India, along with the United States and 12 other Indo-Pacific Economic Framework (IPEF) members, has officially signed an agreement focused on enhancing supply chain resilience. The objective of this pact is to actively diminish dependence on China and facilitate the relocation of production for critical sectors and essential goods among member countries.

The Indo-Pacific Economic Framework (IPEF) consists of 14 members, including India, Australia, the United States, Japan, Fiji, South Korea, New Zealand, Singapore, and Thailand. Together, these nations represent 40% of the global gross domestic product and 28% of the global trade in goods and services.

The formal agreement was signed in San Francisco. Piyush Goyal, the Minister of Commerce and Industry, is actively participating in the IPEF ministerial meeting, emphasizing the strategic importance of the pact in fostering economic cooperation and resilience among member countries.

"India joins the US and 12 other Indo-Pacific Economic Framework for Prosperity partners to ink the #IPEF Supply Chain Resilience Agreement, a first-of-its-kind international agreement that will fortify and strengthen global supply chains, foster adaptability, stability and sustainability," Goyal said in a post on social networking platform X.

Negotiations on this agreement, a key component of the IPEF and focused on fostering more investment and an integrated supply chain, were successfully concluded by the members of the bloc on May 27.

"The agreement is expected to make IPEF supply chains more resilient, robust, and well-integrated, and contribute towards economic development and progress of the region as a whole," the commerce and industry ministry said in a release.

The agreement will become effective upon implementation by any five member countries. Goyal underscored the importance of increased collaboration to achieve the collective objectives of the IPEF. This emphasis particularly centered on the mobilization of affordable financing for transitioning to a clean economy and the augmentation of technology cooperation.

Goyal "also urged early implementation of the envisaged cooperative work under IPEF, including on (the) biofuels alliance suggested by India," the ministry said.

The signed supply chain agreement within the Indo-Pacific Economic Framework (IPEF) holds numerous advantages, including diversification of supply chains, increased investment mobilization, deeper integration of India into global value chains, support for micro, small, and medium enterprises (MSMEs), and the creation of a seamless regional trade ecosystem, facilitating the flow of Indian products.

Structured around four pillars concerning trade, supply chains, clean economy, and fair economy (addressing issues like tax and anti-corruption), India has participated in all pillars except for trade. The supply chain agreement entails the establishment of three new bodies within IPEF to enhance collaboration among member nations. These include the supply chain council, the supply chain crisis response network, and the IPEF labour rights advisory board.

The proposed advisory board, consisting of government, worker, and employer representatives, along with a subcommittee of government officials, aims to support the promotion of labour rights in supply chains, sustainable trade and investment, and the facilitation of opportunities for investment in businesses respecting labor rights. Notably, clauses related to labour are designed as cooperative mechanisms and are not subject to dispute settlement.

While the trade pillar of IPEF is still under discussion, members are expected to announce the conclusion of talks for the fair economy and clean economy pillars during the week.

Image source: The Economic Times