IPEF – Indo-Pacific Economic Framework Agreement

IPEF - Indo-Pacific Economic Framework Agreement

The United States has been working to reduce reliance on China in the past few years, and at the Indo-Pacific Economic Framework (IPEF) meetings held in Detroit last week, the country took big steps toward that goal. The IPEF partners created four pillars, which include supply chain resilience, fair trade, clean energy and proper taxation, and anti-corruption efforts.

Working alongside Japan and 12 other Indo-Pacific nations, the United States agreed to strengthen supply chain resilience for critical items. In particular, the agreement is targeting items like semiconductors and medicines, so that they can be more readily available in emergencies. Semiconductors received a good deal of attention, as did the idea that cooperation on AI and quantum technologies could be of benefit to member nations. Other items that will likely be included are new energy technologies, minerals that can help with the building of electric vehicles and other resources that could have detrimental impact on the countries in the event of a shortage.

The agreement calls for the involved countries to form a council that will focus on coordinating supply chain activities. It will also create a crisis response network that could help notify the 13 partners of potential supply chain disruptions. The group will work from an emergency communications channel, which will allow countries to request support during supply chain disruptions. They will also coordinate closely during any crises that arise, with the hope that such partnership will help everyone recover more quickly.

In addressing labor rights, the agreement calls for an advisory board tasked with raising labor standards throughout supply chains. Members will include government, worker, and employer representatives, giving more voices a place at the table.

Looking at the clean energy pillar, the IPEF partners will introduce a regional hydrogen initiative that will encourage far-reaching use of renewable and low-carbon hydrogen, along with its derivatives.

The fair-trade pillar proved one of the tougher negotiating points among the countries. Partners did not negotiate over tariff reductions or market-access aspects of free trade. The group did, however, seek out rules on agriculture, labor, and environmental standards.

Within the United States, the IPEF agreement was not received without some complaints and pushback. Some industry groups and farming groups spoke up over a lack of access improvements—the groups felt that the new agreement held a lower status to other, existing trade deals in the region. One is led by China, which the industry groups cited in their pushback. However, stakeholders in the IPEF hold the agreement up as an untraditional trade deal, one that will better serve the supply chain, sustainability, and inclusiveness.

In addition to the United States and Japan, other countries involved in the IPEF include Vietnam, Thailand, and South Korea, among others. Canada has expressed interest in joining the agreement in the future. The IPEF may not be perfect, nor received with equal enthusiasm by everyone, but it represents progress in developing global supply chain resilience. Contact OPSdesign today for all your supply chain consulting needs.