Washington DC, May 23, 2022. Prime Minister’s Official Residence. (https://www.kantei.go.jp/jp/101_kishida/actions/202205/23usa.html)
David Deen, June 2023
Trade ministers from 14 countries gathered in Detroit in May to discuss the Indo-Pacific Economic Framework (IPEF). U.S. President Joe Biden launched IPEF a year ago while in Japan, and several rounds of negotiations have since taken place. Sitting at the table were some of the largest and most dynamic countries in the world: Australia, Brunei Darussalam, Fiji India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, the United States, and Viet Nam. Together they represent 40% of global GDP.
Participating countries are motivated to avoid the disruptions experienced during the COVID-19 pandemic, diversify supply chains, and reduce dependency on China. For them, IPEF is an opportunity to reshape supply chains and integrate development and investment models. It is a strategic approach for greater efficiencies on knowledge and technology sharing, investment attraction, co-investment, and industrialization.
Clean energy and climate friendly technologies are a central pillar in the framework. To advance so-called ‘green trade’, IPEF goes beyond what is detailed in other regional trade agreements. This includes aligning a range of policies and standards, such as labour rights according to the ILO Declaration; promotion of inclusive growth, including Indigenous Peoples local communities and women; regulatory transparency; anti-corruption measures; tax incentives; and measures to protect confidential business information [1]. Moreover, IPEF negotiators are working to develop crisis management plans should another global crisis emerge. The pandemic exposed how delays and bottlenecks can cost lives and devastate livelihoods.
The war in Ukraine also reinforced the urgency for more resilient supply chains. In its May 2023 report Strengthening Regional Supply Chain Resiliency Through IPEF, The Asia Society Policy Institute suggests IPEF negotiators develop a “swap system” to share stockpiles during crises, similar to what Japan did to move its LNG supply towards Europe when there were shortages across the continent following sanctions on Russia [2]. The report notes China’s sudden restriction on exports of urea in 2021, a key ingredient in fertilizers and diesel exhaust fluid to limit GHG emissions. This proved devastating for many Indian farmers, and in Korea which relied on China for 95% of its urea. The government scrambled to find suppliers, eventually turning to Australia, Vietnam, Indonesia and Saudi Arabia.
A mechanism to ‘swap’ stockpiles could buffer against such shocks, but also reduce the likelihood countries would impose such restrictions. IPEF members can ‘swap’ stockpiles of oil and gas or, more importantly, critical mineral stockpiles when partners face shortages. Assuring a consistent supply of energy and minerals are an essential part for long-term planning and investment.
IPEF member countries would also benefit by more coordination on which minerals are considered ‘critical’ and in need of supporting policies and support. Many countries have created ‘critical mineral’ lists, and the next step would be building consensus as a region. Discussions on a regional interpretation are underway within the Association of Southeast Asian Nations (ASEAN), among which seven countries are participating in IPEF.
As a leader in mining, oil, carbon capture utilization and storage, as well as green technologies such as clean hydrogen, Canadian businesses can contribute to and benefit from enhanced trade flows among IPEF members. Ottawa has recognized this need and has formally requested entry in October. As of December, Canadian trade minister Mary Ng said all countries are backing Canada’s membership [3], although it isn’t clear when Canada will join.
Negotiations are moving fast. It is realistic to expect a concrete framework in the coming months. If and when Canada does join IPEF, it will be another layer of opportunity to deepen public and private partnerships in the region, particularly to build low-carbon economies. Governments at all levels and businesses of all sizes should prepare to leverage agreements once they become operationalized.
Sources:
[1] Office of the US Trade Representative. (2023, May 27). IPEF Joint Statement for the Trade Pillar, Clean Economy Pillar, and Fair Economy Pillar. Retrieved from https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/may/ipef-joint-statement-trade-pillar-clean-economy-pillar-and-fair-economy-pillar
[2] Yeo, Han-Koo and Wendy Cutler. (2023, May). Strengthening Resiliency of Regional Supply Chains. Asia Society Policy Institute. Retrieved from https://asiasociety.org/policy-institute/strengthening-regional-supply-chain-resiliency-through-indo-pacific-economic-framework-ipef
YouTube discussion on it: https://www.youtube.com/watch?v=yQ7ZkinTeg4
[3] Nikkei Asia. (2022, December 6). Canada’s IPEF bid has support from all members: trade minister. Retrieved from https://asia.nikkei.com/Editor-s-Picks/Interview/Canada-s-IPEF-bid-has-support-from-all-members-trade-minister
Asia Advisory Services 