India surprises by agreeing to talk 'labour' at IPEF

Last week, India, the United States (US) and 12 other member countries of the Indo-Pacific Economic Framework (IPEF) entered into a supply chain resilience agreement (SCRA) that aims to improve coordination and response to supply chain disruptions of the sort witnessed during the Covid-19 pandemic.  

The IPEF is a response of the US to its shrinking economic engagement and clout in East Asia, where the economic influence of China is growing. The US is not a party to the mega regional trade agreements in Asia, namely the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). So, the Biden administration came up with the idea of IPEF in 2022, roping in some like-minded Asian countries other than China, some of whom are already members of RCEP and CPTPP, in a new grouping where any proposals for negotiations on increased market access through tariff reductions will be avoided but the talks will focus mainly on four pillars of boosting trade, especially digital trade, resilient supply chains, clean energy, and fighting corruption.  The US has already suspended talks on digital trade. India is not a part of the trade pillar.
 

The SCRA envisages establishing a supply chain council (SCC), a supply chain crisis response network (SCCRN) and a labour rights advisory board (LRAB). The SCC will develop sector-specific action plans for critical sectors and goods to enhance the resilience of IPEF partners’ supply chains, including through diversification of sources, infrastructure and workforce development, enhanced logistics connectivity, business matching, joint research and development, and trade facilitation. The SCCRN would establish an emergency communications channel for the IPEF partners to seek support during a supply chain disruption and to facilitate information sharing and collaboration during a crisis, enabling faster and more effective responses that minimise negative effects on their economies. 
 

LRAB — consisting of government, worker and employer representatives — would look at supporting the IPEF partners’ promotion of labour rights in their supply chains, promotion of sustainable trade and investment, and facilitation of opportunities for investment in businesses that respect labour rights.
 

The SCRA envisages best endeavours and no binding commitments but apprehensions do abound about the clauses involving labour standards and whether any obligations to not impose export restrictions will follow soon. It is surprising that our government, always opposed to discussing such non-trade issues, has agreed to discuss labour standards in the SCRA. 

Perhaps, the government sees no harm in talking without any commitments and is rather anxious to go along with the US, as India is equally wary of the growing influence of China in East Asia and is also not a part of the RCEP or the CPTPP.

A recent blog post by Abigail Dahlman and Mary E Lovely of the Peterson Institute for International Economics (please see this link: https://www.piie.com/blogs/realtime-economics/us-led-effort-diversify-indo-pacific-supply-chains-away-china-runs-counter) shows clear evidence that despite the efforts of the Biden administration to strengthen ties with its IPEF partners and wean them away from Beijing, these countries, which include Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, the United States, and Vietnam, are increasingly more reliant on economic ties with China. 
 

So, whether the IPEF will lead to anything meaningful is not clear. Anyway, our government should be more transparent with the domestic constituency on IPEF and SCRA.


 

Email : tncrajagopalan@gmail.com