India, US, and 12 Other Nations Sign Supply Chain Resilience Agreement, Reducing Dependence on China
India, the US, and 12 other nations have come together to sign a supply chain resilience agreement aimed at reducing their dependence on China and mitigating economic disruptions caused by supply chain shocks. The agreement was signed during a ministerial meeting of the Indo-Pacific Economic Framework for Prosperity (IPEF) in San Francisco.
The COVID-19 pandemic brought to light the vulnerability of global supply chains, with many countries heavily reliant on China for various products, including pharmaceutical raw materials. This agreement intends to address this issue by diversifying supply chains and potentially shifting production centers in critical sectors.
Commerce and Industry Minister Piyush Goyal highlighted the significance of this agreement, stating that it would fortify and strengthen global supply chains while promoting adaptability, stability, and sustainability. The pact offers several benefits, such as supply chain diversification, mobilization of investments, and deeper integration of India into global value chains. It also aims to support Micro, Small, and Medium Enterprises (MSMEs) and create a seamless regional trade ecosystem to facilitate the flow of Indian products.
The agreement, one of the four pillars of the IPEF, was concluded by the member countries in May this year. It is expected to enhance the resilience, robustness, and integration of IPEF supply chains, contributing to the overall economic development and progress of the region.
During the signing event, Minister Goyal emphasized the importance of collaboration to achieve the collective goals of the IPEF, particularly in terms of mobilizing affordable financing for a clean economy transition and enhancing technology cooperation. He also proposed the early implementation of cooperative initiatives, including a biofuels alliance suggested by India.
In addition to signing the agreement, Minister Goyal held bilateral meetings with the United States Secretary of Commerce, Gina Raimondo, and Malaysia’s Minister of International Trade and Industry, Tengku Zafrul Aziz. Discussions were held with ASEAN counterparts on the progress made in the clean and fair economy pillars, with Minister Goyal urging the expedited conclusion of the free trade agreement review exercise.
The IPEF was jointly launched by the US and other partner countries in the Indo-Pacific region in May 2020. It focuses on trade, supply chains, clean economy, and fair economy. While India has joined all the pillars except for trade, the members are expected to announce the conclusion of talks for the clean economy and fair economy pillars during this week.
The member countries of the IPEF bloc consist of Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the US, and Vietnam. The agreement will come into force as soon as it is implemented by any of the five member countries.
The Indian Ministry of Commerce is planning to hold an outreach program across India to educate the domestic industry about the benefits of the agreement and how it can be utilized. The agreement seeks to provide a framework for understanding significant supply chain risks, improving crisis coordination and response, promoting regulatory transparency, and safeguarding sectors critical to national security and public health.
To monitor and implement the agreement, the IPEF bloc will establish the IPEF Supply Chain Council, which will meet annually. Additionally, the bloc will set up the IPEF Supply Chain Crisis Response Network to address emergency issues and facilitate collaboration among member countries during a crisis. An IPEF Labor Rights Advisory Board will also be formed to promote labor rights in supply chains.
In summary, the signing of the supply chain resilience agreement by India, the US, and 12 other nations marks a significant step towards reducing dependence on China and strengthening global supply chains. By diversifying supply chains, mobilizing investments, and promoting regulatory transparency, the agreement aims to build a more resilient and integrated regional trade ecosystem, benefiting member countries and contributing to the overall economic development and progress of the Indo-Pacific region.
