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Why the Quad Needs to Improve Its Economic Game

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The Debate | Opinion

Why the Quad Needs to Improve Its Economic Game

Trade, investment, and supply chain security need to be high on the agenda of the four-nation grouping.

Why the Quad Needs to Improve Its Economic Game

A photo from the Quad Foreign Ministers’ Meeting in Tokyo, Japan on October 6, 2020.

Credit: Indian Ministry of External Affairs

Since its inception in 2007, the Quadrilateral Security Dialogue, better known as the “Quad,” has had a sense of nebulousness about it. But while the COVID-19 pandemic has wreaked insurmountable havoc on the global economy and has taken close to 5 million lives globally, it has perhaps inadvertently galvanized the momentum around the Quad, accentuating its global presence.

In November 2020, for the first time in nearly a decade, the navies of the four Quad nations participated in a joint naval exercise. And earlier this year, the Quad received fresh impetus on two fronts. There was a high-profile delegation of foreign ministers in February, which was furthered bolstered by the virtual meeting in March of the respective heads of government: Prime Ministers Suga Yoshihide, Scott Morrison, and Narendra Modi, along with U.S. President Joe Biden. Recently in Washington, top envoys of India, Japan and Australia and Indo-Pacific coordinator Kurt Campbell had a Quad ambassadorial meeting. Within his first hundred days in office, Biden has prioritized the Quad, signaling his administration’s foreign policy priorities.

The Indo-Pacific region has gained significant importance considering the geopolitical implications of an increasingly belligerent China and its attempts to establish itself in a pivotal role in the region and globally. Beijing’s bellicosity will no doubt continue to reinforce the importance of the Quad. However, in addition to countering China, there are three critical areas on which the leaders of the Quad countries have chosen to focus, including the creation of a Vaccine Experts Quad Group, a Quad Critical and Emerging Technology Group, and a Quad Climate Working Group.

While the first two fit well into the overall objective of the Quad, the significant issue of climate change should be addressed through other existing international platforms, as this grouping can make little progress without the participation of key Asian economies such as China, South Korea, Vietnam, Indonesia, and the Philippines. Perhaps the elephant in the room, which should take priority in the higher echelons of the Quad’s strategy, is the promotion of trade and commerce, which could subsequently mitigate the geopolitical trade kerfuffle between Washington and Beijing.

Currently, the combined GDP among the Quad countries sits at a whopping $34 trillion, with Washington making up the lion’s share, followed by Tokyo, New Delhi, and Canberra, all of which have recently been in Beijing’s crosshairs. An established trade architecture amongst the Quad grouping will help counter the economic challenges that China poses in the Indo-Pacific. Not only are these countries well-equipped in resources; they also have the balancing capacity to fulfill each other’s needs and make up for their respective economic weaknesses, For example, India, an energy dependent economy that needs to constantly upgrade its infrastructure, could rely heavily on subsidized imports from Australia, a commodity rich economy.

Given the ongoing geopolitical and security challenges in the Indo-Pacific, dependence on China for raw materials and other resources, and the critical nature of maritime trade routes through the South China Sea, there is an urgent need to add a trade component to the Quad’s agenda. While bilateral trade may be more viable, a multilateral trade partnership would help build diversified supply chains and promote economic stability in the post-pandemic era.

Currently, among the four Quad countries, the total share of trade within the grouping stands at 41 percent for the U.S., 34 percent for Japan, 14 percent for India, and 11 percent for Australia. There has been some resistance to establishing free trade agreements between the Quad nations, but such agreements could pave the way for enhanced trade cooperation and commercial activity.

During the March summit, the Quad leaders also committed to expanding the global vaccine supply for the Indo-Pacific in order to end the devastating impact that COVID-19 has had on the health sector, economy, and supply chains across sectors, impacting the movement and manufacturing of critical medical equipment and drugs. Struggling to meet domestic demands, countries amended their existing policies on procurement and exports to focus on their own populations. This seismic shift stems from an overdependence on China, specifically during the pandemic, which has led to massive disruptions in global supply chains. With a trade partnership, the Quad nations could pave the way for the creation of new supply chains across the dynamic Indo-Pacific region.

The four powers have also made a commitment to set up a Vaccine Experts Quad Group comprised of prominent scientists and government officials from all four countries. The mandate for the group is to impart each government’s COVID-19 planning to ensure last-mile delivery in difficult-to-access communities, and support organizations such as the World Health Organization and its COVAX initiative, which is currently playing a critical role in vaccine management and distribution.

In March, the Quad made a commitment of delivering up to 1 billion doses of COVID-19 vaccines to the ASEAN nations by 2022. So far, there has been little progress on the financing and manufacturing uptake in the vaccine production within the grouping. Most countries in the region are struggling to vaccinate their populations as COVID-19 variants continue to mutate and once again set countries on the backfoot. The immediate execution of the vaccine group’s commitments should thus become a priority for the Quad.

Despite the commitment made by the Quad leaders, there are certain obstacles preventing them from meeting these goals. For instance, India, the world’s largest pharmaceutical manufacturer, still awaits a steady supply of active pharmaceutical ingredients and other raw materials from the U.S., the key in diversifying drug manufacturing and in fighting the ongoing COVID-19 pandemic. For the past 18 months, the U.S. Food and Drug Administration has stalled inspections in India, leading to delays in drug manufacturing and innovation, which has been cataclysmic as India battled its horrendous second wave. Such roadblocks not only impact trade between the U.S. and India, but also impact global supply chains and the existing partnership in the healthcare space.

The Quad leadership acknowledged that for a free, fair, and open Indo-Pacific to flourish, technology would need to be a crucial element. A Critical and Emerging Technology Working Group was established to generate dialogues on important technology supply chains, support diversification of equipment suppliers, support cooperation in communications, monitor trends and opportunities in varied fields of technology, and coordinate standards for technology development both at the national and global levels.

However, it is also important that contentious issues like data privacy and data localization are not the focus of this group. The intent is to build a partnership, not to create barriers and walls, which would defeat the purpose of the Quad, leading to friction and mistrust among the four nations. The current data policy and regulatory landscape in India is leading to doubts and mistrust. Building data-related walls will only lead to disintegration in the grouping at a time when sharing data and technology is critical to the partnership. Without trust, the Quad will stagnate and lose sight of its key goals at the time when the world order is in a state of flux.

The Quad’s intent is clear, as demonstrated by the three pillars of cooperation that the leaders of the four countries have spelled out. It is vital now to accelerate the pace of implementation in the areas of cooperation and beyond, adding trade, investment, and global supply chains to the mix. These aspects need to play a significant role in the discussions and planning of the Quad’s agenda.

Geopolitically, the landscape in the Indo-Pacific is rapidly evolving. The four Quad countries should now set the pace to implement the agreed upon deliverables from March and present initial outcomes at the next leadership summit scheduled this fall in Washington, D.C. The key element of trust needs to be nurtured among the Quad nations, otherwise it will defeat the very purpose for which it has been created. Without trust, the Quad will turn into yet another grouping with no concrete objective, but just mere symbolism.