Fifth IPEF Round This Week in Bangkok

The fifth round of the Indo-Pacific Economic Framework negotiations is being held this week in Bangkok as negotiators seek to essentially finish up the talks before the end of this year.

The IPEF consists of four pillars: trade, which is being negotiated by the US Trade Representative’s Office; supply chains, clean economy and fair economy, which are under the jurisdiction of the Commerce Department.

IPEF countries have closed out the supply chains pillar, leaving trade, the clean economy and the fair economy (anti-corruption) still on the table.

Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the United States and Vietnam are participating in the IPEF negotiations, although India opted out of the trade negotiations.

Administration officials have said they would like to see the talks largely wrapped up in time for the Asia Pacific Economic Cooperation forum leaders summit scheduled for November 14-16 in San Francisco.

Commere Secretary Gina Raimondo discussed the next steps for bringing the IPEF negotiations to a successful conclusion in the clean energy and fair economy pillars in a meeting yesterday with Japan’s Minister of Economy, Trade and Industry Nishimura Yasutoshi, according to a readout from her office.

The two officials also discussed key bilateral trade issues and updates, including the agenda for the next Ministerial meeting of the US-Japan Economic Policy Consultative Committee and the importance of cooperation on semiconductors and supply chain resilience

The administration launched the IPEF in 2022, with an aim to finalize negotiations by November 2023 during the US-hosted Asia Pacific Economic Cooperation meeting.

Unresolved in the IPEF Discussions are the rules for dealting with Digital Trade.   The US-Mexico-Canada Agreement (USMCA) advanced digital rules including a strong commitment to the free flow of data and the prohibition of data localization as a business requirement, with an exception for regulatory intervention for legitimate policy objectives.

The business coalition is pushing for retaining provisions similar to those in the USMCA, while labor unions, progressive groups, and some Congress members are opposing the USMCA language and are advocating for different provisions.

The US Trade Representative, Katherine Tai, appears to lean towards the latter group, advocating for more flexibility and public regulation in digital trade rules.  Tai's stance has been criticized by some who see it as a reluctance to uphold the market-friendly digital obligations present in the USMCA.

Bloomberg reports that "right to repair" advocates are expressing concern that the 14-country economic initiative will include a “source code” clause that would provide corporations will broad secrecy rights over software and algorithm specifications and descriptions.   This provision, whaile not initially included in the proposed agreement, is included in the USMCA and remains an objective of industry.

The Commerce Department has released the text of the proposed Indo-Pacific Economic Framework for Prosperity Supply Chain Agreement, calling for the creation of three bodies to address the topic.

“The IPEF Supply Chain Agreement further delivers on President Biden’s commitment to revitalize American manufacturing and strengthen the critical supply chains our workers, companies, and consumers rely on,” said Secretary of Commerce Gina Raimondo. “By working toward finalization of this monumental Agreement, the United States is taking an important step forward to fortify bonds with our partners throughout the Indo-Pacific. Working in lockstep, we will be prepared to best address our shared economic challenges together.”

The proposed Supply Chain Agreement is designed to enable IPEF partners to work together collaboratively to make supply chains more resilient, efficient, transparent, diversified, secure and inclusive, including through information exchange, sharing of best practices, business matchmaking, collective response to disruptions and supporting labor rights.

The aim is to create a commercial environment among IPEF partners that will make supply chains more competitive, according to Commerce. It is also designed to facilitate a reliable supply of critical goods during a time of crisis, working to ensure that US companies have access to key inputs and that US workers will not face unnecessary furloughs and work stoppages due to supply chain disruptions.

Supply Chain Bodies

The IPEF partners continued collaboration would be accomplished through the formal establishment of three supply chain bodies.
Senior government officials from IPEF partners would form an IPEF Supply Chain Council responsible for overseeing collaboration on supply chain issues across the Indo-Pacific.

This work would center around “critical sectors” and “key goods” identified by each partner as essential to its national security, public health and safety, or the prevention of widespread economic disruptions. The Council, envisioned to meet at least annually, would collaborate and organize teams of experts to assess capabilities, map supply chains, identify bottlenecks, and explore options for diversification of concentrated sources of supply for sectors and goods of shared interest.

To help prepare for and respond to future supply chain disruptions, IPEF partners also would form an IPEF Supply Chain Crisis Response Network. Partners would establish an emergency communications channel to facilitate information exchange and provide a platform for IPEF partners to request and offer assistance to respond to, mitigate, and recover from the impacts of a supply chain disruption. The Network would also organize simulations to glean insights into potential vulnerabilities to inform the work of the Supply Chain Council and help IPEF partners prepare for and prevent future disruptions.

The IPEF partners also recognize the importance of labor rights and workforce development in strengthening resilient supply chains across the Indo-Pacific. To that end, the Agreement would establish a unique tripartite IPEF Labor Rights Advisory Board, with government, worker, and employer representatives. The Board would work to identify labor rights concerns across IPEF supply chains and develop recommendations and issue technical reports on specific sectors. The Board also could publish business advisories, best practices, and other relevant information. The Agreement also would commit each IPEF partner to establishing a mechanism for receiving allegations of labor rights inconsistencies at individual facilities in another IPEF country and establish a process for the IPEF partners to work together to address any allegations.

Commerce will continue to provide regular updates and briefings to Congress and to stakeholders as IPEF partners work through their domestic processes to accept, adopt, or ratify the Agreement following signature.