US aims to reshape global supply chain


Upon US’s reshaping the global supply chain to reduce the influence of China that put both opportunities and challenges for other countries.

It is expected that Commerce Secretary Gina Raimondo and US Trade Representative Katherine Tai will co-chair the ministerial meeting of the Indo-Pacific Economic Framework (IPEF) from September 8 to September 8 in Los Angeles (California, USA). The framework initiated by US, also has the participation of 13 other countries: Vietnam, Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Japan, Australia, India, Korea, New Zealand and Fiji. Based on estimation of White House, the economies participating in the IPEF account for 40% of the total global GDP. The event on September 8-9 is the first official IPEF summit.

Source: Internet

Urgent problem

The IPEF is not an economic treaty but a framework for discussion towards cooperation. This framework consists of four pillars: fair and flexible trade; supply chain; clean energy, decarbonization and infrastructure; taxation and anti-corruption. Members can choose to join any of the four individual pillars, and from there proceed with the negotiating steps to come to a detailed agreement.

In which pillars, the supply chain issue is considered to be of great significance to the US economy in the context that the disruption of global supply chain as the result of the Covid-19 pandemic, US-China trade and Ukraine conflicts

Answering Thanh Nien in early September, a businessman who owns several health supplement production facilities in Texas (USA) said that the supply chain disruption is seriously affecting production in the country: "Typically, the plastic jars used to pack supplements only takes up 4-6 weeks to receive, but now it may delay up to 3 months and still no sights of the order," said the businessman. This makes production costs especially for small and medium enterprises.

The situation of high prices due to the affected supply is quite apparent in the US auto market. According to the Financial Times, since supply is lower than demand, the average car selling price in the US in August 2022 has increased more than 48.000 USD, while the price at the beginning of the year was about 46.000 USD, compared to 2019 only around 39.000 USD.

The state of car prices has caused car loans in US also increase. According to CNN, specifically in the second quarter of 2022, the average car loan of US increased to 40.290 USD/car, leading to the monthly car installment payment also increased to 667 USD, 15% higher compared to the same period in 2021. Moreover, the selling price of used cars also increased. Cars play an important role in American life, so the price occurrence of the auto market has a great impact on the US economy.

More challenges

The disruptions is happening to the whole world, not just the US. In such a context, restructuring has become major US’s strategy for the domestic and global economy, especially in the semiconductor chip sector. In particular, Washington wants to orient the supply chain to limit the dependence of the global supply chain on China.

Therefore, IPEF is considered as a basis for countries, especially Southeast Asian region when there are 7 ASEAN members participating in this framework, to strengthen their position in the global supply chain. Responding to Thanh Nien, Dr. Steven Cochrane (Asia-Pacific chief economist, analysis department, Moody's financial analysis company, USA) said: "ASEAN can utilize IPEF to discussion roles in economic cooperation with the United States and among ASEAN members.”

Vietnam can gain many benefits with IPEF

“IPEF focuses on a wide range of goals from supply chains, clean energy, anti-corruption and digital commerce. ASEAN will play a big role in the IPEF's eventual success. This is precise for supply chain cooperation, labor and environmental standards. Gainng important role in the manufacturing industries, Vietnam can achieve many long-term benefits from IPEF such as making new steps in the digital economy and clean energy”.

Professor Ritam Chaurey (specializing in international economics - Johns Hopskin University, USA)

Also answering Thanh Nien, Dr. Ellen L.Frost (expert in political economy in the Indo-Pacific region, East-West Center, USA) assessed: "This is one step for the US to fill the economic gap after the administration of President Donald Trump withdrew from the Trans-Pacific Partnership (TPP, later to become CPTPP)". However, Mrs. Frost also pointed out: “The disadvantage of the IPEF is that it cannot completely replace the gap when US not joining the CPTPP. The framework has not yet removed restrictions on access to the US market.” The failure to show the prospect of removing barriers to enter US market is also what analysts say will hinder the effectiveness of IPEF.

Not only that, Washington is also pursuing the trend of strengthening domestic supply chains, reducing dependence on foreign countries. When answering Thanh Nien, Professor Dwight Perkins, an economist from Harvard University (USA) - who is regarded as the world's leading expert on economic models of Asian countries, pointed out.: “The pandemic will negatively affect the process of economic globalization, especially for developed countries. That's because Covid-19 has made many countries realize that they have to re-enhance domestic production capacity to ensure the ability to self-sufficient part of the necessary products." This trend may limit the effectiveness of US cooperation with partners participating in IPEF.

Therefore, IPEF needs to address many challenges in order to have a greater impact on the restructuring of the global supply chain.


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