IPEF hails “first-of-a-kind” supply chain agreement
The agreement from 14 Asia-Pacific countries aims to improve coordination around supply chains and reduce vulnerabilities
Fourteen countries have reached a deal through the Indo-Pacific Economic Framework (IPEF) to improve resilience and diversification in supply chains using information-sharing and a coordinated approach to crises.
The group had its second in-person ministerial meeting in Detroit, USA in late May 2023, during which they agreed to set up an IPEF supply chain council, supply chain crisis response network and a labour rights advisory network.
Member countries the US, India, Australia, Brunei, Fiji, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam want to reduce reliance on China and to deal with future supply chain crises through the framework.
It is hoped that actions by member states will increase the “resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness and inclusivity of supply chains”.
The group has established four pillars, which are defined as covering trade, supply chains, the clean economy and fair economy.
Member countries are not obliged to join these groups. India, for example, has agreed to join three of the four, remaining an observer of the trade pillar.
The clean economy framework has agreed to set up a regional hydrogen initiative that will aim to encourage deployment of low-carbon and renewable hydrogen and its derivatives across member states.
The overall deal was welcomed by US commerce secretary Gina Raimondo who said it was a “first-of-its-kind” supply chain agreement. However, the deal has yet to be translated into its final text and will then be subject to domestic approval in each of the 14 countries.
The framework aims to identify critical sectors and key goods by each member state, thereby building a “collective understanding of significant supply chain risks”.
In the event of a crisis, collaborative action will hopefully support the “timely delivery of affected goods.” This will involve IPEF members showing “respect for market principles, minimising market distortion, including unnecessary restrictions and impediments to trade, and protecting the confidential information of business”.
Member states have agreed to collaborate on the deployment of clean energy and climate friendly technologies via policies and standards should ensure that energy is sustainable and resilient as well as affordable in the long term. Members are working on initiatives to realise their “unique pathways towards net-zero emission economies” via a process of cooperation.