I haven't been following the Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations as closely as some other people have, but I see that the text of the IPEF's Supply Chain Agreement was released yesterday. I don't have any hot takes on all this, but here are a few things that jumped out at me.
Commitments
The parties make a lot of statements about what they intend to do in order to strengthen supply chains, including the following:
Article 2: Collaborating to Strengthen IPEF Supply Chains
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2. The Parties intend to explore new ways and enhance existing efforts to improve the attractiveness of investment opportunities in IPEF supply chains.
3. The Parties intend to promote, facilitate, and encourage investment in: critical sectors; the production of key goods; the development, maintenance, and upgrading of physical and digital infrastructure; and transportation and workforce projects.
This may include:
(a) organizing investment missions and encouraging public-private joint efforts and other business matching activities to help enterprises identify potential partners in the economies of the Parties; and
(b) sharing expertise on project scoping, structuring, and implementation.
4. The Parties intend to foster improvements in logistics services and logistics infrastructure, as well as in the development of multimodal transport corridors, including by exploring the development, upgrading, or digitalization of ports, logistics hubs, roads, and freight railways.
5. The Parties intend to align guidance, procedures, and policies related to trade facilitation to the extent possible, and to share best practices to help enterprises benefit from such guidance, procedures, and policies.
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The part about investments seems difficult to monitor and evaluate. I suppose we'll hear announcements about some new investments, and we can assume that the IPEF might have had something to do with them, but I'm not sure how much transparency there will be in relation to how the investments came about.
Institutions
The IPEF will involve some new institutions, such as the following on supply chains and labor:
Article 6: IPEF Supply Chain Council
1. The Parties hereby establish an IPEF Supply Chain Council composed of a relevant senior official from the central level of government of each Party.
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8. The IPEF Supply Chain Council may, as decided by the Parties:
(a) explore opportunities to develop best practices in relation to policies, measures or actions impacting trade in critical sectors or key goods; or
(b) discuss any possible collaboration in relation to policies, measures, or actions to enhance the resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity of IPEF supply chains.
9. The IPEF Supply Chain Council shall consider areas in which technical assistance and capacity building could increase the resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity of IPEF supply chains.
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Article 7: IPEF Supply Chain Crisis Response Network
1. The Parties hereby establish an IPEF Supply Chain Crisis Response Network composed of a relevant senior official from the central level of government of each Party.
2. The IPEF Supply Chain Crisis Response Network shall:
(a) serve as an emergency communications channel to rapidly disseminate relevant information among the Parties during a supply chain disruption;
(b) facilitate cooperation on responses to supply chain disruptions, including the actions described in Article 12;
(c) consider the use of table-tops, stress tests, or similar exercises simulating a range of possible supply chain disruptions to provide the Parties with an opportunity to prepare and test strategies for responding to supply chain disruptions, and may share any conclusions from those exercises with the IPEF Supply Chain Council;
and
(d) assess past experiences and existing policies and procedures to facilitate preparedness for, and responses to, supply chain disruptions and to minimize any negative impact of supply chain disruptions on IPEF supply chains, and may share any conclusions from those assessments with the IPEF Supply Chain Council.
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Article 8: IPEF Labor Rights Advisory Board
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2. The Parties hereby establish an IPEF Labor Rights Advisory Board composed of three representatives for each Party: (a) a senior official from the central level of government who is responsible for labor matters; (b) a worker representative; and (c) an employer representative. Each Party shall invite, consistent with its domestic laws and regulations, worker and employer organizations in its territory credentialed al the most recent ILO International Labour Conference to select the Party's worker and employer representatives, respectively, for the Board. Such worker and employer representatives may participate in the Board only if they are subject to appropriate confidentiality requirements consistent with the requirements set out in Article 13.
Labor
The labor provisions mirror the USMCA in the sense of dealing with labor practices in specific facilities, but they don't have the USMCA's enforcement mechanisms:
Article 9: Addressing Facility-Specific Labor Rights Inconsistencies
1. For the purposes of this Article, subject facility means a facility that is located in the territory of a Party and operated by an enterprise that is not a microenterprise.
2. The Parties recognize that labor rights inconsistencies in the economy of one Party can affect supply chains in the economy of another Party and recognize the critical role business practices play in protecting labor rights across IPEF supply chains.
3. Each Party intends to establish or maintain, consistent with its domestic law, a reporting mechanism to receive, including through electronic means, allegations of labor rights inconsistencies at subject facilities located in the territory of another Party, in accordance with this Article.
Monitoring and discussion
The commitments that have been made will be subject to monitoring on the basis of self-reporting:
5. Each Party shall provide to the IPEF Supply Chain Council, annually or as otherwise decided by the Council, a written report on its efforts lo implement Articles 2 through 5 and 11.
These reports will then be discussed in the institutions:
7. The IPEF Supply Chain Council shall meet in person or virtually on an annual basis, or as otherwise decided by the Council, to:
(a) review and discuss each Party's written report provided pursuant to paragraph 5;
(b) establish teams to develop Action Plans providing recommendations to increase the resilience and competitiveness of critical sectors or key goods from among those notified by at least three Parties in accordance with Article 10;
(c) review and discuss Action Plans submitted to the IPEF Supply Chain Council;
(d) review and discuss any labor rights concerns and recommendations of which it is informed by the IPEF Labor Rights Advisory Board pursuant to Article 8.7; and
(e) discuss opportunities to support skills and workforce development activities.
A key thing they are looking for with all this monitoring is "vulnerabilities":
Article 11: Monitoring and Addressing Supply Chain Vulnerabilities
1. Each Party intends to employ an evidence-based and data-informed approach to consider its supply chain vulnerabilities and to monitor import dependencies, prices (where appropriate and feasible), and trade volumes of its critical sectors or key goods.
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Article 12: Responding to Supply Chain Disruptions
1. In the event of a supply chain disruption, or in the event that a Party expects an imminent supply chain disruption, a Party may request an emergency in-person or virtual meeting of the IPEF Supply Chain Crisis Response Network, which should meet as soon as practicable but no later than 15 days after the date when the Party requests such a meeting.
The only exceptions are security exceptions
While the obligations do not seem particularly burdensome, there are security exceptions that can get you out of them:
Article 15: Security Exceptions
Nothing in this Agreement shall be construed to:
(a) require a Party to furnish or allow access to any information the disclosure of which it determines lo be contrary to its essential security interests; or
(b) preclude a Party from applying measures that it considers necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security or for the protection of its own essential security interests.
Dispute settlement is just consultations
There is no dispute settlement chapter, but there are provisions on consultations:
Article 19: Consultations
1. If at any time a Party has concerns with another Party's implementation of a provision of this Agreement, the concerned Parry may request consultations through a written notification to the other Party's contact point, and shall set out the reasons for the request, and the other Party shall respond promptly in writing.
2. The concerned Party shall immediately provide a copy of the request to the other Parties' contact points.
3. If the concerned Party's request and the other Party's response do not resolve the concerns that are the subject of the request, consultations shall commence on a mutually decided date no later than 60 days after the date of receipt of the response.
4. The consulting Parties shall attempt to arrive at a mutually satisfactory resolution as soon as practicable.
Based on what I see in the obligations, including the existence of the security exceptions, I'm not sure there is anything too burdensome in the obligations, so we may not see a lot of concerns about compliance. If governments do have concerns, they can talk about it in consultations, but any resolution is going to be more power-based than rule-based because there is no adjudication mechanism. It's also not clear how transparent any of this will be. Will the request for consultations and response documents be made public? That would be nice, but I'm not counting on it.
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So what will be the impact of this IPEF agreement (and other IPEF pillars still being negotiated)? How much investment will be generated? Will labor rights be improved? Will supply chain vulnerabilities be addressed? That's very hard to say, and at this point I'm not at all sure how assessments of these questions will be done.
