IPEF supply chain resilience agreement opens several doors for India 

The Supply Chain Resilience Agreement aims to reduce dependence on China and enhance the manufacturing of essential goods within member nations.
Union Minister Piyush Goyal. (File photo)
Union Minister Piyush Goyal. (File photo)

The Indo-Pacific Economic Framework’s (IPEF), Supply Chain Resilience Agreement (Pillar 2), is probably the fastest concluded plurilateral economic cooperation agreement, which the Minister of Commerce and Industry, Piyush Goyal, signed on November 14, 2023. India, along with 13 other countries (Australia, Brunei Darussalam, Fiji, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, the US and Vietnam) are party to the agreement, which aims to fortify global supply chains and enhance adaptability, stability, and sustainability.

The agreement 
The Supply Chain Resilience Agreement aims to reduce dependence on China and enhance the manufacturing of essential goods within member nations. It provides a framework to build collective understanding of significant supply chain risks, supported by each partner’s identification and monitoring of its own critical sectors and key goods.

<strong>Arpita mukherjee, </strong>Professor, ICRIER
Arpita mukherjee, Professor, ICRIER

It is expected to make the supply chain robust and well-integrated through crisis response measure, cooperation for mitigation of supply chain disruptions, improvements in logistics and connectivity and by mobilising investment. It aims to protect and benefit labour through adherence to ILO Declaration on Fundamental Principles and Rights at work (1998), as amended in 2022, and ensure the availability of a sufficient number of skilled workers in critical sectors and goods, including by upskilling and reskilling workers. It also aims to identify opportunities for technical assistance and capacity building in strengthening IPEF partners’ supply chains. The agreement will establish three IPEF supply chain bodies to facilitate cooperation among the IPEF partners on supply chain issues. These are: 

• The IPEF Supply Chain Council: The agreement will establish a mechanism for the IPEF members to work collectively to develop sector-specific action plans for critical sectors and key goods to enhance the resilience of IPEF member countries’ supply chains, through measures like diversification of sources, infrastructure and workforce development, enhanced logistics connectivity, business matching, joint research and development, and trade facilitation.

• The IPEF Supply Chain Crisis Response Network: This network will be an emergency communications channel for the member countries to seek support during a supply chain disruption and to facilitate information sharing and collaboration during a crisis.

• The IPEF Labour Rights Advisory Board: The advisory board will consist of government, worker and employer representatives, as well as a subcommittee composed of government representatives, to support member countries in promotion of labour rights in their supply chains, promoting sustainable trade and investment, and facilitate opportunities for investment in businesses that respect labour rights as per the ILO standards. 

Opportunities for India 
Once implemented, the agreement is expected to bring in several benefits to India. The members represent around 40% of the global GDP and 28% of international trade. India can gradually replace China as the global sourcing hub for IPEF partner countries. Some of the potential benefits includes a shift of production centres in key goods/critical sectors to India; increase in domestic manufacturing capacities aligning with the objective of Aatmanirbhar Bharat; and enhance investment in production of key goods, logistics services and infrastructure.

It will help in deeper integration of MSMEs in value chains and enhance trade facilitation through digital exchange of trade documentation and quicker port clearances. Provision of joint research and development can help diversify manufacturing and adhering to ILO standards will facilitate the transition of employment from informal to formal. 

Speaking at the event for signing the agreement, Goyal emphasised on enhanced collaboration to realise collective aims of the IPEF, particularly on the need for mobilising affordable financing for clean economy transition and for enhancing technology cooperation. He also urged early implementation of the envisaged cooperative work under IPEF, including on bio-fuels alliance. At the sideline of the signing-in ceremony, Goyal held meetings with businesses communities for facilitating investment in India and B2B collaborations. 

The agreement is unique as it aims to increase the resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity of supply chains of the signatory countries through both collaborative activities. India already has trade agreements with several IPEF partners and these needs to be reviewed in the line of this new initiative. While many components of this agreement are not binding, if the IPEF partners are committed to operationalise the agreement, this will bring benefits to businesses and workers in the member countries.

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