Revolutionizing the Industry: Groundbreaking IPEF Supply Chain Agreement

The first agreement negotiated as part of the Indo-Pacific Economic Framework for Prosperity (IPEF) has been released, providing concrete insights into the potential of the agreement to enhance the region’s economic architecture. The agreement focuses on supply chain resilience, aiming to increase transparency, facilitate investment, and encourage digital standards. However, the broad and non-binding language may leave it open to interpretation, potentially leading to dead letters with little tangible impact.

The new institutional mechanisms may provide more concrete outcomes, including an IPEF Supply Chain Council, an IPEF Supply Chain Crisis Response Network, IPEF Labor Rights Advisory Board. The United States hopes that IPEF will become an enduring forum for negotiations, but the new workload may raise concerns about IPEF siphoning attention and resources from other initiatives and some participants may struggle to actively participate across the full suite of activities. Effective implementation is key to realizing the potential of the agreement.

Parties in the Supply Chain Agreement (IPEF) are assessing the enduringness of the agreement, especially with the US election in 2024. The agreement, which is an Executive Agreement for the US, allows future presidents to participate. However, the agreement does not have a binding dispute settlement mechanism, only consultation and public reporting requirements to incentivize implementation. This is not surprising given the content of the agreement and its provisions. The US hopes for quick ratifications from the parties to enter into force and show its value as the US heads into election season. The Supply Chain Agreement does not have any binding dispute settlement, but it is expected to be more impactful for businesses operating supply chains. While it would have been preferable to see concrete outcomes for companies operating supply chains, a traditional dispute settlement regime is not clearly worth the negotiating effort.

IPEF’s Supply Chain Agreement demonstrates a willingness to innovate and address new challenges, with the US Secretary of Commerce Gina Raimondo stating that IPEF is enforceable and that non-compliant parties could be removed from the club. The agreement could become a valuable framework for resolving supply chain issues in the region if participation is robust, implementation is real, and stakeholders take an interest. However, the key benefits of the Supply Chain Agreement depend on discussions, consultations, and cooperation. The US Secretary of Commerce has warned that non-compliant parties could be “kicked out of the club,” which is not reflected in the Supply Chain Agreement. Only time will tell if this model, centred on good intentions, can translate into tangible outcomes.

Indo-Pacific Economic Framework for Prosperity (IPEF)IPEF Supply Chain AgreementRevolutionizing the Industry: Groundbreaking IPEF Supply Chain Agreement