Policy updates: IPEF developments

The Indo-Pacific Economic Framework (IPEF) was unveiled by US President Joe Biden at the East Asia Summit in October 2021 and officially launched in May 2022. Its four main pillars are: (1) trade; (2) supply chains; (3) clean energy, decarbonization, and infrastructure; and (4) tax and anti-corruption. It has subsequently held several rounds of meetings.

Events related to IPEF


Month Meeting type Location Summary
May Leaders' meeting Tokyo IPEF officially launched. Agrees to tackle four pillars: (I) trade, (II) supply chains, (III) clean energy, decarbonization, and infrastructure, and (IV) tax and anti-corruption.
September First ministerial meeting Los Angeles Sets negotiating targets for four pillars. India opts out of negotiations on Pillar I (trade); other 13 countries to participate in negotiations on all pillars.
December First negotiating round Brisbane Shares negotiating text, discussions begin in earnest.
Second ministerial meeting Online Welcomes results of first meeting, agrees to hold next meeting in February.


Month Meeting type Location Summary
February Special negotiating round New Delhi Holds negotiations on three pillars, excluding trade given India’s opt-out.
March Second negotiating round Bali Partners discuss negotiating texts on labor, environment, digital trade, technical assistance, and inclusivity.
May Third negotiating round Singapore Continued negotiations on all pillars.
Third ministerial meeting Detroit Substantially concludes negotiations on Pillar II (supply chain), first pillar to reach agreement. Approves creation of IPEF Supply Chain Council.
June Fourth ministerial meeting Online Building on substantial agreement on Pillar II (supply chain), partners reaffirm commitment to ambitious outcomes for Pillar III (clean economy) and Pillar IV (fair economy). US government announces infrastructure financing from US International Development Finance Corporation (DFC).
July Fourth negotiating round Busan Continues discussions on pillars I (trade), III (clean economy), and IV (fair economy).
September Published text of supply chain agreement - Partners begin domestic processes to prepare for signature following publication of final text of agreement.
Fifth negotiating round Bangkok Continues negotiations on three pillars.
October Fifth ministerial meeting Online Little progress with digital trade negotiations, but agreement to achieve significant progress by year-end.
Sixth negotiating round Kuala Lumpur -
November APEC leaders' summit San Francisco -

Source: Nomura, based on various sources

Supply chain first area where agreement reached

The IPEF partners have quickly made progress with discussions on the supply chain pillar. Following the substantial agreement in May 2023, the US Department of Commerce published the final text in September.

Key points of IPEF Supply Chain Agreement

IPEF Supply Chain Council and national governments' identification of critical sectors and key goods

  • Each partner identifies critical sectors and key goods.
  • Will develop Action Plans for critical sectors and key goods notified by multiple countries.
  • Action Plans may include recommendations to promote diversification of sources, relieve logistical bottlenecks, enhance connectivity, or minimize/remove impediments to trade.

IPEF Supply Chain Crisis Response Network and response to supply chain disruptions

  • Partners to form an IPEF Supply Chain Crisis Response Network as an emergency communications channel in the event of supply chain disruptions.
  • Parties can use the Network to request an emergency meeting in the event of supply chain disruptions.
  • Partners commit to supporting other partners' response to supply chain disruptions (e.g., facilitating joint procurements and delivery of goods, identifying alternative transportation routes).

IPEF Labor Rights Advisory Board and mechanism for receiving allegations of labor rights violations

  • Agreement establishes IPEF Labor Rights Advisory Board to identify labor rights concerns across IPEF supply chains; will also draw up reports on partners' labor laws and practices.
  • Will establish framework for discussing allegations of labor rights violations in other partner countries. If situation cannot be resolved after set period of time, IPEF Labor Rights Advisory Board subcommittee may publish allegations or make recommendations.

Source: Nomura, based on Department of Commerce (US), Ministry of Foreign Affairs (Japan) data

We think the agreement's designation of "critical sectors" and "key goods" is particularly important. This defines the scope of initiatives to strengthen supply chains through the IPEF. According to the agreement, critical sectors and key goods will be identified based on factors such as: (a) the impact of a potential shortage on its national security, public health and safety, or prevention of significant or widespread economic disruptions; (b) the level of dependence on a single supplier or a single country, region, or geographic location; (c) geographic factors including actual or potential transport constraints, especially for its island or remote regions; (d) the availability and reliability of alternative suppliers or supply locations; (e) the extent of imports required to meet domestic demand; (f) the availability of domestic production capacity; or (g) the extent of interconnectedness with other critical sectors or key goods. Each IPEF partner will notify the other parties through the IPEF Supply Chain Council of its initial list of critical sectors and key goods that match these criteria, within 120 days after the agreement comes into force (parties can add/remove or make changes to their lists at any time). We expect this to clarify supply chain risks for IPEF partners and accelerate their efforts to strengthen supply chains' resilience.

While not explicitly mentioned, climate change issues are doubtless a key underlying theme of the Supply Chain Agreement. Raw materials and minerals needed to achieve a green economy, such as EV storage batteries and silicon for solar cells, are concentrated in a few emerging nations. Advancing supply-chain resilience initiatives via IPEF will be critical in these areas. The key point will be whether the IPEF develops cooperative mechanisms that enable emergency allocations of supply during disruptions, or is limited to joint development at normal times (eg, R&D on diversifying supply or reducing dependencies).

We also note that the agreement highlights issues with workers' rights in supply chains. The Agreement establishes a mechanism whereby IPEF partners can report alleged violations of workers' rights at facilities (operated by companies with at least 21 employees) in other partner countries. The partner that received the allegation (ie, the party that notified the IPEF Labor Rights Advisory Board) and the host party (in whose territory the subject facility is located) are obliged to work together to resolve it.

We note that the Facility-Specific Rapid Response Labor Mechanism (RRLM) under the United States-Mexico-Canada Agreement (USMCA) is an example of a similar framework. The USMCA mechanism has real-world economic implications given that it can ban imports from businesses until labor rights violations are resolved. The IPEF Supply Chain Agreement states only that it will encourage dialogue between the relevant partners and develop proposals to address any negative effects on IPEF supply chains resulting from the alleged labor rights violations. We therefore do not expect the Agreement to result in similar outcomes to the USMCA's RRLM for IPEF partners, but we think they will face a greater need to accommodate workers' rights in the course of their business activities.

Expect IPEF progress at APEC

The next APEC leaders' meeting is scheduled for November 15-17 with the theme of "Creating a Resilient and Sustainable Future for All". Its three priorities are (1) interconnected, (2) innovative, and (3) inclusive, which include goals such as strengthening supply chain resilience, enhancing climate mitigation and resilience, tackling environmental challenges, advancing gender equity, addressing inclusion in trade, and elevating workers' voices. It also aims to make progress with the IPEF's four pillars to align with these priorities. We will be watching ahead of the November meeting whether the IPEF can make progress on pillars other than the supply chain, where it has already published an agreement. Decisions based on international frameworks could also affect the Japanese government's sustainability initiatives.

Summary from "Nomura ESG Monthly (October 2023)"

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