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What are the potential benefits?
The Indo-Pacific Economic Framework for Prosperity is an opportunity to strengthen economic cooperation with the United States and across our wider home region.
IPEF will provide an open and inclusive platform for the US to engage more deeply in the economic architecture of the Indo-Pacific, which we think is valuable for both New Zealand and the wider region.
The Framework will cover some of the most important future-focused economic issues facing our region and the world, including harnessing the digital economy, decarbonising our economies, and making our supply chains more resilient.
The principles of sustainability and inclusivity are embedded throughout the Framework. These are principles that underpin New Zealand’s Trade for All Agenda, principles we are bringing to the table in discussions to ensure the benefits of this Framework are broadly shared by our peoples.
The IPEF will create new opportunities with major Indo-Pacific economies to cooperate on:
- Supply chains
- Clean economy
- Fair economy
Benefits of the Supply Chains agreement
The agreement sets out a range of collective and individual actions that Parties intend to take to improve the resilience, efficiency, productivity, sustainability, transparency, diversification, security, fairness, and inclusivity of IPEF Supply Chains. In particular, the agreement will help New Zealand address future disruptions, by:
- Developing a shared understanding of global supply chain risks, through each Party identifying their critical sectors and key goods in their supply chains;
- Promoting regulatory transparency in IPEF supply chains;
- Monitoring and addressing supply chain vulnerabilities;
- Strengthening the capability of workers involved in supply chains; and
- Establishing a Crisis Response Network to provide an emergency communications channel and facilitate collaboration through which Parties are able to support each other in the event of a supply chain disruption.
Implementation of the agreement envisages the involvement of a diverse range of stakeholders involved in IPEF supply chains, including businesses and workers, but also our wider communities which will have an important role to play in strengthening supply chain resilience.
Another feature of the new agreement is a mechanism to work together with other IPEF countries on labour concerns raised about specific facilities. This will help promote responsible business conduct and transparency in terms of upholding labour rights in supply chains.
Why work on supply chain resilience?
New Zealand has been particularly hard hit by supply chain disruption since 2020. Exporters and importers struggled to get cargo in and out of New Zealand by sea and air. Chronic delays have driven up costs and disrupted supply and production. Supply chain disruption has contributed directly to the global spike in inflation and cost of living that is hitting New Zealand households.
According to the Customs Brokers and Freight Forwarders Association, the cost of sending a shipping container from New Zealand to the US grew from $2000 to $10,000 at the peak of the disruption. The time taken for shipping containers to travel across major global shipping routes skyrocketed from under 60 days in 2019 to an all-time high of more than 120 days in 2022, according to Flexport’s Ocean Timeliness Indicator.
Through the IPEF supply chains agreement, countries will commit to share information, identify stress points and come up with practical solutions to supply chain disruptions experienced in the wake of the COVID-19 pandemic and into the future.
Following signature of the IPEF Supply Chain Agreement on 14 November 2023, the 14 IPEF partners will continue work on their respective domestic processes necessary for the entry into force of the IPEF Supply Chain Agreement.
The full text of this supply chain agreement has been published, after negotiations concluded in May 2023. Find the published text on IPEF text and resources | New Zealand Ministry of Foreign Affairs and Trade (mfat.govt.nz)(external link).
Read the May 2023 Beehive press release(external link).
Benefits of the Clean Economy agreement
The agreement sets out a range of collective and individual actions that Parties intend to take leverage economic benefit from transitioning to net zero GHG emissions economies. In particular, the agreement will benefit New Zealand by:
- Supporting availability of clean energy, transport and emissions removal technologies to New Zealand users, and positioning us close to new technological innovation;
- Creating new channels for New Zealand innovators and investors to partner in scaling up climate change solutions;
- Offering New Zealand research institutions and businesses opportunities to work alongside like-minded others to develop technological solutions;
- Alignment of methodologies and certification standards to grow demand for low emissions exports;
- Reducing non-tariff barriers and providing clarity and certainty in business environments and collaborate on mutually recognized standards, methodologies, and certifications;
- Driving demand for climate-smart agricultural practices, policies and technologies and promoting legally harvested timber and the carbon benefits of the utilization of harvested wood products;
- Helping manage export life-cycle emissions, through action to establish green shipping corridors, and increase production of sustainable aviation fuels; and
- Development of robust carbon markets in the region, to build supply of tradable emissions reductions.
New Zealand can benefit from working alongside other countries to develop supply and demand for technologies that reduce GHG emissions, and critical inputs to these. Joint efforts can support achievement of shared climate change goals. Implementation of the agreement envisages the involvement of a diverse range of stakeholders participating in the region’s economic transition, including businesses and workers, but also Indigenous Peoples and local communities, which will have an important role to play in ensuring the transition to low emissions economies is inclusive and equitable.
A key feature of the new agreement is a mechanism to work together with other IPEF countries on bespoke programmes to tackle particular shared challenges. Supply of low and zero emissions hydrogen is one example. These cooperative work programmes will help develop the regulatory environments to attract investment that will enable dispersal and deployment of emerging solutions.
A further innovation is an annual IPEF Clean Economy Investor Forum, to catalyze investment for sustainable infrastructure and climate technology.
Why work on regional decarbonisation?
The IPEF clean economy agreement seeks to support participating economies to thrive while delivering on climate change commitments made under the Paris Agreement and domestically. Partners will cooperate to mobilise private finance, deliver technical assistance and capacity building to establish conditions for attracting investment, and accelerate efforts around accessibility of clean technologies. These actions will help address known barriers to effective global climate action.
Scaling up regional demand, and supply of clean technologies will enhance New Zealand’s access to key inputs to its Emissions Reductions Plans, overcoming supply chain constraints that risk holding our businesses back from achieving their goals.
New Zealand has as strong tradition of climate innovation, and a number of impact focused entrepreneurs developing and exporting solutions for climate challenges. Supporting the Indo Pacific region’s focus on partners’ shared decarbonisation effort offers new opportunities for New Zealand companies to showcase their solutions and connect with new investors and end-use customers.
Benefits of the Fair Economy agreement
The Fair Economy agreement contains provisions on Tax and Anti-Corruption to create an investment climate in the Indo-Pacific region that is safe, transparent, reliable for business, and ultimately, attractive to investors.
Parties have agreed to work together on areas such as corruption, including bribery, tax, and to support capacity building, technical assistance, and innovative implementation approaches to effectively implement tax and anti-corruption initiatives.
Highlights of the Fair Economy agreement include:
- A focus on Technical Assistance and Capacity Building that will assist countries’ implementation of the Fair Economy agreement;
- Commitments to adopt or maintain and effectively enforce measures concerning domestic and foreign bribery and money laundering, and ensure appropriate accounting and auditing standards;
- Labour provisions with a focus on the principles concerning the fundamental rights as stated in the ILO Declaration on Fundamental Principles and Rights at Work;
- Recognition of the important roles played in the fight against corruption by civil society, along with individuals and groups outside the public sector, including women and Indigenous Peoples; and
- Commitments to recognise and support tax transparency and information exchange for tax purposes, efforts to improve domestic resource mobilization, and effective implementation and administration of tax policies.
Why work on anti-corruption in IPEF?
There is value in shoring up the resilience of the Indo-Pacific investment climate through strong commitments on corruption, money laundering and tax.
The Fair Economy Agreement will assist countries in effectively implementing existing international commitments through the United Nations Convention against Corruption (UNCAC), and the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.
Enhanced fairness, inclusiveness, transparency, the rule of law, and accountability in each of the IPEF economies will be beneficial to New Zealand exporters and investors in the region. The transparency and predictability of the business environment is also key – strong governance will make it easier to do trade in the Indo-Pacific.