3 Quad nations back strong supply chains
India, Australia and Japan on Tuesday agreed to launch an initiative to ensure the resilience of supply chains in the Indo-Pacific, with the move coming against the backdrop of tensions created by China’s aggressive actions across the region.
The creation of the “Supply Chain Resilience Initiative” was mooted by Japan amid the Covid-19 crisis, which has played havoc with supply and manufacturing chains, and the three countries held preliminary discussions on the issue over the past few weeks, people familiar with developments said on condition of anonymity.
During their first virtual meeting on the issue, commerce minister Piyush Goyal and his Australian and Japanese counterparts, Simon Birmingham and Kajiyama Hiroshi, outlined their intention to work for the launch of the new initiative because of the “pressing need for regional cooperation on supply chain resilience in the Indo- Pacific”, a joint statement said.
They signalled their determination to “take a lead in delivering a free, fair, inclusive, non-discriminatory, transparent, predictable and stable trade and investment environment and in keeping their markets open”, it added.
The ministers instructed their officials to promptly work out details of the new initiative for its launch later this year, and called on other countries in the region with similar views to join the initiative, the statement said.
The people cited above said the supply chain initiative was a natural follow on to the security cooperation between the three countries, both bilaterally and through platforms such as the Quadrilateral Dialogue Mechanism or Quad, which also includes the US.
The three countries will now work with regional partners, including members of the Association of South East Asian Nations (Asean), to build stronger supply and manufacturing chains that are protected from external shocks and influences, the people said. The three nations see countries such as Vietnam, Indonesia and New Zealand among the players who can have a key role in the initiative, the people added.
The issue of supply chains found mention in Prime Minister Narendra Modi’s address on Independence Day, when he said: “Many businesses around the world see India as a supply chain hub today. Now we have to move forward with ‘make in world’ as well as ‘make for world’.”
Addressing the trilateral meeting, Goyal said the initiative couldn’t have come at a more opportune time in the post-Covid-19 scenario, when there is a likelihood of churning of supply chains in the Indo-Pacific region and it was incumbent on the three countries to take the initiative.
“The diversification of supply chain is critical for managing the risks associated with supply of inputs including disciplining price volatility. We could provide the core pathway for linking value chains in the region by creating a network of reliable long-term supplies and appropriate capacities,” he said.
In order to improve competitiveness of sectors, the three countries may need to identify manufacturing and services sectors that contribute the most to domestic value addition in the region. “We support the need for specific activities listed for enhancing the resilience of the supply chains, which include those related to [promoting] and facilitating trade and investment as well as diversification of production base,” he said.
Goyal noted that the cumulative GDP of Australia, India and Japan during 2019 was $ 9.3 trillion and their cumulative merchandise goods and services trade were $ 2.7 trillion and $0.9 trillion respectively. “With such a strong baseline, it is important that we use this opportunity to work towards enhancing the share of our trade and investment in the region,” he said.
However, he pointed out that Japan’s procurement of many specific products from India was limited despite Japanese global imports being high. This includes sectors such as steel, marine products, processed agriculture, agro-chemicals, plastics, carpets, clothing and footwear. He expressed hope the proposed initiative would try to bridge this and work towards enhancing mutual trade.
Former Rajiv Bhatia, distinguished fellow for foreign policy studies at Gateway House who closely tracks the Quad, said the supply chain initiative has been in the works for some time.
“Essentially, the thinking is that the Quad with its political, strategic and security elements isn’t enough of a response to the emerging situation in the Indo-Pacific and it needs an economic pillar, including deeper economic cooperation, trade, connectivity, supply chains and global and regional value chains,” he said.
“It should be welcomed that India is moving in that direction. These are early days and concepts are being cleared. How effective this initiative will be will depend on action on the ground, and we don’t have much time to lose while focussing on the concretising of ideas,” Bhatia added.