A Quad Industrial Compact To Anchor US-India Economic Alignment

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18 hours ago

The Quad now faces a choice: continue with fragmented coordination, or build an architecture resilient enough to outlast politics, absorb shocks, and shape regional order
Power doesn't always arrive with a bang. Sometimes, it hums quietly through the rhythm of assembly lines, the precision of a robotic arm, or the silent extraction of lithium from ancient rock. We often think of strategy in terms of diplomacy and deterrence, but the deeper architecture of power is economic, woven through trust, shared labour, and mutual capability.
The philosopher Byung-Chul Han wrote that today's conflicts are no longer 'viral" but 'neural". They are less about overt aggression, more about systems of dependency. And in that sense, resilience is no longer a matter of who has the most firepower, but who controls the circuit boards, critical minerals, and production standards that make the firepower work.
Real alliances are not built in summit rooms but in the subtle choreography between supply chains and shared intent. That's why a Quad Industrial Compact is necessary evolution. One that transforms alignment from a diplomatic gesture into an economic structure robust enough to anchor the future.
On May 31 at the Shangri-La Dialogue, US Defence Secretary Pete Hegseth underscored the urgency of integrating industrial bases across allies, noting, 'It's one thing for an adversary to see multinational forces… It's another… to see an integrated defence industrial base supporting those forces."
The US-led Partnership for Indo-Pacific Industrial Resilience (PIPIR) reflects that vision. The message to allies was clear. Symbolic alignment will not suffice. Partners must deliver shared capabilities.
This doctrine reflects a drastic if not perilous situation. China reigns supreme in advanced manufacturing, controlling over 70 per cent of global critical minerals processing and 80 per cent of solar manufacturing. This creates economic dependence as a tool of coercion. Simultaneously, US policy volatility, from tariff swings to exclusionary subsidies further accentuates uncertainty for partners seeking long-term alignment.
Even as the recent India-Pakistan conflict re-hyphenated India in Washington's imagination, now more than ever, it is important we keep our eye on the ball, that is ever so quickly approaching.
A Quad Industrial Compact is necessary to deepen trade, investment, innovation, and supply chain linkages among the United States, India, Japan, and Australia. It would anchor multilateral cooperation in shared economic strength, reduce exposure to coercive dependencies, and transform diplomatic convergence into resilience.
WHY A QUAD COMPACT NOW?
Geopolitical threats are sharpening as economic coercion becomes a standard tool of statecraft. The Quad is already the Indo-Pacific's leading 'soft-security" framework, but the line between soft and hard power is blurring. Economic heft underwrites diplomatic influence. A formal industrial framework among the Quad countries would reinforce deterrence by embedding economic interdependence, making strategic decoupling costly and cooperation sticky.
Macroeconomic trends reveal deep complementarities among Quad countries. India, with a median age of 29.8, contrasts with Japan's 49.9, the US's 38.9, and Australia's 38.1. India adds between 7-8 million workers annually, while Japan faces population decline and the US grapples with skilled labour shortages. India's projected 6.2 per cent GDP growth in 2025 dwarves forecasts for the U.S. (1.8 per cent), Japan (0.6 per cent), and Australia (1.6 per cent). Yet, its labour force participation lags at 55 per cent, with just 26 per cent for women, signalling vast untapped capacity for at scale manufacturing.
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Scale also varies.
India's $4 trillion economy serves 1.6 billion people; Australia's $1.7 trillion serves just 27 million. Despite employing 57 million, India's manufacturing sector contributes just 13-14 per cent to GDP, below its 25 per cent target. The potential for advanced manufacturing is immense. India's Production Linked Incentive (PLI) schemes have attracted $18.72 billion in investment across target sectors including electronics, automotive, and pharmaceuticals. For instance, since 2020, manufacturing in the EV sector has increased by 860 per cent, with the 2-wheeler EV sector recording a whopping 3,400 per cent growth.
Despite momentum, there is a lack of cross-border industrial coordination.
The Quad possesses complementary strengths across advanced sectors worth $340+ billion annually. Yet coordination gaps prevent these advantages from becoming strategic leverage against China.
In battery materials, Australia mines 50 per cent of global lithium but processes only 3 per cent, exporting the rest to China. India holds significant graphite reserves with emerging anode manufacturing capabilities like Epsilon Advanced Materials. Together, the countries can create integrated anode-cathode supply chains for US battery manufacturing plans of 1 TWh capacity by 2030.
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In semiconductors, Japan holds one-third of global fabrication equipment market share while India has ambitious fab manufacturing goals, attracting proposals worth $21 billion already. The US leads in design and advanced manufacturing incentives. This creates a complete value chain from equipment to production to innovation—if coordinated.
The innovation-manufacturing bridge reveals deeper synergy. The US leads in R&D ($900+ billion in 2023), private equity ($838 billion deal flow in 2024) and venture capital ($360 billion in 2024) but remains vulnerable in critical mineral inputs and midstream production. Australia provides raw materials, India offers cost-effective manufacturing scale, and Japan contributes technical expertise.
Cross-border tax incentives and coordinated policy frameworks can transform individual national strengths into competitive advantages while reducing strategic dependencies.
LEARNING FROM ASEAN
IASEAN has shown how fragmented countries can build regional supply chains through regulatory harmonization. Rather than tariffs or FTA sprawl, ASEAN focused on behind-the-border coordination: common standards, certification reciprocity, and customs digitization. Electrical and automotive supply chains stretch from Thailand to Vietnam, enabled by mutual recognition of conformity assessments and data-sharing norms.
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The Quad should adapt this model.
Shared industrial standards, synchronised subsidies, and interoperable certifications could ease trade frictions. Vietnam's entry into semiconductor chains without heavy onshoring, or Japan's Mekong investments, show how aligned priorities can yield structural benefits.
ASEAN's success harmonising sanitary and phytosanitary measures and customs clearance, as in the ASEAN Single Window, offers a tested roadmap.
A Quad Industrial Compact can work on three pillars:
Pillar 1: Trade and Investment Partnership
The Quad lacks a unified trade architecture. The U.S. has no FTAs with India or Japan. India's tariff regime remains opaque and protectionist in key sectors like semiconductors, solar, and agri-inputs. The disjointedness deters cross-border investment.
A Quad Compact should harmonize regulations in strategic sectors and prioritize mutual recognition of testing, certification, and sustainability standards. Harmonized tariffs on critical goods like EV battery components, solar modules, and semiconductors would reduce the transactional costs of cross-border value chains. Customs platforms like India's ICEGATE or Australia's ICS could be integrated through a federated digital single-window system that allows seamless cargo movement across the four economies.
In addition, a Quad Economic Framework could serve as the legal and institutional backbone. It could include a commercial arbitration mechanism, rotating jurisdiction among member countries, and a neutral secretariat. This body would adjudicate investment disputes, protect intellectual property rights, and facilitate enforcement of cross-border contracts. Over time, its authority could be broadened to issue compliance rulings and develop model commercial codes to ease legal fragmentation.
Pillar 2: Industrial Strategy Council
Each Quad country has launched major national industrial programs — India's $26 billion PLI, the U.S.'s $447 billion IRA and CHIPS Act, Japan's $68 billion semiconductor and AI package, Australia's $15 billion National Reconstruction Fund — yet these often operate in parallel rather than in sync.
The Quad Industrial Strategy Council should serve as a central coordination mechanism to align initiatives, mapping production capacities, identifying supply chain gaps, and developing shared project pipelines. It could also fund feasibility studies and joint venture matchmaking. For example, a jointly subsidized lithium oxide facility could combine Australia's raw material advantage, Indian processing, Japanese tech, and U.S. demand.
The Council should prioritize project co-location strategies. Semiconductor materials firms in Japan could be fast-tracked into India's emerging fabrication clusters under U.S. CHIPS Act support, while Australia offers green energy infrastructure. Joint industrial zones, backed by all four governments, should include coordinated permitting, cross-border equity ownership structures, and integrated logistics hubs.
Pillar 3: Quad Innovation & Skills Platform
High-tech collaboration within the Quad is hindered by fragmentation and duplication. The platform should aim to consolidate existing initiatives and create economies of scale in both talent and research funding.
A shared Quad research fund should be launched, with mandates for multi-country consortia. Its grants could focus on mission-critical technologies such as artificial intelligence, biotechnology, smart grid systems, and green hydrogen. Each grant should require participation from institutions in at least three-member countries, encouraging mobility, trust, and diffusion of results.
Meanwhile, a Quad Skills Accord should standardize credential recognition and create fast-track pathways for technical professionals. For example, a mining engineer certified in Western Australia should be eligible to work on Indian rare earth projects without regulatory duplication. Similarly, Indian data scientists or Japanese robotics engineers should be able to participate in innovation programs without immigration friction. Short-term research visas and talent exchanges would accelerate this pipeline.
The platform must also promote convergence in digital governance. As each Quad member debates AI regulation, data localization, and cybersecurity policy, a common minimum standard—aligned loosely with OECD or ASEAN frameworks—would provide legal predictability for startups and multinationals alike. Digital public goods such as interoperable identity systems, data protection protocols, and cybersecurity audits could be shared across borders.
STRATEGIC DIVIDEND
A Quad Industrial Compact would transform the Indo-Pacific's soft-security architecture into an economic coalition. For India, it offers a bridge from aspiration to execution. For the U.S., it provides industrial leverage to complement its military presence. For Japan and Australia, it offers a hedge against economic overreliance on China. More than a diplomatic arrangement, the Compact would be a shared industrial scaffolding, a one of a kind industrial compact preempted by security.
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The Quad now faces a choice: continue with fragmented coordination, or build an architecture resilient enough to outlast politics, absorb shocks, and shape the regional order for decades to come.
(Aditya Sinha writes on macroeconomic and geopolitical issues. Akshat Singh is an independent policy consultant and previously was an associate fellow at the Center for Strategic and International Studies, Washington DC. Views expressed in the above piece are personal and solely those of the authors. They do not necessarily reflect News18's views)
Location :
New Delhi, India, India
First Published:
June 30, 2025, 00:45 IST
News opinion Opinion | A Quad Industrial Compact To Anchor US-India Economic Alignment