Recently, the trade ministers of Australia, Japan and India agreed to develop a supply chain resilience program for the Indo-Pacific region. The announcement, which followed a video conference between Australia’s Simon Birmingham, Japan’s Kajiyama Hiroshi and India’s Piyush Goyalin in early September, came amid a growing recognition in all three nations of the dangers of excessive economic reliance on China. While the details of the initiative remain sketchy, the three countries have tasked their respective bureaucracies with looking for ways to develop an initiative that would strengthen alternate supply chains in an effort to counter China’s control of the trade of essential supplies. The initiative is being planned for launch next year. It is meant to be an inclusive initiative and the three countries are looking to extend it into Southeast Asia.
The idea of the Australia-Japan-India (AJI) trilateral is not itself new. The three countries had their first trilateral dialogue in June 2015. The meeting saw the participation of then Indian Foreign Secretary S. Jaishankar, Japanese Vice Foreign Minister Akitaka Saiki and Peter Varghese, the secretary of Australia’s Department of Foreign Affairs and Trade. Predictably, a dominant theme in the discussions was maritime security and freedom of navigation, which continues to be the case five years later. In fact, the three nations’ shared concerns on the maritime front have only increased due to China’s recent assertive behavior in the region. While the Indo-Pacific region has an alphabet soup of minilaterals and formal arrangements, the AJI trilateral appears to be one of the strongest, despite some challenges. A recent report on the trilateral by the Perth USAsia Centre highlights the potentials of the trilateral, as well as some of the challenges that still persist. Nevertheless, the decision to form a trilateral supply chain initiative is an indicator of the actionable agenda that could be pursued by the AJI in the coming years.
China’s behavior has provided the glue that binds the trilateral together. For all the rhetoric about its peaceful rise, China’s behavior since the beginning of 2020 has antagonized many. China’s actions have forced the AJI trilateral to acknowledge the danger of economic over-dependence on China. As such, supply chain diversification and resilience has become an important issue for all three countries. Commenting on the initiative, Indian Prime Minister Narendra Modi has stated the need to reshape global supply chains “based on trust and stability.”
Reducing dependence on China is not going to be easy for India in the short term. At the same time, difficulties with China have reached a point where opinion is shifting in New Delhi. Indian elite opinionmakers have made it amply clear that India will need to bite the bullet, even if it means going through some hard times. India is still not considering complete economic decoupling, of course, but a significant reduction in terms of its reliance on China. Because India exports mostly primary commodities, China can easily replace India, but it is going to be difficult for India to overcome its dependence on China This is not a challenge unique to India, but it forces India and other countries to consider together what steps to take to diversify their economies away from a heavy reliance on China.
India would also like to take advantage of the general interest that many countries have in moving their manufacturing out of China, but this is easier said than done. For instance, even though many industries leaving China may want to come to India – and though India may be even keener to attract them – India still faces many challenges, including problems of land acquisition, outdated labor laws, an uncertain tax regime and growing domestic conflicts, to name just a few. In contrast, Vietnam is emerging as a major destination for businesses leaving China.
Discussing these measures together with like-minded partners may help in setting up alternatives to these nations’ economic dependence on China Each country in the AJI trilateral recognizes that alone, they are no match for China’s economic power. Alone, each is much more vulnerable because of their dependence. But together, they might be able to find some solutions. Whether this will work is yet to be seen, but a beginning is being made.
Another area that is high on the agenda for the AJI is maritime security and ensuring freedom of the seas in the Indo-Pacific. This is not all about navies and formal security collaboration, but will also involve the important notion of “norm entrepreneurship,” as identified in the Perth USAsia Report. The trilateral will thus try to promote respect for international law, and a free, open, rules-based and inclusive Indo-Pacific. The hope is that eventually the three nations can think in terms of doing joint military exercises or even coordinated patrols in the Indo-Pacific. India has resisted such steps for a long time, but China’s aggressive actions on the borders and elsewhere are likely to make New Delhi more amenable to considering bolder steps.