Prospects and Challenges of Indo-Pacific Supply Chains

Through the layout of the Indo-Pacific strategy, the United States announced its return to the Asia-Pacific region and will return to the stage of cooperating with allies and leading global political and economic development.

The Indo-Pacific strategy is the global political and economic strategy of the US government. EU countries, the United Kingdom, Australia, Japan, and India have also proposed the prospect and challenge strategy of high standards in the Indo-Pacific vs. liberalizing the Indo-Pacific supply chain. On the one hand, it echoes the United States. On the one hand, it also shows the potential autonomous strategies of these countries. The United States officially released the National Indo-Pacific Strategy Report in February 2022. The future of each country and the world depends on a lasting and prosperous free and open Indo-Pacific region for decades to come. As for the practice in economic, trade, and industrial development, it is to gradually promote the economic and trade issues set up by IPEF (Indo-Pacific Economic Framework), which cover supply chain resilience, digital economy and technical standards, carbon reduction and clean energy, and high-quality infrastructure construction, and labor rights standards.

Through this multilateral partnership framework, the United States intends to plan the economic development model and rules dominated by the United States. However, since the U.S. government has decided not to return to the CPTPP at this stage, the U.S. economic and trade policy no longer pays attention to the liberalization of foreign markets, but to leading a high-standard market economic order.

Three elements of a free and open Indo-Pacific:

• Invest in democratic institutions, a free press, and vibrant civil society.
• Increase fiscal transparency in the Indo-Pacific to expose corruption and drive reform.
• Ensure that the region's oceans and skies are managed and used by international law.

The content and future development of the Indo-Pacific economic structure:
After four years of the Trump administration, the relationship between the United States and its allies has not been as good as before, and many countries have promoted independent and independent foreign policies because of their distrust of the United States. But under the Biden administration, the United States began to resume allied diplomacy. In addition to practicing Build Back Better, we expect the United States to return to the core of global leadership again, leading the world order and the rules of global political and economic operations, including industrial supply chain operations, environmental protection, and labor rights. Subsequently, the promotion of the Indo-Pacific economic structure was launched.

Judging from the key issues presented by the Indo-Pacific economic structure, the United States regards the global challenges it faces as its responsibility and plays a leading role.

In the face of climate change, the United States has started to promote policies related to carbon reduction and clean energy:

In the face of climate change, the United States has started with policies related to carbon reduction and clean energy to promote the United States' return to the global system to cope with climate change on the one hand. Working together to tackle climate change.

In the face of differences in the steel and aluminum industry trade in the past, to seek a partnership with the EU, the United States agreed to use tariff quotas to restore the normalization of bilateral steel trade, and also agreed to promote "Global Sustainable Steel Arrangement" to deal with steel and aluminum. overcapacity and climate change, and ensure U.S. growth and jobs in the industry.

In the face of digital and innovative development, establish digital economic and technical standards, regulations, and safety norms:

In terms of operations on digital economic issues, the US strategy should still be to build a digital economic alliance with Singapore, New Zealand, Chile, Australia, the United Kingdom, Vietnam, and other countries way to win over like-minded allies of the United States to join.

At this stage, regardless of the DEPA (Digital Economic Partnership Agreement) promoted by New Zealand and other countries or the digital economic rules promoted by the United States under the IPEF framework, it is highlighted that digital economic issues will have more and more weight in international trade and economics, and these rules It will also lead the direction of the future development of the digital economy industry. However, the United States focuses more on the cooperation and regulation of digital security, so through the Five Eyes Alliance, it has drawn in the European Union, Japan, and Taiwan to establish the "Digital Technology Trade Alliance". And establish the "Digital Connectivity and Cybersecurity Partnership, DCCP" with countries in the Indo-Pacific region to promote the Digital Economic Partnership Alliance, thereby promoting the digital economy and cybersecurity issues dominated by the United States.

Facing the challenges of the global economic and trade environment, build a resilient supply chain that covers the link between technology and industry:

The U.S. government has decided to continue the phase one trade agreement signed by the U.S. and China in 2018, and will not cancel the Trump administration’s policy of imposing high tariffs on China. Prevent China from continuing to absorb American technology. To cope with the competition in China's high-tech development, the United States must expand investment in emerging technologies, including medical research, artificial intelligence, quantum computing, biotechnology, and other fields, and it needs to increase to about 2% of GDP. The US government actively promotes policies such as "Creating Helpful Incentives to Produce Semiconductors", "American Innovation and Competition Act", and "America Creating Opportunities for Manufacturing, PreEminence in Technology, and Economic Strength (COMPETES) Act of 2022". The U.S. government has declared through executive orders to ensure important supply chains, actively encouraged companies to invest in emerging technology research and development in the United States through fiscal measures, and set up factories for production. Thereby establishing a domestic high-tech and emerging technology industrial chain in the United States, allowing American technology and the industry continues to lead the world.

Build high-quality infrastructure and share with global partners to rebuild a better future:

To move towards the goal of sustainable development, share a prosperous economy with global partners, and assist in the development of infrastructure in medium and low-developed countries are the policy directions that the United States should promote. The United States will work with the G7 countries to equip emerging economies with high-standard, high-quality infrastructure, and at the same time create good job opportunities. These include promoting a resilient and secure global telecommunications system, focusing on 5G supplier diversification and Open Radio Access Network (O-RAN) technology, and establishing a well-established telecommunications supply market to allow new, trusted collaborators to work together. The United States will also work with ASEAN countries to promote carbon reduction and infrastructure-related programs.

By establishing an industrial supply chain that values ​​labor rights, ensuring industrial development and labor employment opportunities in the United States, and establishing global labor standards:

The United States emphasizes the need to institutionalize the legally binding and mandatory implementation of minimum labor standards in FTAs/RTAs and establish an enforceable dispute settlement mechanism. The United States wants to dominate the global economic and trade regulation system with higher standards of trade laws and rules. Driven by innovation and focus on rapid technological transformation to meet global and regional political and economic challenges. Especially in the face of China's economic, diplomatic, military, and technological challenges, the purpose of the United States is not to change China, but to shape the overall strategic environment and build a common and mutually beneficial environment for the United States, its allies, and partners. An environment of interests and values ​​to balance China's rise and influence.

Economic and Trade Liberalization vs. High Quality and High Standards

Both CPTPP and RCEP have come into effect one after another and operate in the Asia-Pacific region. These two free trade agreements have driven close links between the industrial supply chains of economic and trade partners in the region. However, the CPTPP emphasizes high-quality, high-standard economic and trade norms, and incorporates into the agreement the parts that have not yet formed specific trade norms in the WTO at this stage, such as e-commerce, state-owned enterprises, labor, environment, regulatory coordination, and anti-corruption. To take into account the development level of each economy, even if RCEP seeks high-quality regulations, it cannot win the approval of most countries for inclusion except for some chapters, such as rules of origin for textiles and garments, state-owned enterprises, labor, environment, etc. Some chapters are structured even if Not much different from CPTPP, but normative clauses are not as strict as CPTPP.

From the perspective of the impact on the industrial supply chain, the formation of RCEP and the preferential standards for product import and export between 15 countries including China, Japan, South Korea, New Zealand, and Australia form a system of its own, allowing members in the region to form a complete system. Supply chains facilitate trade and investment between countries in the region. To prevent economies other than member states from becoming free riders, CPTPP has stricter rules of origin than RCEP. In addition to the higher ratio of regional output value content, the calculation of textiles and garments incorporates the principle of yarn forward. To avoid the inclusion of too many intermediate materials from non-member countries in the textile and clothing products produced by CPTPP member countries. However, such strict regulations form the phenomenon of supply chain competition among different FTA structures, and even because more countries adopt looser FTA rules, it is easier for lower-standard FTAs ​​to form an independent supply chain system.

However, the above situation may be gradually alleviated due to the gradual expansion of CPTPP and RCEP members and higher overlap. To ensure the economic and trade interests of members, they may follow CPTPP to adopt high-standard norms, so that the "New Century Trade" formulated by CPTPP Rules" became the global standard. Therefore, the development of CPTPP and RCEP presents three types of competition and cooperation, including competition and cooperation between the United States and the Middle East. Competition and cooperation between the Asia-Pacific region and East Asia region; and competition and cooperation between traditional trade rules and new-generation trade rules. This is not just the development of free trade agreements but also contains geopolitical and international political and economic implications.

Corresponding to the Indo-Pacific strategy promoted by the United States, although the global economic rules newly planned by the United States at this stage are no longer promoted by traditional free trade agreements. The goal is still to dominate the development of the global economy and market. On the other hand, has continued to make continuous efforts in economic and trade liberalization. From the perspective of global influence, economic strength, and market capacity, the United States and China are targets that cannot be ignored by the industry, and the industrial structures of the two countries are still closely linked. Especially in the supply chain of low-end technology and consumer products superior. No matter whether the market is open or under strict economic and trade regulations, it is beneficial to the operation of enterprises.

Ongoing challenges facing the global industrial supply chain:

Under the framework of the United States promoting the Indo-Pacific strategy, the competitive environment between the United States and China has not changed. In addition to the international strategic environment, the United States is worried about the challenges brought about by the rise of China, and it is affected by factors such as industrial supply chains and geopolitics for many years. The U.S.-China trade deficit structure still clearly exists. Therefore, the competition and confrontation measures adopted by the U.S. against China should continue for a period, which is the source of challenges that the industrial supply chain continues to face. After all, the United States and China are the world's top two manufacturing and consumer markets, and companies can't choose sides in terms of operations. In addition, in the face of the high standards and norms set by the US Indo-Pacific economic structure, such as infrastructure standards, digital economic standards and safety rules, labor rights norms, etc., will affect the operation and management of enterprises, and these standards will be gradually adopted. Incorporate into international norms, and then form binding corporate responsibility. Business owners should therefore start reviewing production processes along the supply chain to ensure compliance with international standards.
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​Reference: ​​maonline