August 31, 2020: Japan, India and Australia are seeking to build stronger supply chains to counter China’s dominance as trade and geopolitical tensions escalate across the region.
The three nations are discussing building a “supply chain resilience initiative.” The talks are currently at the working level, but Japan would like to bring them to a higher level at some point, according to a person in Tokyo.
India’s government is considering the plan and will make a decision soon about whether to participate, some of the people said.
The intensifying U.S.-China conflict and worsening diplomatic relations across the region are forcing companies to consider whether they can continue to do business in China as before. In addition, the disruptions to trade caused by COVID-19 have underlined how dependent many nations were on China for essential goods such as ventilators or masks, spurring talk about diversification.
Japan is trying to pare its reliance on Chinese factories, with the government subsidizing some companies to shift or expand operations in Japan and Southeast Asia. So far 87 firms are participating in the program, which will pay out ¥243.5 billion ($2.3 billion).
Both India’s 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.
Along with the U.S., Japan, Australia and India are members of the Quadrilateral Security Dialogue, or Quad, a loose grouping for national security consultation.
Earlier this year Australia and India agreed to work together on diversifying supply chains.
The new proposal will seek to lean on such bilateral agreements between countries and put in place further measures for trade facilitation and attracting foreign direct investment in the Indo-Pacific region, the people said. Nations from Southeast Asia would also be invited to participate, they said.
Source: The Japan Times
