India weighs supply chain pact with Japan, Australia

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, according to people in Tokyo and New Delhi with knowledge of the matter.

The three nations are discussing building a “supply chain resilience initiative,” according to the people, who asked not to be identified. The talks are at a working level currently, but Japan would like to bring them to a higher level at some point, according to a person in Tokyo.

The Indian government is considering the plan and will make a decision soon about whether to participate, some of the people said. An Australian official declined to confirm the talks.

The intensifying

USChina

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 Covid19 brought home 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 programme, which will pay out 243.5 bn yen ($2.3 bn).

Both India’s and Australia’s trade and diplomatic relations with China are fraying. India has restricted some Chinese imports and banned several Chinese apps. In Australia, exports like beef, barley and now wine have been targeted by China amid deteriorating ties between the two nations.

Along with the US, Japan, Australia and India are members of the Quadrilateral Security Dialogue, or Quad, a loose grouping for national security consultation.

A spokesman for Australia’s foreign ministry said the nation is working with a range of partners to ensure supply chains are kept open.

— Bloomberg