Commerce Says Supply Chain Work in IPEF Done; Expert Says Not Really

The former lead negotiator for the Trans-Pacific Partnership, after a close examination of the joint statements from the latest Indo-Pacific Economic Framework negotiating session, said the "substantial conclusion" of the supply chain pillar is less than meets the eye.

Wendy Cutler, vice president of the Asia Society Policy Institute and former Office of the U.S. Trade Representative negotiator, noted that "supply chain outcomes are welcome, albeit modest and largely process-oriented."

Cutler said the goals that the countries said they agreed to are important, but she said they "do not appear to be translated into rules, commitments or initiatives." Those agreed upon goals include:

• monitoring critical sectors and key goods so the group has a better understanding of supply chain risks
• improving crisis coordination when there are supply chain disruptions
• Strengthening supply chain logistics and infrastructure
• promoting regulatory transparency and investments in national security and public health goods as well as investment in sectors that, if disrupted, could lead to widespread economic disruptions
• technical assistance and capacity building
• respecting market principles, minimizing unnecessary restrictions and impediments to trade.

"Rather, the announcement focuses on three new bodies to help flesh out and operationalize the objectives, including a Council, a crisis response mechanism, and a labor advisory board. In essence, the IPEF members have established a framework within a framework to address supply chain concerns, with much of the substantive work yet to be discussed and agreed upon," she wrote in an emailed blog post on May 29.

The Commerce Department announced May 27 that the countries are working toward "early realization" of supply chain cooperation, and said their agreement "contemplates the establishment of three new IPEF Supply Chain bodies to facilitate cooperation among the IPEF partners on supply chain issues." Those include a supply chain council, to develop sector-specific action plans for sectors or goods, including sourcing diversification, enhanced logistics, trade facilitation, joint research and development, infrastructure and workforce development and business matching.

The second body is a crisis response network, and the third is a labor rights advisory board, with government, worker and employer representatives.

Cutler seized on the word "contemplates" in the statement. "Curiously, the new bodies are 'contemplated,' and apparently not yet agreed upon, suggesting that there were some last-minute hitches in even setting up this structure," she wrote.

Cutler said it's no small feat to reach agreement among 14 countries with different needs and levels of development. "That said, it’s still an open question whether meaningful outcomes can be achieved by the November target date of completion. The challenge of achieving high standards while securing the buy-in of all participants already seems to be impacting the talks, as evidenced by the largely process-oriented announcement on supply chains. Once released, the final text of the supply chain agreement may shed more light on whether substantive commitments were agreed upon," she wrote.

The readouts of progress in the other pillars -- trade, clean economy and fair economy -- came from the Office of the U.S. Trade Representative, which only leads negotiations for the trade pillar.

On trade, the joint statement said, in part: "Recognizing different levels of economic development and capacity constraints, the Trade Pillar partners are committed to considering flexibilities, where appropriate, and working with partners on providing for technical assistance and capacity building. They noted that substantial progress has been made with respect to the chapter text on Technical Assistance and Economic Cooperation."

Cutler said the announcement suggests "the negotiations still face significant hurdles. This is not surprising, given the topics included and lack of offers of market access to allow for traditional trade-offs." The topics include labor standards and environmental standards.

Three dozen trade groups wrote to Commerce Secretary Gina Raimondo and to Tai complaining that the limited market access initiatives that had been contemplated in IPEF -- lowering technical barriers to U.S. exports, whether in regulations of chemicals and medicines or in sanitary/phyto-sanitary rules -- is no longer been talked about (see 2305300034)

In the Clean Economy pillar, part of the statement said: "Thus far, the IPEF partners have put forward a variety of innovative ideas and approaches to accelerate their transition to a clean economy. Recognizing the importance of delivering concrete economic outcomes, the IPEF partners are concurrently identifying and developing initiatives and proposals to advance cooperation in key areas that are critical to realizing their unique pathways towards net zero emission economies ... ."

Cutler said that statement "suggests that while IPEF members agree on the importance of the transition to a sustainable economy, there is no meeting of the minds on how IPEF can contribute in concrete terms. The announcement notes that many ideas and proposals are being discussed, but is vague on where the work may be headed in concrete terms."

The Fair Economy pillar tackles tax and anti-corruption issues. "The IPEF partners have made good progress toward development of the text of an agreement that will strengthen implementation of effective anti-corruption and tax measures to boost commerce, trade, and investment among IPEF economies," the statement said.

Cutler said the use of the term good progress means this pillar is likely to be finished second, after the supply chain pillar.