The members of the Indo-Pacific Economic Framework (IPEF) reached a significant milestone at the IPEF Ministerial Meeting in Detroit, Michigan with the substantial conclusion of negotiations on a landmark Supply Chain Agreement. This agreement, involving all 14 IPEF member countries, is aimed at fortifying the resilience, efficiency, and inclusivity of their supply chains through a combination of collaborative activities and individual actions. The agreement lays the foundation for improving supply chain resilience and transparency, as well as enhancing public-private cooperation and business certainty in and among IPEF member states – particularly in sectors deemed “critical” by member governments.
A Closer Look at the Agreement
Based on the description provided, the IPEF Supply Chain Agreement is designed to build a collective understanding of significant supply chain risks. According to a Joint Statement released by the IPEF parties, the agreement also aims “to coordinate crisis response measures and to expand cooperation to better prepare for, and mitigate the effects of, disruptions to better ensure business continuity and improve logistics and connectivity, particularly in critical sectors.” Ultimately, as the U.S. Commerce Department explained in its press release announcing the deal, the “proposed IPEF Supply Chain Agreement seeks to ensure that American workers, consumers, and businesses benefit from resilient, reliable, and efficient supply chains by facilitating the steady supply of the materials, components, and inputs that U.S. companies rely on to compete effectively on the world stage.”
The text of the agreement has not yet been finalized. According to the Commerce Department, the negotiated agreement will now begin undergoing “further domestic consultations and a comprehensive legal review to prepare a final text for signature and then ratification, acceptance, or approval.” However, certain aspects of the agreement have been publicly announced, including the creation of certain new IPEF Supply Chain bodies and upcoming U.S. government-led initiatives in support of the Agreement’s goals.
New Bodies Established Under the Agreement
To facilitate the implementation of the agreement, three new IPEF Supply Chain bodies will be established:
1. The IPEF Supply Chain Council: This body will work collaboratively to develop sector-specific action plans for critical sectors and key goods to enhance the resilience of IPEF partners’ supply chains. This includes diversification of sources, infrastructure and workforce development, enhanced logistics connectivity, business matching, joint research and development, and trade facilitation.
2. The IPEF Supply Chain Crisis Response Network: This body will establish an emergency communications channel for the IPEF partners to seek support during a supply chain disruption and to facilitate information sharing and collaboration among the IPEF partners during a crisis. This network will enable a faster and more effective response that minimizes negative effects on their economies.
3. The IPEF Labor Rights Advisory Board: This body will consist of government, worker, and employer representatives to support the IPEF partners’ promotion of labor rights in their supply chains. The board will also facilitate opportunities for investment in businesses that respect labor rights. In addition, the IPEF partners have committed to creating a mechanism for addressing facility-specific violations of labor rights within supply chains involving IPEF members. However, this mechanism is likely to lack the teeth of the labor rights mechanism established under the U.S.-Mexico-Canada Agreement.
Technical Assistance and Capacity Building Programs
Additionally, in support of the agreement, the United States has committed to several new technical and capacity building programs and initiatives:
- The United States will hold a series of trainings and symposiums on issues related to supply chain monitoring and operations, inviting experts from each of the IPEF markets to improve cargo risk assessment practices, share best practices in incident response planning to help industries affected by natural disasters and cyber incidents recover faster, and enhance the ability of IPEF partners to identify import dependencies and other potential supply chain bottlenecks.
- The United States will launch an IPEF STEM Exchange Program to match early- and mid-career professionals from IPEF countries with professional development opportunities related to supply chain operations.
- Secretary of Commerce Gina Raimondo will join the President’s Export Council on a fact-finding mission to select IPEF markets. The Department of Commerce will also lead up to ten trade missions to IPEF markets over the next five years focused on linking American exporters to opportunities in sectors for which IPEF Partners are seeking increased diversification and resilience.
- The United States will work towards Mutual Recognition Arrangements (MRAs) with the eight IPEF Partners’ Authorized Economic Operator (AEO) Programs that currently do not have MRAs with the United States’ Customs Trade Partnership Against Terrorism (CTPAT) program.
- The United States will announce its support for cooperation on digital shipping, including pilot projects with IPEF Partners starting with the Port of Singapore.
- The United States will also announce several new feasibility studies and reverse trade missions, which will bring experts from IPEF markets to the United States to meet with leading U.S. exporters. This will support supply chain modernization in IPEF markets, while creating new business opportunities for American firms and workers.
Taken together, the initiatives and new bodies created under the IPEF Supply Chain Agreement represent a significant effort to improve coordination among member country governments and between governments and the private sector on enhancing supply chain resilience. The focus on improving coordination as a primary focus is entirely appropriate, as a certain degree of policy alignment will be essential to create resilience supply chains in critical industries. Because every supply chain is unique, with its own challenges and opportunities, it can be difficult to craft substantive disciplines that apply across them.
However, as the agreement is essentially built around creating processes for collaboration and cooperation, its success will depend on how it is implemented. History tells us that many committees and similar structures established by U.S. trade agreements meet sparingly, if at all. How robustly the IPEF members engage with each other in these newly-created entities, as well as with the full range of relevant stakeholders in their jurisdictions, and the collective political will they bring to such engagement, will determine whether the agreement fulfills its promise and becomes a model upon which other agreements are built. The level of engagement of the members will be influenced, in large part, by the knowledge, energy, and ideas that the private sector brings to the table.