Tag Archive for: APEC

Is the US committed to strengthening the Indo-Pacific economic order?

With the signing of the Indo-Pacific Economic Framework supply-chain agreement in November last year, on the sidelines of the APEC summit in San Francisco, the United States took a major step towards establishing a regional economic architecture under its leadership, despite the initial hiccups that followed the IPEF’s announcement more than a year ago.

By fostering collaboration among IPEF member states, the agreement aims to enhance the resilience, efficiency, transparency, diversity, security and inclusivity of supply chains in the Indo-Pacific. Washington has asserted that this will not only bolster the competitiveness of the region’s supply chains but also reduce costs, all while ensuring a stable supply of critical goods in times of crisis. The agreement encourages the parties to explore diversification strategies, streamline trade through regulatory enhancements and optimise logistics.

The aims of the agreement are to pre-empt, prevent and proactively manage disruptions to global supply chains. Given the supply-chain problems witnessed during the peak of the Covid-19 pandemic, which significantly affected the US economy and led to inflationary pressures, this is a prudent move. Economists have argued that around 60% of the surge in US inflation in early 2021 can be attributed to supply-chain constraints. However, the agreement’s implications extend beyond addressing supply-chain disruptions.

It’s evident that the IPEF seeks to reduce member countries’ dependence on specific sources, prompting parties to assess their level of reliance on individual suppliers, countries, regions and geographic locations. While some commentators have viewed this as a US attempt to shift regional trade away from China, it can also be seen as a bid to secure US access to the Asian regional supply chain. Some also speculate that it could be a strategic move in anticipation of strained US–China trade relations.

The IPEF’s emphasis on transparency and institutionalisation, and the ensuing commitments and obligations, is designed to safeguard the US’s economic interests, particularly in critical sectors and essential commodities. The agreement establishes a Supply Chain Council tasked to ‘assess capabilities, map supply chains, identify bottlenecks, and explore options for diversification of concentrated sources of supply for sectors and goods of shared interest’. It also sets up a Supply Chain Crisis Response Network requiring partners to establish channels and mechanisms to prepare for, prevent and ‘respond to, mitigate, and recover from the impacts of a supply chain disruption’. These measures are designed to ensure that the US retains access to vital sectors and goods, regardless of unforeseen circumstances.

Setting these reasons aside, the drive to strengthen supply chains and engage various stakeholders—including industry, academia, the public sector and non-government organisations—should be viewed positively. These efforts are poised to result in more competitive and resilient supply chains.

In addition, the agreement incorporates provisions to institutionalise the protection of labour rights. It establishes a tripartite IPEF Labor Rights Advisory Board, comprising government, worker and employer representatives, tasked with identifying and addressing labour rights shortcomings. Arrangements of this sort are present in countries like Singapore and Malaysia, thus making it more acceptable than the usual route for addressing such concerns under a traditional free-trade agreement.

While much of the agreement employs broad language and non-binding terms (for example, the word ‘intend’ appears often), several commitments and obligations mirror those found in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, to which many IPEF member countries are signatories. Notably, there’s no mention of a dispute-settlement mechanism, a feature that could alleviate concerns about the agreement’s enforceability. Nonetheless, the creation of the three governing bodies implies a level of discipline not typically associated with APEC’s more relaxed approach.

Leadership under the agreement will be critical, since the process will be driven by a rotating chairmanship. While the current US administration appears committed to this initiative, there’s no guarantee that this position will be maintained. Donald Trump has already vowed to kill the deal if he wins the presidential election in November. There are also questions about the level of commitment of other member nations. They may not show it, but for those IPEF members that are also parties to the CPTPP, having the US involved is advantageous. The main reason for some of them joining the IPEF was the hope that it would lead to the US rejoining the CPTPP.

The challenge now lies in making trade a compelling domestic issue for them—a problem that the US itself faces. Some have suggested that the recent U-turn by the US on the IPEF digital trade negotiations reflects a retreat towards nativist protectionism. The US decision to abort plans to announce a partial trade agreement on enforceable trade rules is also seen as a sign of ‘the great American no-show’. But we shouldn’t set off the alarm bells prematurely. Washington’s reluctance to discuss some key digital trade aspects and its postponement of talks as a result doesn’t signify a withdrawal from IPEF.

The provisions in question, some of which have faced criticism for potentially granting unrestricted authority to large technology corporations, might find favour among several members of the IPEF, especially those that seek the ability to oversee these corporations and manage data transfers. Similar measures have been implemented within the World Trade Organization as well, indirectly indicating that the current regulations in the e-commerce agreement are considered satisfactory. This seems to attest more to support for the existing architecture than a critique against it. Nevertheless, we can be forgiven if we have held such suspicions thanks largely to the US’s own actions in recent years.

Whether the IPEF will cement the US as an important stakeholder in the Asian multilateral regional economic order will be determined primarily by the level of sustained interest and commitment from Washington. The Trump administration’s inward-looking policies and decision to pull out from the Trans-Pacific Partnership, mirrored in many ways by the Biden administration’s reluctance to join the CPTPP, have raised questions about the US’s credibility as a champion of free and open multilateral trade. The IPEF has the potential to address such concerns. The successful conclusion of the ASEAN-led 15-member Regional Comprehensive Economic Partnership, which also involves China and Japan, put China in a more confident position vis-à-vis the US in the region.

With the IPEF still at a nascent stage, it would be challenging for the US to mould its fine print and wield it directly against China. However, the IPEF stands a good chance to position itself as one of the key pillars of the Asian multilateral regional economic order in a scenario where China adopts more insular trade policies under its ‘dual circulation’ strategy. While that strategy may not be entirely inward-looking, its goal of protecting China from global economic headwinds by making it more self-reliant could entail localisation of supply chains within China. This could be the IPEF’s (and the US’s) moment to rechampion free and liberal trade values—provided Washington walks the talk.

PNG border security a key strategic interest for Australia

As a backgrounder to the APEC meeting in Port Moresby this week, we recently set out in The Australian some of the broad maritime and border security issues Papua New Guinea faces.

Here we’d like to focus in a little more detail on the increasing national security challenges that PNG’s borders pose for the country’s government.

Indirectly there are serious consequences for Australia if PNG’s borders aren’t secure. PNG is our nearest neighbour and it’s not too difficult to move people and goods that have illegally entered PNG on to Australia.

Providing security at PNG’s borders is difficult and requires a large commitment from the country’s scarce administrative, security and law enforcement resources.

PNG’s major border security threats are linked to a range of illicit activities such as smuggling of drugs, weapons, tobacco and people, as well as health and biosecurity risks.

Life on both sides of PNG’s borders with Indonesia, Solomon Islands and Australia is intertwined in terms of culture, family and economics. And transactions and movements at the country’s borders have been growing.

The 720-kilometre border with Indonesia is the one that most requires protection. It is mainly a land boundary, except for a small stretch where the Fly River marks the border.

Indonesia also attaches high importance to the border and in recent years has undertaken major infrastructure and social development projects in the area. Indonesia is now establishing bases every 10 kilometres on its side of the border. These developments have not been matched on the PNG side.

Apart from the northern border post at Wutung, the border is largely open to the uncontrolled movement of people and goods by both land and sea, which poses a high quarantine risk to PNG.

Boats make illegal crossings at night, and contraband is smuggled in along the northern and southern maritime borders. Illegal crossings also occur by canoe along the river systems around the southern part of the land border.

PNG has limited surveillance capabilities on sea, land and air along the Indonesian border.

In the south, Daru is a designated PNG port of entry and is the entrance to Western Province. But it seems the government has no real assets to monitor the area, especially boats coming along the coast from Indonesia.

PNG’s border with Australia is managed under the Torres Strait Treaty, which establishes several maritime boundaries between the two countries and addresses a range of related issues, including sovereignty over islands, fishing rights and protection of the marine environment.

The treaty is complex. It creates four different kinds of maritime boundaries and limits, including a zone for protecting the traditional way of life and the livelihoods of local inhabitants, allowing free movement and access to fishing grounds. Under the treaty, ‘traditional inhabitants’ come from 13 villages in PNG.

Day-to-day negotiations on border issues are conducted by treaty liaison officers appointed by each country.

The border is the best controlled of PNG’s borders, but some illegal movement of goods and people still occurs.

PNG has no resources to mirror the patrolling that takes place on the Australian side of the border. In the Torres Strait Treaty villages there’s no network of border liaison officers (or quarantine officers) like Australia has on its side.

Australia will need to maintain its efforts to work collaboratively with PNG on border security. The joint cross-border patrols that occur several times a year to mutually protect the shared border might, for example, be expanded to areas outside the Torres Strait protected zone.

No patrols are conducted in the ‘dog leg’ of PNG’s exclusive economic zone in the western Torres Strait, which isn’t covered by the Torres Strait Treaty. A high level of illegal, unregulated and unreported fishing is believed to occur, including by fishing vessels from Indonesia and by licensed PNG-flagged vessels. Some form of trilateral cooperation for enforcement in the area would seem appropriate.

PNG’s boundary agreement with Solomon Islands isn’t yet in force, but both countries respect the  integrity of a maritime boundary that’s around 1,800 kilometres long.

The border has been problematic in the past, but since the end of hostilities on Bougainville, it’s reverted to its role as a peaceful and artificial dividing line between related communities. Movement of goods and people across the border is virtually uncontrolled on the PNG side. For example, there’s currently no border post at Kangu Beach between PNG and Solomon Islands.

In the case of the southern border with Solomon Islands, unauthorised movements of people and goods occur. There are no registration cards for border crossings. Beer is apparently a border currency: the beer is stronger and cheaper in Solomon Islands. Illegal home brew also comes in.

In effect, PNG’s southern border is self-regulating, and night-time crossings from Solomon Islands are common. In the event of a security, humanitarian or heath crisis in Bougainville, many PNG citizens would seek refuge across the border, as occurred during the armed conflict in Bougainville in the 1990s.

Uncontrolled border movements, particularly across the borders with Indonesia and Solomon Islands, mean that PNG is both missing out on possible customs revenue and being exposed to illegal imports such as drugs and arms, as well as the unrecorded entry of people.

PNG agencies working on the borders are severely starved of equipment and funding. One positive development here is the report that Australia will commit hundreds of millions of dollars towards a new multi-nation investment to deliver power and communications infrastructure to PNG. This is a step in the right direction as it will facilitate communications between border posts as well as links with Port Moresby.

Secure borders are also a gateway for greater wealth for PNG through trade and commerce. PNG’s border security strategies will need to facilitate the legitimate movement of people and goods while keeping the borders secure from illicit contraband and irregular people movements.

Last year PNG appointed its first immigration and border security minister, a long overdue move which should help achieve a more focused approach to border protection.

Australia will need to maintain its efforts to work collaboratively with PNG on border security. PNG is a key strategic interest for Australia that has been underappreciated since its independence. While we have paid attention to our own border security with PNG in the Torres Strait, we should also provide greater support for PNG in maintaining its borders with Indonesia and Solomon Islands.