronger supply chains to reduce reliance on China

Mint | 29 May 2023

14 IPEF nations forge stronger supply chains to reduce reliance on China

by Mausam Jha

In an evident attempt to decrease their dependency on China and prepare for potential future supply chain challenges, 14 nations involved in the Indo-Pacific Economic Framework (IPEF), including the United States and India, have reached an agreement aimed at enhancing supply chain resilience and diversification.

The agreement involves sharing information and coordinating responses during crises.

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.

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 agreement will undergo the process of being translated into a final text and will subsequently be subject to domestic approval procedures in each participating country. Alongside the United States and India, the members of IPEF consist of Australia, Brunei, Fiji, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam.

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.

This will be achieved through the identification and monitoring of critical sectors and key goods by each partner. The pact also seeks to enhance crisis coordination and response to supply chain disruptions by fostering collaborations that facilitate the timely delivery of affected goods.

The agreement will enable cooperation, mobilize 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.

According to the statement, IPEF members have reached a consensus to achieve these objectives by adhering to market principles, reducing market distortions, eliminating unnecessary trade restrictions and barriers, and safeguarding the confidential information of businesses.

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".

Although India is not involved in the trade pillar, the remaining members of IPEF have expressed their dedication to formulating comprehensive trade commitments that are of high standards, inclusive, free, fair, and promote openness. These commitments will be built upon the foundation of a rules-based multilateral trading system.

 source: Mint