Assessing IPEF’s supply chain breakthrough

While it’s probably a good reminder and a useful item, I can say with confidence that no kid ever dumped out their bag of goodies at the end of the night and cheered when they saw the toothbrush or read the lecture about brushing.  We were too busy eating and sorting candy or trading with friends and siblings.

Getting a lecture-wrapped toothbrush is not confined to Halloween.  As an adult, we probably encounter variations regularly.

One such “toothbrush moment” happened last weekend.  The 14 member governments of the Indo-Pacific Economic Framework (IPEF) announced the substantial conclusion of one element of the agenda—on supply chain resilience. 

No one has ever argued against building resilient supply chains.  It’s a good idea.  Of course, companies build supply chains.  But governments do need to create an environment that supports their resilience.

This idea, and the rest of the IPEF agenda, is of interest to the members of IPEF (Australia, Brunei, Fiji, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, United States, and Vietnam) who have all invested fairly significant resources into negotiations.  More than 600 delegates gathered in Singapore for the last IPEF round.

Supply chains make up one portion of the IPEF agenda, combining with a pillar on green infrastructure, one for tax and anti-corruption, and a grab bag of topics put under the heading of “trade.”  While negotiations are set to continue on the other three pillars, supply chain work is supposed to be substantially concluded at this time.

What does that mean?  Basically, participants were being pushed to deliver results in record time.  The IPEF, after all, is meant to showcase different ways of working.  It is not a trade agreement along past models.  It should be possible to get an agreement faster than other deals.

Members have spent time sharing experiences and best practices grappling with challenging supply chain bottlenecks.  Covid-19 disruptions gave ample stories for delegates to consider, but these were not the only supply chain challenges shared with the group.

It is certainly useful for members to share best practice examples and to consider different ways of achieving collaboration to craft more resilient supply chains.  There were lots of coordination issues around Covid that could be tackled in the event of future disruptive events, such as inconsistent application of rules on freight landing, flight arrangements, crew rotations, and documentation requirements for cargo and people. 

It is not necessary, however, for IPEF members to necessarily craft solutions to these issues from scratch.  As I have noted before, UNESCAP already completed an outstanding project looking into exactly the sorts of provisions that might be relevant in times of crisis.  The project created a draft legal text, a handbook, and even video training sessions for use by government officials.  It would have been fairly simple for IPEF members to simply start with these materials and adjust, if necessary, to fit the requirements of the group.

This is not what seems to have happened.  Instead, members shared experiences and tried to figure out how to solve challenges that might arise in the future.  Given the rapid timelines, it may not be a surprise that the best “solutions” turned out to be to continue talking.  In fact, most of the supply chain pillar consists of a series of committees to address specific aspects of resilience in the future.

This is, frankly, a bit like getting a toothbrush for Halloween.  It’s not a bad idea.  Talking and keeping lines of communication open is important.  But it’s not really what you thought you were getting when you dumped out the bag at the end of the night of trick-or-treating. 

As a result, businesses are already showing impatience and disappointment with IPEF.  A group of nearly 30 diverse sizable industry associations just sent a letter to the US Commerce Secretary and the US Trade Representative expressing their concerns about IPEF outcomes.  The key sentence of relevance is “However, we are growing increasingly concerned that the content and direction of the administration’s proposals for the talks risk not only failing to deliver meaningful strategic and commercial outcomes but also endangering US trade and economic interests in the Indo-Pacific region and beyond.”

IPEF’s peculiar negotiating structure, as has been noted before, is largely the result of a White House determination that market access of any kind was off the table for the talks.  The letter from businesses highlighted a range of topics that could have been included that did not offer up tariff reductions but could still provide important economic and business outcomes.  These include standards-related barriers to trade, obstacles to remanufactured goods, or specific regulatory challenges for key sectors. 

Of course, it is possible that these types of issues will end up being identified by the IPEF committee structures, with the creation of new approaches to solve some of the concerns raised by American businesses and firms across the region.  However, it’s also possible committees never get past sharing experiences or never manage to meet at all. 

The great irony is that governments and businesses do seem keen to address new issues that will be increasingly important in the future like digital trade rules, sustainable trade, or resilient supply chains.  But if the supply chain pillar that has been substantially concluded is any guide, the IPEF as a whole falls woefully short of accomplishing these tasks.  It’s a toothbrush and a lecture rather than a bag with candy.