AFTINET | 9 September 2023
Preliminary summary comments on the Indo-Pacific Economic Framework (IPEF) Supply Chain text (Pillar 2)
by Dr Patricia Ranald, Convener Australian Fair Trade and Investment Network (AFTINET)
This is a preliminary summary analysis. A more detailed analysis will be circulated later.
Negotiations for this text were completed on May 28 2023, and the text was released today, September 8, 2023. The text is likely to be signed in November 2023, after which it will be tabled in Parliament and reviewed by the Joint Standing Committee on Treaties, which would mean that the agreement could come into force in the first quarter of 2024.
All 14 IPEF members have negotiated the supply chain text. They are the US, Australia, Brunei, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, Fiji and Vietnam. Three other pillars on trade, environment and tax and anti-corruption issues are still being negotiated.
IPEF is not a traditional trade agreement because there is no additional market access provided through reductions in tariffs on goods or increased market access for services.
This means that any commitments made by governments cannot be enforced by trade penalties.
This text deals with the focus of IPEF, which is to reduce supply chain dependence on China and to create alternative networks of supply chains and prevent disruptions.
It is welcome that the text mentions the importance of consultations about the impacts of supply chains with workers, communities, women, Indigenous Peoples, persons with disabilities, rural and remote community populations and minorities. However it is disappointing that these mentions in the preamble and in the text are aspirational and non-binding, rendering them ineffective. References to the ILO declaration on the Fundamental Rights of Workers (p. 4), and the one mention of sustainable forms of production and the circular economy (p. 6) are also welcome since most of the regional trade agreements do not include any such references at all. However the processes for dealing with labour rights issues are not transparent and involve consultations only without any final resolution or penalties. There are no processes at all in this pillar for dealing with environmental issues. Pillar 3 of the IPEF is meant to deal with environmental and climate change issues.
In general much of the language uses verbs like “intend to” and “commit to” rather than the stronger “shall” meaning those commitments are weak, and their implementation relies on cooperation through a series of committees which are listed below.
Most of the “shall” language refers to sharing information and cooperation about supply chain information, providing information to governments and business about regulatory frameworks and about disruptions to supply chains, and to the establishment of the committees.
Governments commit to sharing information about critical supply chains , disruption to supply chains and about labour rights through a series of committees. The following committees, established within 30 days after the agreement comes into force, are meant to select chairs after 60 days and develop terms of reference and work programs after 120 days.
1. The IPEF Supply Chain Council, (p. 9) has one senior official representative from each country, and will develop an action plan and establish teams to develop action plans in each country to share information and develop projects to improve supply chains. Possible access to investment and funding of infrastructure and development projects are mentioned, but there are no specific funding or development commitments.
2. The IPEF Supply Chain Response Network (p. 12) which is intended to respond to disruptions in supply chains.
3. The Labour Rights Advisory Board, (p.13) which it is intended to respect promote and realise labour rights in IPEF supply chains. This will have three representatives from each of the 14 countries from business, , government and worker representative bodies (presumably unions, although this word is not used), a total of 42 people. This is meant to monitor and report on labour rights in IPEF countries, in consultation with the ILO. The exact relationship with the ILO and any overlap with ILO reports are not clear.
4. The Labour Rights Advisory Board subcommittee, (p. 15) which consists of one government representative from each country. This body is meant to address what are called Facility Specific Labour Rights Inconsistencies. This subcommittee makes decision by a two-thirds majority and is meant to develop guidelines for a reporting mechanism about violations of labour rights in specific enterprises 180 days after the agreement comes into force. This ensures the state representatives control the process.
This facilities- based process is partly modelled on the dispute process in the US-Mexico-Canada Agreement, but it lacks the transparency and final enforcement process of trade penalties which give that agreement some enforceability.
All the details of the complaint are to be kept confidential during the complaints process (p.16), and the process only results in consultation between the parties and then between the subcommittee and the parties, without any obligation to reach a solution. This means the process is unenforceable.
The subcommittee will maintain a public list of unresolved allegations but the list will only identify the countries and sector involved, and the specific labour right involved, but will not identify the enterprise (p. 17).
Banning asbestos in supply chains
Asbestos products are now banned in Australia. The banning of deadly asbestos products is endorsed by the World Health Organisation and the ILO, and permitted by the World Trade Organisation. This is the first time that asbestos has been specifically mentioned in a trade related agreement in the region, where asbestos is still extensively used as a building material in several countries, despite regional union and public health campaigns, in which Australian unions and APHEDA have played a leading role.
This issue of a ban was raised in submissions to the Australin government by AFTINET and the ACTU, and was pursued in the negotiations by the Australian government, but appears to have been opposed by other governments.
The resulting compromise clause reads
“The parties intend to cooperate to provide technical assistance and capacity building to prevent asbestos -related diseases and to promote transition from the use of asbestos to safer alternative products in IPEF supply chains.” (p. 7)
it is important that the issue is acknowledged, but this falls far short of a ban and it remains to be seen whether the intention to cooperate will translate into action.
Treaty of Waitangi exception
This clause enables the New Zealand Government “to accord more favourable treatment to Māori in respect of matters covered by the agreement, including in fulfilment of its obligations under the Treaty of Waitangi “(p. 22). We do not know if the Australian government sought any similar exception relating to Australian First Nations people.
Withdrawal after three years
The final provisions of the agreement allow parties to withdraw from the agreement by providing written notification of withdrawal, which will take effect six months after the date of receipt (p.24)
It is clear there was major disagreement between the negotiating countries about the strength of commitments and whether they should be enforceable, particularly in relation to labour rights and the asbestos ban.
The end result in the text is weak commitments with no enforceability. It remains to be seen whether governments will comply with the setting up of consultation committees and whether these processes will result in actual changes in supply chains or improvements in labour rights standards.