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India, Japan, Australia to boost supply chain security by reducing dependency on China

11:38 | 22/08/2020

India, Japan and Australia have started discussions on launching a trilateral Supply Chain Resilience Initiative (SCRI) to reduce reliance on China in future.

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Japan’s Ministry of Economy, Trade and Industry broached the idea of the Supply Chain Resilience Initiative with the Indian government around a month ago and informal talks have been ongoing. Photo: AFP

Initiative on launching a trilateral Supply Chain Resilience Initiative (SCRI) to reduce dependency on China

The initiative, first proposed byJapan, is now taking shape, the Economic Times has learnt. Dates are being worked out to hold the first meeting of the commerce and trade ministers of the three countries by next week.

Japan through its Ministry of Economy, Trade and Industry approached India recently and pressed on the urgency to take the initiative forward, according to people in the know. Tokyo was in favor of launching SCRI by November, sources said.

The government is moving on the proposal quite seriously, especially in the light of China’s aggressive moves on the Line of Actual Control in Ladakh. Usually, the sources said, New Delhi would consider any such proposal cautiously as it would be seen as an alliance against China.

This time, the government appears to have taken the call at the highest levels to become part of the global supply chain, thus emerging as an alternative to China.

Plan on Factory Diversification of India, Japan and Australia

According to Business Standard, both Indias and Australia’s trade and diplomatic relations with China are fraying. Prime Minister Narendra Modi’s government restricted some Chinese imports and banned several Chinese apps after a deadly border clash with its neighbor. In Australia, exports like beef, barley and now wine have been targeted by China amid deteriorating ties between the two nations.

The Quad Along with the US, Japan, Australia and India are members of the Quadrilateral Security Dialogue, or Quad, a loose grouping for national security consultation.

Two calls and a text message sent to India’s trade ministry spokesperson during business hours were unanswered.

A spokesman for Australia’s foreign ministry said the nation is working with a range of partners to ensure supply chains are kept open and resilient during the recovery from Covid-19, but did not confirm whether it was working on a deal with Japan and India. There’s no clear agreement between the three nations on any action yet, an official from Japan’s trade ministry said.

Earlier this year Australia and India agreed to work together on diversifying supply chains.

The supply chain initiative could also eventually be expanded to include the 10 members of the Association of Southeast Asian Nations

The South China Morning Post stated that with trade and political tensions simmering between India and China, New Delhi is also keen to step up a supply chain shake-up by rolling out the initiative by the end of the year, added the economists who are close to the matter.

“Yes, the discussion is on and now the plans need to be executed,” said Jagannath Panda, the East Asia coordinator at the Manohar Parrikar Institute for Defence Studies and Analyses in New Delhi.

The initiative is viewed as a direct response to the geopolitical tensions involving China, including the border skirmish between China and India in June which resulted in the deaths of at least 20 Indian soldiers.

But it also has wider implications for the Indo-Pacific region, according to Mark Goh, National University of Singapore Business School professor and director at the Logistics Institute-Asia Pacific.

It would also not only extend the India-Japan Industrial Competitiveness Partnership, which was established in December to help improve India’s industrial competitiveness, but it would open up opportunities for various countries in the Indo-Pacific countries to establish new “China+1” strategies for having backup supply chains outside China, Goh said.

The initiative could also allow India to find a way back into the region’s trade network after it withdrew from the Regional Comprehensive Economic Partnership (RCEP) multilateral trade deal between the members of Asean, Japan, South Korea, New Zealand and China that is due to be signed by the end of the year, Goh said.

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