There is a growing perception that developed economies led by the US, while looking at its geo-economic objectives, should also appreciate the growth aspirations of the developing South.

In this context, it is quite encouraging to find the US and India signing an MoU seeking cooperation in semiconductors. It is anticipated that this will help India play a greater role towards diversified supply chains. Currently, Taiwan and South Korea comprise 80 per cent of the global foundry market for chips.

While efforts like these are meant to reduce reliance on certain geographies for critical needs, self-reliance through joint ventures and technology partnerships must also be an objective.

De-risking supply chains is also a basic objective underlying the 13-nation Indo-Pacific Economic Framework (IPEF). The IPEF has tried to put together a common set of goals. The framework is structured around four pillars — trade, supply chains, clean economy, and fair economy.

While India in the recent past chose not to be a part of other plurilateral deals like TPP and Regional Comprehensive Economic Partnership (RCEP), it is perhaps again testing the waters by partially agreeing to be a part of IPEF and watching the deliberations under trade.

Non-tariff barriers

IPEF does provide a good platform to iron out non-tariff barriers like sanitary and phytosanitary (SPS) measures and Technical Barriers to Trade (TBT) issues. While the developed countries insist on developing IPEF members to agree on labour standards, environmental standards, amongst others, it can only happen gradually.

Developed IPEF, needs to be mindful of the developing countries like India which has a huge MSME base. Many a times, MSMEs are unable to tap the opportunities in IPEF, not because of trade barriers, but on the contrary due to non-tariff ones.

IPEF can look at creating a mechanism to have a common minimum acceptable framework on quality of goods and then improve upon it over a period. Enforcing high standard makes developing South uncompetitive — and here capacity building, technical assistance, including sharing of expertise and best practices, would be the key.

In a similar context, it may be mentioned that the total foreign direct investments in manufacturing by US in 2021 stood at around $2 trillion, with 20 per cent to IPEC economies, but this was largely concentrated with Japan at 17 per cent. The US will now need to engage more with the Indo-Pacific to fulfil the IPEC vision.

Interestingly of the 14 identified economies under IPEF, 10 have dedicated public development banks (PDBs) with a majority stake held by the respective governments. PDBs in IPEF hence could play a catalytical role if the economic framework amongst these Indo-Pacific countries is designed suitably.

Most of these PDBs extend medium- to long-term loans and have been in business for many years and were set up to also play a strategic role towards reducing import dependency and enhancing exports.

Suitable utilisation of these PDBs with adequate government support on strategic projects under the ambit of the objectives of IPEF could go a long way in strengthening ties between developed and developing countries. The semi-conductors initiative should be seen in this context.

The writer is an economist with India Exim Bank. Views are personal