A landmark agreement concerning supply chain resilience in the Indo-Pacific region, led by the United States and involving Japan and other key economies, has officially come into effect. This agreement marks a significant milestone in multinational collaboration aimed at enhancing resilience and coordination during times of disruption in the region.
Negotiated under the U.S.-led Indo-Pacific Economic Framework, launched in 2022, the agreement enables member economies to support one another in securing critical items during supply chain disruptions, such as those experienced during a pandemic. Notably, the absence of China in the framework has led some to view it as a strategy to reduce dependence on the country for essential goods, including semiconductors.
Five countries, including the United States, Japan, Fiji, India, and Singapore, have completed the necessary domestic procedures, allowing the supply chain agreement to enter into force. The Indo-Pacific Economic Framework, comprising 14 economies, focuses on fostering deeper economic engagement across four pillars: trade, supply chain resilience, clean energy, and taxation coupled with anti-corruption measures.
The supply chain agreement, finalized in November and effective from May 2023, represents the first agreement to be implemented among the initiatives developed by Indo-Pacific Economic Framework members. Under this agreement, countries will identify critical sectors and key goods, devising action plans to enhance the resilience and competitiveness of these items. Additionally, an IPEF Supply Chain Crisis Response Network will be established to facilitate emergency communications and information exchange among members.
Furthermore, efforts will be made to address labor rights concerns across supply chains by establishing a representative body composed of government, workers, and employers. The Japanese government has expressed optimism about the agreement’s potential to strengthen supply chains with like-minded countries, both during peacetime and emergencies.
The Indo-Pacific Economic Framework encompasses economies accounting for approximately 40% of global GDP, and while trade agreements have yet to be reached, significant progress has been made across other pillars. Spearheaded by the Biden administration, this initiative seeks to deepen economic engagement in the Indo-Pacific region amidst China’s expanding influence, emphasizing collaboration and resilience-building efforts.
