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The IPEF, targeting a 14-nation crisis, starts on Wednesday

The IPEF, targeting a 14-nation crisis, starts on Wednesday

Posted April. 13, 2024 07:42,   

Updated April. 13, 2024 07:42


Scheduled to take effect on Wednesday within the country, the Indo-Pacific Economic Framework (IPEF) supply chain agreement, spearheaded by the United States, aims to tackle the supply chain crisis triggered by China. As a result, in scenarios similar to the 'urea water crisis' of 2021, stemming from supply chain complications with China, South Korea is poised to gain instant support from resource-abundant nations like the United States and Australia, alongside other countries in the Indo-Pacific region.

"On March 18, the ratification of the IPEF supply chain agreement was submitted, and as per the stipulations of the agreement's activation, it will come into force within the country 30 days later," the Ministry of Foreign Affairs and other governmental entities declared on Friday. Prior to this, the government reviewed and approved the ratification of the IPEF in a Cabinet meeting held on March 6, followed by President Yoon Suk Yeol's endorsement and submission of the ratification to the IPEF. Earlier this year, in February, the IPEF agreement was initially activated in the United States, Japan, Singapore, Fiji, and India. South Korea marks the sixth nation to endorse the agreement.

Initiated in May 2022 under the guidance of President Joe Biden's administration, the IPEF represents the inaugural multilateral international pact concerning supply chains. In the subsequent year, May, South Korea, the United States, Japan, Australia, and 14 other member states, segmented into four divisions—trade, supply chain, clean economy, and fair economy—undertook negotiations, culminating in the formation of an agreement. The combined GDP of the IPEF member nations constituted 40.9% of the global GDP in 2020.

A Crisis Response Network (CRN) will be instituted per the agreement, enabling the 14 countries to collectively and promptly address supply chain crises. Should a nation enduring a supply chain dilemma seek aid, an urgent meeting will be convened within 15 days via the CRN to explore remedies, including aligning demand and supply companies and identifying alternate transport routes. During normal periods, efforts will be channeled towards amplifying supply chain resilience via increased investment, logistical enhancements, and collaborative R&D. The IPEF member countries have also consented to avoid actions that could detrimentally impact the supply chain.

With South Korea's heightened vulnerability to China's export constraints and similar actions, due to its substantial reliance on Chinese minerals and energy resources, the government anticipates that the activation of the IPEF agreement will considerably fortify its capacity to navigate supply chain crises. By 2022, South Korea had over 4,000 items with an import dependence exceeding 50% on specific countries, with the reliance on certain nations for essential minerals like lithium, cobalt, and graphite surpassing 80% the preceding year.

Kyu-Jin Shin newjin@donga.com