PacNet #59 – How the new National Security Strategy transforms US China policy

The United States has transformed its policy toward China.

This shift is not plain from the language of the National Security Strategy, released this week, even though that document identifies China as a country with “the intention and, increasingly, the capacity to reshape the international order in favor of one that tilts the global playing field to its benefit.”

Rather, the change becomes visible with the study of speeches by top administration officials, recent presidential executive orders and other actions by the US government.

Previously, the US, along with allies and partners, focused on preventing China from acquiring technology that would improve its military capabilities. The ambition is now much grander: The goal is to constrain the development of China’s high-tech economy, to thwart its rise as a challenger to US (and Western) technological supremacy.

It is a risky strategy and may instead accelerate developments it seeks to thwart.

During the Cold War and the period after, the US approach was one-dimensional—it sought to deny adversaries access to technologies that could better their military capabilities. The policy defined threats narrowly and focused on acquisition through trade.

That perspective reflected the limitations of America’s rival, the Soviet Union, which was unable to muster a challenge beyond that posed by its armed forces.

Today’s primary concern, China, poses a more formidable threat. It is not only a potential military adversary but it can compete with the United States (and the West) economically, in soft power, diplomacy and development aid, and in the contest to develop the most advanced technologies.

It is that latter capacity that is most alarming since leadership in the high-tech arena will determine which country leads the 21st-century economy.

Also worrying is the use of those technologies to construct surveillance systems capable of empowering autocrats or undermining human rights. The technologies strengthen regimes that reject democratic ideals and promote opposing ideologies.

China’s economic success allows it to evade traditional means of controlling tech transfer. China has lots of money, which it can use to invest in or buy companies, or as venture capital to set them up.

The desire by others to crack China’s huge domestic market gives the Beijing government leverage to demand tech transfer as a term of engagement. And the skills of its scientists embed them in the international collaborations that set the frontiers of technology.

US administrations have been tightening the screws for some time. One marker was the adoption, as part of the 2018 National Defense Authorization Act, of the Export Control Reform Act and the Foreign Investment Risk Review Modernization Act. They expanded and strengthened regulations of strategic trade and foreign investment in the US.

The “entities list” that the Commerce Department uses to restrict destinations of goods and technologies has grown steadily longer as more Chinese companies are added. Companies that make technologies that can be used for surveillance or repression are being added, too.

Recent decisions have made clear that the US is going further to block China’s ability to compete.

In early October, the Biden administration announced new rules to limit Chinese access to advanced computer chips and chip-making equipment. Enforcing the foreign direct product rule (FDPR) means that any company that sells advanced chips to Chinese firms or organizations working on artificial intelligence and supercomputing will require a US government license if the company uses US technology to make the chips.

Almost all significant semiconductor companies do. A Boston Consulting Group analysis concluded that there are at least 23 types of chipmaking equipment for which US companies control more than 65% of global supply, making this restriction a powerful chokepoint in the semiconductor supply chain.

That status prompted Gregory Allen of CSIS, the Washington-based think tank, to conclude that the rule signals “a new US policy of actively strangling large segments of the Chinese technology industry—strangling with an intent to kill.”

A second landmark is an executive order issued by President Biden last month that provides direction to the interagency Committee on Foreign Investment in the United States to “ensure that it remains responsive to evolving national security risk.”

This executive order, the first issued since CFIUS was established in 1975, identifies five risk factors that the committee must weigh as it evaluates a transaction: 1) supply chain resilience, 2) US technological leadership, 3) aggregate investment trends, 4) cybersecurity and 5) US persons’ sensitive data.

The second factor is the key. CFIUS must now consider a transaction’s effect on US technological leadership in sectors vital to national security—a category that currently includes microelectronics, artificial intelligence, biotechnology, quantum computing, advanced clean energy, climate adaptation technologies and parts of the agricultural industrial base with implications for food security.

“Leadership” is a broad signifier, and the sectors themselves aren’t part of “national security” as traditionally defined. National Security Advisor Jake Sullivan hammered this point home in a speech last month. First, he noted that “Preserving our edge in science and technology is not a ‘domestic issue’ or ‘national security issue.’ It’s both.”

This merging of economic security and national security has become routine and is a pillar of the national security strategy issued this week.

More intriguing is the claim that “we have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies. We previously maintained a ‘sliding scale’ approach that said we need to stay only a couple of generations ahead.”

But, Sullivan went on to say, “That is not the strategic environment we are in today. Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”

The US is now alert to deals “that could undermine America’s national security by blunting our technological edge.” This is the context that informs the statement in the National Security Strategy that the United States will “prioritize maintaining an enduring competitive edge over the PRC.” It signals the move away from “traditional national security concerns” that focused on military capabilities toward strategic competition more generally.

To be clear, that does not represent a complete decoupling with China. That is neither possible nor desirable. It is, however, a call to decouple at the high end, on the frontiers of new technologies where potential impacts of advances and breakthroughs are greatest.

It is risky, nevertheless. It assumes that the United States can identify technologies that are key to leadership. It assumes that the United States won’t be disadvantaged by losing access to Chinese skills and successes. (The impact of cutting off Chinese researchers could be greater than feared: if governments in Europe or Asia do not align with the United States, then their projects will be off limits to American scientists.) It also denies, to the United States, insights into what the Chinese are doing.

This policy will confirm to Chinese that their longstanding complaint that the United States seeks to block their rise is correct. Chinese officials criticized the new rules as “sci-tech hegemony” that aims “to hobble and suppress the development of emerging markets and developing countries.”  It will animate the drive to promote indigenous development and production in China. It will harden divisions between China and the United States.

The policy has no chance of success if the United States goes alone. It must have allies and partners in this effort. This has been a pillar of Biden administration policy and the National Security Strategy hammers home this simple truth.

It is not clear how far allies share this outlook, however. The European Union Strategic Outlook toward China, issued in 2019, called that country a “strategic rival,” but there are disputes among members—and even within countries—when distinguishing between “competition” and “rivalry.”

So far, however, the US and chief allies in Asia and Europe appear to be working together. It isn’t clear if that solidarity will be maintained as the new US policy becomes sharper and better defined.

Brad Glosserman (brad@pacforum.org) is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior adviser (nonresident) at Pacific Forum. He is the author of Peak Japan: The End of Great Ambitions (Georgetown University Press, 2019). This article is drawn from a forthcoming book on the new national security economy. 

An earlier version of this article was published in Asia Times.

For more from this author, see his recent chapter of Comparative Connections.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged.

PacNet #53 – How the United States can build a chip alliance in Northeast Asia without decoupling

A pandemic-induced semiconductor supply chain snarl caused global production jams in a wide array of products used for consumer, industry, and military applications. This, combined with the geopolitical risk created by the industry’s concentration in Northeast Asia, its reliance on China, and predatory Chinese industrial policies, has caused America, its allies, and its partners to brace against future shocks. With the CHIPS and Science Act signed into law, Washington is now moving toward a semiconductor alliance with Tokyo, Taipei, and Seoul. A successful collaboration will address risks to key points of the semiconductor supply chain by adding rigor to the system, ensuring continued access to supply, and maintaining an environment of innovation. It’s a step in the right direction, but much remains to be done. The effort will fall short if the alliance cannot address members’ concerns and respond to the risks posed by the People’s Republic of China without tripping down the slippery slope of technological decoupling. Although the PRC poses a threat that warrants a response, the highly distributed nature of the global supply chain means that decoupling would be inordinately expensive, alienate America’s partners, and inhibit the innovative capacity of America’s firms. Furthermore, the fate of the industry will likely be determined by the innovation race, so the alliance should spend equal time cooperating on that front. The upcoming first meeting of the prospective chip alliance should address these concerns while formulating a framework for enduring cooperation and mutual gain.

The semiconductor industry is highly specialized and concentrated. There are over 50 points in the supply chain where a single country provides over 65% of supply. Last year, pandemic-induced disruptions caused a global supply snag, drawing attention to the world’s fourth-most traded product. The industry is heavily concentrated in Northeast Asia, where geopolitical risks are considerable. Since Taiwan makes over 90% of the world’s most advanced chips, a PRC takeover would cause a “deep and immediate recession” in the United States, according to Commerce Secretary Gina Raimondo. A contingency on the Korean Peninsula would have similar consequences.

The PRC could acquire a monopoly over a supply chain choke point and utilize this as leverage to extract concessions. The PRC already routinely weaponizes its economy with informal sanctions and engages in destabilizing industrial policies like irregular subsidies and forced technology transfers. Chinese firms collude with one another to weaken foreign takeover targets before buying them in a distressed state. Beijing engages in IP theft against South Korean and Taiwanese firms. And the Chinese government’s sprawling chip investment vehicles also creates the risk that a supply chain could “inadvertently support China’s military-civil fusion.”

The alliance should cooperate with the PRC wherever possible and confront it wherever necessary, mirroring US Secretary of State Antony Blinken’s statement that, in all matters related to China, America will “cooperate wherever we can… [and] contest where we must.” The US should press Beijing to report irregular subsidies as required by WTO regulations and cease market-distorting practices and forced technology transfers. Subsidy ceilings should factor into the conversation, including with the PRC, to prevent a never-ending race to the bottom. Alliance cooperation on export controls with the European Union will be an important aspect of this approach. Multilateral export controls on semiconductor equipment is conducted through the Wassenaar Arrangement, a group of 42 countries that collaborate on restrictions of dual use technologies. But industry experts think the institution is inadequate, and have pushed for alternatives. However, while targeted restrictions are effective, “broad unilateral restrictions,” could hurt US firms, raise consumers’ costs, and cause pain to partner countries producing in China.

The best method to strengthen and secure the supply chain is a coordinated approach with allies and partners that avoids completely excluding the PRC, so long as it refrains from destabilizing behaviors such as invading Taiwan. Some have called for technological decoupling and total on-shoring of chip production to cut dependency on the PRC. This is impractical. It would cost over $1 trillion to transition to a system wherein each country is self-sufficient, prompting a rise in costs of 35%-65%. It would cost the United States $4 billion to build just one fab making the relatively low-tech chips needed for automobiles, which would only become profitable after five years. Furthermore, decoupling would alienate America’s allies (who count China as a top customer), decrease US firms’ market share, and insulate US firms from foreign innovation. Decoupling would lead to two separate ecosystems with different standards. Firms from countries like Taiwan and Korea would face a difficult choice: either get cut off from their manufacturing base or get cut off from the US IP that’s core to their products.

America has thus far attracted investments for fab plants from Samsung (a $17 billion fab in Texas) and Taiwan Semiconductor Manufacturing Company (a $12 billion facility in Arizona). The CHIPS Act will provide $52 billion in incentives to support chip manufacturing, research, and workforce development. Companies that receive this support are barred from building new advanced plants in China and from making certain advanced modifications to existing plants, leading some firms to “re-evaluate further Chinese investments.” These policies are just the beginning.

To coordinate on investments, supply chain resilience, and production plans, Washington proposed Chip 4, a group involving the United States, Japan, Taiwan, and South Korea. Taiwan and Japan have committed to joining, with Taiwan calling for greater semiconductor cooperation among democracies. South Korea has taken a more cautious approach, agreeing to attend the first meeting. Korea’s memory chip producers rely on materials from China and chips account for nearly 40% of Korea’s exports to China. A news report claimed that the US Commerce Department has exempted some Korean fabs in China from restrictions banning equipment capable at producing chips below 14 nanometers. The alliance will be more durable if it demonstrates flexibility. Forums of cooperation should not simply be based on a contest of leverage against the PRC.

How has Korea found itself at the center of the dynamic? The PRC interprets the other Chip 4 members as outside its sphere of influence, but losing traction with Korea would signal that the PRC’s regional influence is waning. The Yoon administration and Beijing are off to a rocky start, with tensions simmering over Beijing’s assertion that Seoul is beholden to a supposed agreement by the former administration not to install more US missile defense systems. Beijing’s 2017 economic retaliation cost Korea over $7 billion and pushed the Korean public to turn sharply against the PRC: 80% currently view the PRC negatively, a record high, according to Pew. And three quarters of the public want the government to “actively respond to China’s economic retaliation,” according to a 2021 survey by the Korea Institute for National Unification.

Following a recent meeting between South Korean Foreign Minister Park Jin and Chinese Foreign Minister Wang Yi, the PRC’s foreign ministry asserted that “the two sides need to stay committed to openness…and keep the industrial supply chain stable and unfettered.” In the meeting, Park explained that Korea’s attendance at the Chip 4 meeting is meant to safeguard “national interests,” not to exclude “any specific country.” Korea will make a decision about joining after the meeting, and has taken to referring to Chips 4 as a “consultative body,” rather than an alliance. While certain export restrictions are needed on national security grounds, it will be important to refrain from over-punishment of partners that deviate from export controls. The success of cooperation hinges not on the comprehensiveness of export restrictions but on the ability of the partners to shore up the supply chain while sustaining a high tempo pace of innovation.

The United States should collaborate with Korea, Taiwan, and Japan on a mutually beneficial, values-based vision for semiconductor collaboration that protects national security interests without spoiling supply chain efficiencies. The alliance should create a compensation mechanism to address retaliatory measures its members experience for participating in the alliance, such as assisting affected industries or reciprocal sanctions. To balance resilience and innovation, the alliance should engage with industry stakeholders, including (but not limited to): private sector firms, academia, and industry associations. Joint ventures, joint investments, and joint workforce development programs would benefit all, as would contingency planning and supplier diversification. A priority should be the resolution of a dispute between Japan and South Korea that has impacted the trade of semiconductor-related materials between the two countries. Amid growing tensions, Japan restricted exports of semiconductor materials to South Korea. The move disrupted supply chains between both countries.

The pandemic-induced chip supply chain snarls are not the industry’s last supply chain challenge. Geopolitical risk and Chinese industrial policy pose considerable risks and warrant coordination. But alliance partners’ concerns should be considered and decoupling is not viable. The better option is a partnership that addresses security threats without impairing the global supply chain.

Major Jessica Taylor (jg0787@princeton.edu) is a logistics readiness officer in the United States Air Force Reserve (USAFR) and a Ph.D. student in Security Studies at Princeton University’s School of Public and International Affairs, where she focuses on Alliance cooperation on systemic geopolitical risk to supply chains.

Jonathan Corrado (jonathan.corrado@koreasociety.org) is Director of Policy for The Korea Society, where he produces programming and conducts research on a range of security, diplomacy, and socioeconomic issues impacting the US-Korea Alliance and Northeast Asia.

The views expressed in this article are those of the authors alone and do not necessarily represent the views of their respective institutions.  

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged.

PacNet #52 – The Growing Crisis of Illegal, Unreported, and Unregulated Fishing

A recent conference, in which Pacific Forum joined the Navy League’s Indo-Pacific Maritime Security Exchange (IMSE), the East-West Center, and the Daniel K. Inouye Asia Pacific Center for Security Studies, focused on the problems of IUU fishing and potential solutions to counter its recent dramatic growth. The author was one of the organizers of the conference, whose proceedings and session videos can be found at https://imsehawaii.org.

Illegal, unreported, and unregulated (IUU) fishing has become a major problem worldwide and particularly in the Pacific. According to the US Coast Guard, “IUU fishing has replaced piracy as the leading global maritime security threat. If IUU fishing continues unchecked, we can expect deterioration of fragile coastal States and increased tension among foreign-fishing Nations, threatening geo-political stability around the world.”

The National Oceanic and Atmospheric Administration states that approximately 60% of fish caught worldwide come from the Pacific Ocean. Over half are species that are unsustainable if fishing at current rates and methods continue. As fishing fleets have grown they have outstripped the oceans abilities to replenish stocks. The Peoples Republic of China (PRC) is estimated to catch approximately 35% of fish, according to NOAA statistics. Dr. Carlyle Thayer of the University of New South Wales stated in his address to the Indo-Pacific Maritime Security Exchange’s recent conference on the subject that the PRC is also the no. 1 nation for IUU fishing. Others have been complicit in IUU fishing, including Taiwan and Vietnam. Vietnam, after receiving a warning from the European Union that its fish exports would be barred from its market formulated a high-level task force to work against such practices. Taiwan for diplomatic reasons has done the same. But IUU fishing tends to be a low-risk/high-value activity as penalties for IUU fishers consist mostly of modest fines.

There are many aspects to the problem.

  • Illegal fishing is conducted in waters under the jurisdiction of a state but without the permission of that state.
  • Unreported fishing involves a catch that has not been reported, as required.
  • Unregulated fishing occurs where there are no management measures and is conducted in a manner inconsistent with treaty responsibilities.

Besides over-harvesting of species, IUU fishing takes money from legal fishers and out of local economies. Fisheries are the primary source of income for many Pacific and Oceanic states. It is projected by the Nature Conservancy that many Pacific Island nations will not be able to meet their local food needs in a few years given their population growth and continued IUU fishing. The Nature Conservancy also estimates that over 95% of IUU fishing activities by the Pacific Tuna Fleet involve legally licensed boats that misreport their catch, not by so-called unregistered dark boats.”

IUU fishing also destroys habitat. Bottom trawling damages corals and sea grasses. The losses of sea grasses are important regarding COand climate change. It is estimated the loss of grasses has a greater effect than the CO2 emissions from Germany or the international aviation industry.

Other crimes are associated with IUU fishing, including forgery of records and fraud, corruption, false vessel identity and flagging, licensing avoidance and deception, human rights abuses (e.g., forced labor, human trafficking, and child labor), illegal transshipments of catch and fuel, smuggling of drugs and protected species, black marketeering and money laundering, and the evasion of penalties.

Finding potential solutions to counter IUU fishing was the principal focus of the Indo-Pacific Maritime Security Exchange conference in early September.

Heretofore surveillance of territorial waters and Exclusive Economic Zones relied on a nation’s patrol ships and aircraft and active transmissions, such as from the Advanced Identification System (AIS) and vessel monitoring system (VMS), mandated by nations to monitor ships in their areas of responsibility. But IUU fishers often turn off these transmitters—and increasingly spoof their signals—to hide illegal activities.

Sea-based aerial drones are proving to be a valuable adjunct to ships and aircraft for covert surveillance, according to the US Coast Guard, which employs the ScanEagle drone from its newer cutters. Satellite electro-optical imagery has been available commercially for years, but is limited by field of view, resolution, and weather. When cued by other sources, however, it can help identify suspicious vessels.

Newer forms of imagery include the Visible and Infrared Imaging Radiometer Suite, from NOAA’s Joint Polar-orbiting Satellite System, which detects the bright nighttime lights used by many purse seiner and ring net fishing boats to attract squid and other species. Another is synthetic aperture radar (SAR). It allows surveillance in all-weather conditions as it penetrates clouds and darkness. Many nations have orbited SAR satellites, and commercial companies have recently entered the marketplace for SAR imagery.

The collection of radio frequency emissions by commercial satellites is a new capability. Several US and European firms have entered this market and can pick up navigation radar and other radio emissions from boats at sea even if the boats turn off their required AIS or VMS broadcasts.

In development are unmanned vessels that tow underwater hydrophones that can detect, classify, and report via satellite vessels by type and activity through analysis of sonograms.

While there are many sensor sources, they can produce an overwhelming amount of data and any one source is rarely sufficient to determine many kinds of IUU fishing. The integration of data from disparate sources and the analysis of those data is therefore critical. The data glut is a challenge requiring various advanced analytical techniques, including artificial intelligence and machine learning.

Several organizations analyze data related to IUU fishing. Best known is Global Fishing Watch, a nongovernmental organization that tracks in near-real time fishing around the globe. Australia’s Commission for the Conservation of Antarctic Marine Living Resources is the responsible overseer of fishing in the broad Southern Ocean surrounding the Antarctic continent. The Pacific Islands Fishing Forum Agency, the International Maritime Control and Surveillance network, and several universities and commercial firms are also involved in aspects of analyzing IUU fishing to provide scientific insight, risk management judgments to companies, or assist in investigations of organizations and individuals behind such illegal activities.

IUU fishing knows no national boundaries. It is a growing global problem. No one nation is capable of enforcing fishing laws and regulations. Countering IUU fishing will require multi-state collaboration, information sharing, and multilateral agreements between regional fishing management organizations, of which there are a plethora. To date, however, information sharing has not always gone well.

There are approaches to IUU fishing beyond law enforcement that organizations are pursuing. These include eliminating national subsidies for fishing. The PRCs subsidies, the most generous of any nation by far, estimated at approximately $7.2 billion in 2018, make otherwise unprofitable fishing profitable, according to Prof. Tabitha Mallory of the China Ocean Institute and the University of Washington. Certification of catches assures buyers of fish that they were caught legally. Publicity about IUU fishing and the deceptive practices associated with it is seen as an important step in depressing market attractiveness of illegally caught fish. Finally, the promotion of aquaculture—farm-raised fish, in which the PRC is deeply invested, is seen as a potential solution for future food needs.

Peter Oleson (peter.oleson@yahoo.com) is a former senior defense official and professor.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #31 – The Structural Limits of the Supply Chain Resilience Initiative

As a hub of global economic activity and great power tensions, the Indo-Pacific is home to an increasing number of minilateral arrangements shaping the future of the region. Groupings like the Quadrilateral Security Dialogue (Quad), as well as the Japan-America-India, Australia-Japan-India, and France-Australia-India trilaterals demonstrate this trend. The Supply Chain Resilience Initiative (SCRI), launched in April 2021 and complementing the Australia-Japan-India trilateral, is the latest such venture.

China’s deep integration in the international financial system and status as “factory of the world” make global supply chains unsustainably China-centric. COVID-19 revealed many states’ over-dependence on China-centered value chains, and the SCRI seeks to reconfigure global supply chain networks to overcome such vulnerabilities.

The SCRI seeks to ensure global supply chains remain resilient to future “black swan” events, such as pandemics and geopolitical tensions. With several states prioritizing supply chain risk diversification, the SCRI can also further Indo-Pacific economic security dialogue between like-minded nations. Importantly, the SCRI can help balance against China’s rapidly expanding influence, including through the Belt and Road Initiative.

Yet, despite its merits, the SCRI faces considerable structural limitations.

Firstly, although primarily a geo-economic mechanism, the SCRI risks losing focus amid the intensifying regional power rivalry. The initiative is a product of strategic necessity brought about by the pandemic, yet this emphasis on supply chain management is frequently ignored in media and scholarship in favor of strategic positioning vis-a-vis China. Yet, like Japan’s Expanded Partnership for Quality Infrastructure and India’s Act East Policy, the SCRI is not necessarily an anti-China venture.

China-dependent supply chains are a major concern for both smaller and major powers across many critical sectors, including essential pharmaceutical products, food, and industrial raw materials. However, the SCRI does not aim to entirely re-route existing supply chains; this would require complete economic decoupling from China, an unfeasible (and undesirable) goal considering Beijing’s economic clout. Instead, it seeks to build alternative, resilient supply chains to reduce over-dependency, diversify risk, and enhance ability to absorb future market disruptions. Rather than isolating China, the aim is to ensure national economies can withstand adversity. The focus on enhancing cooperation with like-minded nations is drawn on the imperative of building “a free, fair, inclusive, non-discriminatory, transparent, predictable and stable trade and investment environment.” The focus on inclusivity implies openness to dialogue (or participation) with all nations committed to similar ideals—even China.

Secondly, the SCRI remains far-fetched, even overly ambitious. Despite their broad-based synergy on China (or matters relating to China), the main proponents of the SCRI—Australia, India, and Japan—have gaps in their global multilateral practices, including trade and economic outlooks. This will limit the progress of the SCRI. For instance, Japan’s reluctance to support the expansion of the G7 to include India and Australia highlights how national interest considerations supersede any prospects of regional cooperation. Japan is a trading economy, and supply chains are critical to its growth. This is not true for India, which prioritizes manufacturing and innovation, even while aspiring to enhance integration with other economies before it can emerge as a trading nation. These differences could impact the SCRI’s direction and the importance each state gives it.

Thirdly, no clear vision currently exists among SCRI founders on how to shape their initiative. To succeed, a clear plan or charter is vital. The lack of a guiding document risks hampering cooperation, as has been the case with the Quad and Quad-plus, which has only picked up steam over the past year amid increased tensions with China. A similar problem emerged with the Asian Infrastructure Investment Bank and Regional Comprehensive Economic Partnership. Although India and Australia became AIIB members, Japan and the United States opposed it. With RCEP, Japan and Australia could not continue engaging (or supporting) India, displaying a lack of coordination and resulting in New Delhi’s withdrawal from this mega-trade deal.

These examples show the need for a common understanding, agreed framework, and concentrated dialogue to shape and implement the initiative. A charter would be useful in laying down expectations and requirements for the SCRI. As founding members consider the SCRI’s expansion “based on consensus” and acknowledge the importance of business and academia in further developing it, a charter could be critical in coding and committing to an “inclusive” outlook. A formal document would also mitigate criticisms that the initiative is a cartel or “anti-China,” potentially opening the door to induction for Beijing (or even to countries aligned strongly with Beijing) and allowing the Australia-Japan-India trilateral a rulebook to regulate China’s actions.

Fourthly, the SCRI remains limited to its founding members. With its focus on recalibrating global supply chains, expansion to include the United States must be explored. This would make the SCRI a derivative of the Quad, strengthening the Indo-Pacific concept and furthering their supply chain goals. President Biden’s recent comprehensive supply chain review outlined Washington’s need to build “resilient, diverse, and secure” supply chains; SCRI integration could be a productive move forward.

Similarly, the SCRI must consider full/partial participation of key economies and economic blocs—including ASEAN, the European Union (especially France, given its Indo-Pacific focus), and the United Kingdom. Several such entities, including the United States and ASEAN, have sought to reconfigure supply chains to reduce dependence on China and increase resiliency, but made no concerted effort in this direction. While the SCRI might be an Asian exercise, its ambition to create diverse, expansive, inclusive, and resilient supply chains mandates involvement by other major and middle-ranked economies everywhere. Moreover, the participation of technologically advanced actors beyond Asia would prove crucial given the SCRI’s focus on digital technologies. 

The SCRI’s success will depend on inroads it can make with ASEAN. With Australia-Japan-India at its core, the SCRI promotes inclusivity and multipolarity, but also seeks to build Asia-driven (or Indo-Pacific-driven) supply chains. Japan and India are key East Asian and South Asian economic powers; Australia is a major Indo-Pacific actor closely connected to Asia. In relative comprehensive national power, the Lowy Institute’s 2020 Asia Index placed Japan third in the region, India fourth, Australia sixth, and the United States first (with China a close second). Connecting with ASEAN will be economically lucrative and promote the SCRI’s “Asian” vision.

Despite its merits, the SCRI is structurally limited right now. Yet with economic transformation and post-pandemic recovery shaping regional power distribution, the expectations for the SCRI are immense. To meet expectations, the Australia-Japan-India trilateral must acknowledge the challenges and shape the initiative adequately to overcome them.

Dr. Jagannath Panda (jppjagannath@gmail.com) is a Research Fellow and Centre Coordinator for East Asia at the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. Dr. Panda is the Series Editor for “Routledge Studies on Think Asia.”

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.