Friday, May 14, 2021

QUAD Allies India, Australia & Japan Form A ‘Supply Chain Shield’ Against China’s Dominance

QUAD allies India, Australia, and Japan have come together to establish a Supply Chain Resilience Initiative (SCRI) after China dropped India from its South Asian Covid action plan.

The three countries had initially met in September last year to discuss the prospects of trade diversification. The idea was to reduce their dependence on Chinese markets for finished goods and medical supplies during the pandemic. 

Acknowledging the “vulnerabilities” of “supply chains globally and in the region”, the trio has now decided to overcome the challenges by strengthening joint business projects through SCRI.

The latest initiative comes after China joined hands with Asian neighbors — Pakistan, Afghanistan, Nepal, Sri Lanka, and Bangladesh to set up COVID-19 emergency supplies reserves to help them fight the pandemic.

Interestingly, India, which has been hit by a massive second wave, is not part of this group, as reported by The EurAsian Times.

Their over-dependence on China for the supply of crucial commodities has revealed the vulnerability of the trading economy. Australia, India and Japan’s national planning are a clear reference to this effect, writes  J. Panda for Kyoto News Agency.

While the three nations have made attempts to lessen economic dependence on China, the prevailing conditions of an assertive and unyielding China have led the three QUAD allies to set up a joint supply chain initiative — the Supply Chain Resilience Initiative.

China’s belligerence, even during the Covid-19 pandemic, has aligned the three nations in their shared goal: to stand up to China and reduce Chinese economic influence and limit its interference and coercive diplomacy tactics.

SCRI

SCRI is seen as an attempt to checkmate China by the QUAD bloc on the economic front. Criticizing the move, Chinese Foreign Ministry spokesperson Zhao Lijian stated that “shifting industrial chains is against economic laws and facts” and that “it would disrupt global supply chains.”

The formation of SCRI was formally announced during a Trilateral Ministerial Meeting held virtually on April 27. Trade ministers of India, Japan, and Australia attended the meeting that was followed by a joint statement.

After talking about the supply chain vulnerabilities, the statement mentioned the “importance of risk management and continuity plans in order to avoid supply chain disruptions” which can be tackled through “enhanced utilization of digital technology” and “supporting trade and investment diversification.”

The initial projects of SCRI would include “sharing of best practices on supply chain resilience and holding investment promotion events and buyer-seller matching events to provide opportunities for stakeholders to explore the possibility of diversification of their supply chains”.

The ministers also decided to convene at least once a year to provide guidance to the implementation of the initiative and recognized “the role of business and academia for the initiative”.

India’s Minister of Commerce and Industry Piyush Goel suggested that “sharing of information should lead to capacity-building which will further help in making the matching events more result-oriented”.

He also added that India under its Production Linked Incentive (PLI) scheme worth $26 billion would cover 13 champion sectors in the coming five years to create and nurture manufacturing global champions for an ‘Atmanirbhar Bharat’ or self-reliant India.

He also invited companies from Japan and Australia to “utilize these incentives and increased their commercial viability while achieving diversification of supply chains”.

Earlier, China’s Global Times had criticized the SCRI and wrote: China-centered Asia value chain should have been the core of global economic recovery. Yet, instead of turning to China – the first major economy to recover from the pandemic – the initiative appears to be pinning hopes on India, reeling under the Covid-19 pandemic.

Given its tense relationship with China, Australia and even Japan might be expecting India to lead the SCRI alliance and replace China’s role in its economy. Such a notion is actually acceptable since India has the same demographic dividend as China had decades ago.

However, it remains debatable if India can really undertake such a critical role to counter China’s supply-chain dominance.

While India has made sincere efforts to promote industrialization, however, its manufacturing bottlenecks are unlikely to be addressed any time soon.

Additionally, with rising coronavirus cases, the Indian economy is taking its worst hit for decades. The impact is so severe that it may drastically impede the resumption of the manufacturing industry in the nation.

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