IPEF Member Countries conclude landmark supply chain agreement to enhance resilience

A landmark announcement revealed that the member countries of the Indo-Pacific Economic Forum (IPEF) have concluded the negotiations for the Supply Chain Agreement during the IPEF Ministerial Meeting held in Detroit (Michigan, USA). This significant step will strengthen supply chains by enhancing resilience and reducing vulnerabilities. The IPEF is a bloc of 14 members, namely, Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, the United States, and Vietnam, who will work together for the betterment of each member’s supply chain ecosystem, as well as that of the region.

The IPEF focuses on a few key areas of the supply chain industry including resilience, efficiency, productivity, sustainability, transparency, diversification, and security. It also advocates fairness and inclusivity of the member countries’ supply chains.

The idea of the IPEF germinated as these countries realised the need to reduce their dependence on China as the only source to fulfill their manufacturing as well as supply chain needs. The extended lockdowns and resultant disruptions in manufacturing and supply chain activity were the main reasons that the IPEF stemmed from. As businesses globally reassessed their sourcing strategies, the governments of various countries also had to take notice of the same and act on it.

To make things worse for supply chains operating around the world, the challenges created during the pandemic were further aggravated when coupled with the geopolitical and geo-financial situations created by the Russia-Ukraine war. While complete decoupling from China is not feasible due to existing dependencies, collective efforts are being made to address these issues. De-risking strategies have emerged as a practical approach, along with the formation of smaller groupings that adopt feasible measures to minimize vulnerabilities and optimize opportunities.

Launched in May 2022, the IPEF focuses on strengthening economic engagement and fostering peace and prosperity in the Indo-Pacific region on the back of its four key pillars – trade, supply chains, clean economy, and fair economy.

Source: The Economic Times

The negotiations leading to the IPEF Supply Chain Agreement involved multiple rounds of consultations, negotiations, virtual inter-sessional meetings, and bilateral discussions. The agreement encompasses various institutional components, including the IPEF Supply Chain Council, the IPEF Supply Chain Crisis Response Network, and the IPEF Labor Rights Advisory Board, each tasked with specific agendas.

The IPEF Supply Chain Crisis Response Network has been established to create an emergency communication network among member countries. This stem of the IPEF will facilitate early warnings and post-impact support in the event of disruptions. It has been designed to enhance information-sharing and cooperation, enabling a faster and more effective response to minimize negative economic effects.

The IPEF Supply Chain Council, on the other hand, will develop sector-specific action plans for critical sectors and key goods. These plans will focus on enhancing supply chain resilience through diversification of sources, infrastructure and workforce development, logistics connectivity, business matching, joint research and development, and trade facilitation.

The IPEF will also establish a Labor Rights Advisory Board, consisting of government representatives, workers, and employer representatives, as well as a subcommittee composed of government representatives, to support the IPEF partners’ promotion of labor rights in their supply chains, promotion of sustainable trade and investment, and facilitation of opportunities for investment in businesses that respect labor rights.

The IPEF Supply Chain Agreement builds upon the existing efforts of like-minded countries, such as the Australia-Japan-India trilateral’s Supply Chain Resilience Initiative. These initiatives aim to enhance resilience and minimize disruptions. The IPEF partners are committed to operationalizing this landmark Agreement as soon as practicable, including starting preparatory work, to bolster resilient supply chains while recognizing the different economic and geographic characteristics of the partners.

Leave a Reply

Your email address will not be published. Required fields are marked *

LATEST NEWS