IPEF supply chain agreement to take effect in Korea next month

Economy

Published: 07 Mar. 2024, 16:45

IPEF supply chain agreement to take effect in Korea next month

President Yoon Suk Yeol speaks during a government-public debate held in Incheon on Thursday. [NEWS1]

An agreement relating to supply chain resilience among Indo-Pacific countries will take effect in Korea next month as part of the country’s efforts to reduce risks in securing core materials.

The deal negotiated under the Indo-Pacific Economic Framework for Prosperity (IPEF), an economic initiative launched in May 2022, will allow member countries to request and provide assistance in response to supply chain disruptions.

The initiative devised by the United States under the Joe Biden administration with 14 participating nations strives to deepen economic engagement on the framework's four pillars: trade, supply chains, the clean economy and a fair economy.

The agreement among member countries such as Korea, India, Australia, Singapore and Vietnam does not include China.

The IPEF is expected to help Seoul avoid risks, like the shortage of urea solution in late 2021 when China imposed export curbs on the material. As urea is a chemical compound used to produce fertilizer and diesel exhaust fluid for diesel engines, the supply shortage thereby took a toll on diesel car and truck drivers in Korea.

Based on the agreement, the member countries are expected to help Korea respond to such risks through the joint identification of substitute suppliers and the development of alternative transportation routes at times of supply chain crisis. The signatories will also refrain from negatively impacting supply chain networks for each other.

The government on Wednesday passed the instrument of ratification for the agreement at a Cabinet meeting held at the government complex in Sejong presided over by President Yoon Suk Yeol. The instrument of ratification will be submitted to the IPEF following Yoon’s approval.

The agreement will become effective 30 days after the date of deposit. Among the countries that have joined the initiative, five — the United States, Japan, India, Singapore and Fiji — saw the supply chain agreement enter into effect on Feb. 24. The deal, agreed to in May 2023 and signed in November, was the first to come into force among the deals reached by IPEF economies.

The framework is considered by some as a means to counter China, Korea’s largest trading partner, from further expanding its influence in the region by excluding the country from global supply chains and rearranging them.

The IPEF member countries represent around 40 percent of global gross domestic product and 28 percent of global goods and services trade.

BY JIN MIN-JI [jin.minji@joongang.co.kr]