Korea reaches deal with 13 IPEF countries on supply chain resilience

Industry

Published: 28 May. 2023, 16:52

Korea reaches deal with 13 IPEF countries on supply chain resilience

Korean Trade Minister Ahn Duk-geun and ministers of 13 countries of the U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF) hold a meeting on supply chain resilience in Detroit on May 27. [YONHAP]

Korea reached an agreement with 13 other countries in the U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF) for supply chain resilience in an effort to reduce economic dependence on China.

Trade ministers of 14 countries in the IPEF reached a deal to make supply chains more resilient and secure in Detroit, the Ministry of Trade, Industry and Energy said Sunday. This marks the first time the countries agreed on specific measures since U.S. President Joe Biden launched the economic framework in May 2022 with countries including Korea, Japan, Australia, and Indonesia.

Under the second pillar of the framework, which focuses on supply chain resilience, the agreement includes cooperation between countries to tackle supply chain crises and to improve the labor market related to supply chains.

The 14 countries will cooperate in supporting each other when they are in emergency situations related to supply chains such as quickly finding alternatives and allowing simpler customs clearance.

They also agreed to remove unnecessary trade restrictions, and expand investment and joint research and development to diversify supply chains.

A Supply Chain Council will be established consisting of government officials from the 14 countries to inspect the cooperation and hold further talks.

The countries will also work together to improve the labor market, which is critical in stabilizing supply chains.

"It's essential to quickly come up with follow-up steps in order to materialize the framework," Trade Minister Ahn Duk-geun said.

Korean Trade Minister Ahn Duk-geun, seventh from left, and ministers of 13 countries of the U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF) take a photo after reaching a deal in Detroit on May 27. [YONHAP]

The agreement is the largest international economic deal Korea has joined so far. The combined GDP of the 14 countries accounted for 40.9 percent of the world's total as of 2020.

While the deal does give details on specific items, it comes as China has constantly been expanding its presence in the Indo-Pacific region and other countries are highly dependent on the country, especially in critical mineral products.

As of last year, Korea imports 95 percent of critical minerals to make electric vehicle batteries like lithium, cobalt and graphite from China.

"Joint cooperation with the countries with mineral resources like Australia and Indonesia will be a big help to Korea to secure stable supply chains, and diversify our own," the Trade Ministry said.

The Inflation Reduction Act, signed by U.S. President Joe Biden in August gives up to $7,500 in tax credits to buyers of EVs assembled only in North America and restricts usage of China-made minerals and components, sparking concerns that Korean carmakers here will lose ground in the U.S. market.

Since September, the IPEF has been in negotiations on four key areas — fair trade, supply chain resilience, infrastructure and green technology, and tax and anti-corruption.

Negotiations are continuing for the other three pillars of the agreement. More announcements will likely come in November in San Francisco.

BY SARAH CHEA [chea.sarah@joongang.co.kr]