Assessing IPEF’s New Supply Chains Agreement

Negotiators from 14 Indo-Pacific nations concluded negotiations in substance on a new Indo-Pacific Economic Framework for Prosperity (IPEF) Supply Chain Agreement. At a ministerial-level meeting on the margins of an Asia-Pacific Economic Cooperation (APEC) forum gathering in Detroit, Michigan, IPEF parties released a statement outlining major contours of the agreement. The first of four potential agreements that the United States aims to conclude under IPEF, the supply chains agreement represents a positive step toward further economic integration in the Indo-Pacific. However, questions remain about how binding or impactful the supply chains agreement will be and which additional agreements will come to fruition under the framework this year.

Q1: What did IPEF partners agree to under the new Supply Chains Agreement?

A1: The IPEF Supply Chains Agreement is heralded by some IPEF parties as the “world’s first multilateral supply chain agreement.” IPEF parties—Australia, Brunei, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam—agreed to “make [their] supply chains more resilient and competitive” and “establish a framework for lasting cooperation on issues like workforce development, supply chain monitoring, investment promotion, and crisis response.”

While IPEF partners did not make any binding trade commitments toward achieving these goals, the new agreement did state new shared expectations for partners to identify and monitor supply chains for critical sectors and key goods, improve crisis coordination and response during crisis, strengthen supply chain logistics, enhance the role of workers, boost workforce development, and identify opportunities for technical assistance and capacity building.

Though final text on the IPEF Supply Chains Agreement is not yet available, the United States and its IPEF partners have agreed to a variety of new supply chain commitments. The United States has committed to several new technical and capacity building programs: digital shipping pilot projects, including one with the Port of Singapore; expansion of the U.S. Customs Trade Partnership Against Terrorism (CTPAT) program in the Indo-Pacific; a IPEF STEM Exchange Program; and additional trainings, symposiums, and two-way trade missions with IPEF partners. Beyond these specific measures, the United States also hopes to grow public and private sector engagement and investment in the region. In return, the United States hopes the IPEF Supply Chain Agreement will better position IPEF partners to reshape their supply chains to meet U.S. interests including resilience and competitiveness, in line with the broader U.S. friend-shoring agenda that incentivizes supply chain reshuffling to countries that do not pose a national security threat.

Three new structures are being created to operationalize the agreement:

  • IPEF Supply Chain Council: This new body will attempt to build resilience and competitiveness in certain critical sectors. The council will oversee the development of “action plans” for these sectors that could help companies proactively identify and address supply chain vulnerabilities that have the potential to become significant bottlenecks for regional supply chains.
  • IPEF Supply Chain Response Network: This is a new “emergency communications channel” that will allow IPEF parties to streamline communication and coordinate a response when one or more IPEF parties faces a supply chain crisis.
  • IPEF Labor Rights Advisory Board: This is a new advisory body made up of government, worker, and employee representatives tasked with helping to identify areas where certain labor rights concerns threaten overall supply chain resilience and compositeness. Language in the agreement’s press statement also suggests that this advisory board could recommend action under a new facility-specific mechanism for addressing allegations of labor rights inconsistencies. While the United States-Mexico-Canada Agreement’s Facility-Specific Rapid-Response Labor Mechanism provides a model for this, an IPEF mechanism would likely be less binding or reciprocal without congressional approval.

IPEF partners will further flesh out the contours of this agreement as they finalize domestic consultation and legal review, with the hope of developing final text for the IPEF Supply Chain Agreement for signature, ratification, acceptance, or approval as soon as practicable.

Q2: What is the significance of the IPEF Supply Chains Agreement?

A2: A year after IPEF was formally launched in Tokyo in May 2022, the IPEF Supply Chains Agreement is the first tangible IPEF outcome parties have produced. The conclusion of an agreement on such a wide-ranging topic within one year is an achievement in and of itself. The conclusion of the IPEF Supply Chains Agreement provides more concrete details about the Biden administration’s approach to Indo-Pacific trade and supply chain resilience. It is also a strong signal of progress after convenings in Los Angeles, Brisbane, New Delhi, Bali, and Singapore over the past few months that will boost morale and momentum as negotiators seek to conclude three more IPEF agreements before November.

The early success of the supply chain pillar, compared with the trade pillar, signals a strong regional interest in participating in new resiliency efforts. It also highlights that a diverse set of countries are keen to play a greater role in the United States’ efforts to reshape global supply chains. In prioritizing resiliency and competitiveness over pure efficiency, the United States government has found willing, if begrudging, partners in the Indo-Pacific who hope to avoid future supply chain disruptions like those experienced during the Covid-19 pandemic. Over the past few months, sources close to these negotiations have characterized negotiations on supply chains as “better than expected.”

Despite strong progress on the supply chain pillar, questions remain about the impact and durability of the final agreement. The IPEF Supply Chains Agreement will not be a traditional trade agreement, meaning U.S. commitments made will not be enshrined into U.S. law by Congress and foreign commitments will not be fully enforceable. Without specific incentives or financing mechanisms included within the agreement, critics worry that there are no practical means to catalyze the kinds of supply chain changes the agreement seeks. On key supply chains such as critical minerals, some critics also see IPEF as a missed opportunity to bring additional partners under the Inflation Reduction Act’s critical minerals sourcing umbrella.

Q3: What were other outcomes from the IPEF ministerial meeting or APEC meetings?

A3: With supply chain negotiations being the main focus of attention going into the Detroit ministerial, there were few tangible outcomes from other pillars. The Office of the U.S. Trade Representative (USTR) noted that strong progress was made on Pillar I (Trade), Pillar III (Clean Economy), and Pillar IV (Fair Economy). It was unclear to what extent progress was made on IPEF’s crucial digital economy provisions, which domestic and foreign stakeholders continue to highlight as a top priority area in IPEF. Notably, IPEF partners announced a new proposed “regional hydrogen initiative” to encourage the deployment of low-carbon and renewable hydrogen, as well as its derivatives, in the Indo-Pacific. While not all IPEF parties will join this initiative at its inception, it offers the chance for other parties to join when ready.

Separate from the IPEF ministerial meeting, representatives from a broader set of 21 Pacific Rim economies attended the Second Senior Officials’ Meeting (SOM2) and related meetings in Motor City from May 14–26. Officials from these Pacific Rim countries discussed key trade, transportation, and other economic issues, ramping up workstreams focused on building interconnectedness, innovation, and inclusivity among APEC economies in the lead up to President Biden’s hosting of APEC heads of state in San Francisco in November. While the APEC Ministers Responsible for Trade Meeting did not release a joint statement, U.S. trade representative Katherine Tai released a chair’s statement that signaled progress on sustainability and inclusivity goals.

On the margins of SOM2, U.S. commerce secretary Gina Raimondo and Ambassador Tai held meetings with Chinese commerce minister Wang Wentao, the first U.S. cabinet-level meetings with a senior Chinese official since the January 2023 Chinese balloon incident. Despite the fact that no tangible deliverables came out of these meetings, they offered a chance for U.S. and Chinese counterparts to be “candid and substantive” in their respective critiques and offered an open line to “responsibly manage the relationship.” New Zealand also chaired a meeting of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership’s (CPTPP) members on the margins of APEC.

Q4: What comes next for IPEF and APEC this year?

A4: Commerce Department and USTR officials have signaled that even with one IPEF agreement nearing conclusion, negotiating rounds will continue at a regular cadence for the other three pillars. The next IPEF negotiating round will be held in Busan, South Korea, likely in early July, with three to four more potential rounds after. U.S. officials, as well as their foreign counterparts, have stated on the record that they hope to conclude negotiations on all agreements before November.

On the APEC track, State Department officials are leading the interagency effort to prepare for Indo-Pacific heads of state to come to San Francisco in November. From July 29 to August 21, the United States will host APEC’s Third Senior Officials’ Meeting and Related Meetings (SOM3) covering workstreams including finance, energy, health, food security, and other topics. In November, heads of state and stakeholders will arrive for the APEC Leaders’ Meeting, Concluding Senior Officials’ Meeting (CSOM), and CEO Summit. It is also likely that additional gatherings among IPEF and CPTPP members will occur on the margins in San Francisco.

As the IPEF Supply Chains Agreement is finalized, regional partners are looking to the United States to take practical steps toward implementing the agreement. As noted by Korean trade minister Ahn Duk-guen, “It’s essential to quickly come up with follow-up steps in order to materialize the framework.”

Aidan Arasasingham is a research associate with the Economics Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Emily Benson is director of Project on Trade and Technology, and senior fellow of Scholl Chair in International Business at CSIS. Matthew P. Goodman is senior vice president for economics at CSIS. William A. Reinsch holds the Scholl Chair in International Business at CSIS.

Gregory Wood, CSIS Economics Program research intern, provided valuable research support.

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Aidan Arasasingham

Aidan Arasasingham

Former Research Associate, Economics Program
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Emily Benson

Emily Benson

Former Director, Project on Trade and Technology and Former Senior Fellow, Scholl Chair in International Business
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Matthew P. Goodman

Matthew P. Goodman

Former Senior Vice President for Economics