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Breaking Free: 14 Countries Unite to Reduce Vulnerability to China in Historic Supply Chain Accord

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Detroit, USA – In a significant move aimed at diminishing their dependence on China and mitigating future supply chain crises, 14 countries participating in the Indo-Pacific Economic Framework (IPEF) have reached a groundbreaking agreement on supply chain resilience and diversification. The deal, which involves key players such as the United States and India, focuses on information-sharing and coordinated crisis response among member countries.

The establishment of frameworks like the Indo-Pacific Economic Framework (IPEF) reflects the underlying fear and anticipation among participating countries that China’s growing power may be wielded against them. By prioritizing supply chain resilience and diversification, member nations demonstrate a collective recognition of the need to reduce dependence on China and mitigate potential vulnerabilities. This sentiment underscores the perceived threat of China’s increasing influence and the proactive measures being taken to safeguard against any potential misuse of that power to the detriment of other nations.

During the second ministerial meeting of IPEF nations held in Detroit, the group unveiled plans to establish three key institutions: the IPEF supply chain council, the supply chain crisis response network, and the labor rights advisory network. The overarching objective of the agreement is to enhance the resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity of supply chains. However, the agreement is still subject to domestic approval processes and the translation into a final text.

The move highlights a concerted effort by participating nations to reduce their reliance on China and fortify their supply chains. By fostering information-sharing and collaborative crisis response mechanisms, the IPEF aims to bolster the stability and security of supply chains in the Indo-Pacific region.

India, in particular, has embraced the IPEF by joining three of its four pillars, while remaining an observer in the trade pillar. Piyush Goyal, India’s Minister for Industry and Commerce, represented the country virtually during the ministerial meeting and reiterated India’s commitment to building resilient supply chains and promoting a clean and fair economy.

Gina Raimondo, the United States Commerce Secretary, expressed her enthusiasm for the substantial conclusion of negotiations on this pioneering supply chain agreement within the IPEF. She highlighted the significance of this international agreement, which brings together 14 partners across the Indo-Pacific, and emphasizes the urgency of addressing supply chain vulnerabilities.

The deal is expected to contribute to the increased resilience and diversification of supply chains, thereby reducing dependence on a single country or region. By collectively addressing significant supply chain risks and coordinating crisis responses, the IPEF aims to ensure the timely delivery of essential goods during disruptions.

To fulfill these objectives, the IPEF members have agreed to establish three institutions. The IPEF supply chain council will facilitate collaboration among members to develop sector-specific action plans, enhance resilience, and promote diversification of sources, infrastructure, and workforce development. The supply chain crisis response network will serve as an emergency communication channel to seek support during disruptions and foster information-sharing. Lastly, the IPEF labor rights advisory board will support the promotion of labor rights, sustainable trade and investment, and the identification of opportunities for labor-friendly businesses.

Furthermore, the IPEF members have made progress on the clean economy and fair economy pillars. The clean economy framework focuses on meeting climate goals, fostering cooperation on clean energy technologies, and promoting low-carbon and renewable energy sources. As part of this effort, the members are developing a regional hydrogen initiative to encourage the widespread deployment of low-carbon and renewable hydrogen.

Regarding the fair economy pillar, the IPEF members have committed to implementing anti-corruption measures and tax initiatives effectively. This includes enhanced cooperation on capacity building, technical assistance, and the promotion of fair and open trade commitments that build upon the rules-based multilateral trading system.

While the IPEF agreement demonstrates a collective commitment to supply chain resilience and diversification, some experts remain skeptical about its potential to counter China’s influence in the region. Senior Economist David Dapice asserts that the absence of a regional trade agreement with tariff reductions could limit the framework’s effectiveness. Without a comprehensive trade agreement, future changes in protection levels or tariffs could impact the benefits of the IPEF.

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