In a landmark gathering of minds, the United States, Japan, and 12 other Indo-Pacific nations have forged an unprecedented agreement to fortify the resilience of critical supply chains. The momentous accord, achieved during the U.S.-led Indo-Pacific Economic Framework (IPEF) meeting in Detroit, marks a significant milestone since its inception in May of the previous year. With an overarching goal to reduce dependence on China, which has been rapidly expanding its economic clout in the region, this pact signifies a powerful stride towards safeguarding regional stability.
Deemed the “first of its kind on supply chains,” by Economy, Trade and Industry Minister Yasutoshi Nishimura, this multilateral agreement establishes a dedicated council to coordinate supply chain activities. Additionally, it sets up a pioneering “Crisis Response Network,” aimed at issuing early warnings to IPEF countries regarding potential disruptions to the supply chain. Moreover, this network will serve as a vital communication channel during emergencies, enabling prompt support and expediting recovery efforts.
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U.S. Commerce Secretary Gina Raimondo emphasized the significance of this accord during a press conference, citing the critical shortage of semiconductors that severely impacted American auto production amidst the COVID-19 pandemic. Raimondo underscored the immense value of the Crisis Response Network, expressing how it would have been instrumental in safeguarding jobs and ensuring the uninterrupted flow of supply chains during the crisis.
While the agreement does not explicitly mention specific goods, a Japanese official revealed that its scope encompasses critical minerals, semiconductors, new energy technologies, and other resources or equipment that could profoundly affect society if supply disruptions were to occur.
The comprehensive agreement seeks to enhance the resilience, efficiency, productivity, sustainability, transparency, diversification, and security of supply chains. This concerted effort addresses concerns arising from the COVID-19 pandemic and geopolitical tensions, such as Russia’s incursion into Ukraine. Furthermore, a notable component of the agreement involves the creation of a labor rights advisory board, consisting of government, worker, and employer representatives, dedicated to elevating labor standards within supply chains.
In the realm of clean energy, the IPEF partner countries have expressed their collective interest in launching a regional hydrogen initiative. The objective is to drive the widespread adoption of renewable and low-carbon hydrogen, as well as its derivatives, throughout the Indo-Pacific region. Anticipating a comprehensive agreement in November, the IPEF partners aim to align the announcement with the gathering of Asia-Pacific Economic Cooperation forum leaders in San Francisco.
It is important to note that the trade pillar of the IPEF does not encompass negotiations pertaining to tariff reductions or market-access aspects typical of traditional trade agreements. Rather, it focuses on establishing common rules pertaining to agriculture, labor, environmental standards, and trade facilitation. U.S. Trade Representative Katherine Tai reassured that progress has been made under the fair trade pillar and expressed confidence in achieving further results in the coming months. She reiterated that the IPEF’s core mission transcends mere maximization of efficiency and liberalization, aiming to foster sustainability, resilience, and inclusivity.
The IPEF represents an astounding 40% of global GDP, underscoring the pivotal role it plays in shaping the Indo-Pacific region. President Joe Biden’s launch of the initiative during his visit to Japan symbolizes the United States’ renewed commitment to the region after its withdrawal from the Trans-Pacific Partnership free trade deal in 2017. The current framework includes Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, the United States, and Vietnam, with Canada actively seeking to join the alliance.