Resurrection of TPP — A wake-up call
India cannot afford to sit it out as the world discusses the next paradigm of trade defined by new technologies and new production patterns. If it does so, all the important decisions and institutions would be made without any of India’s concerns or interests being even put on the table. Being “at the table” is a necessity for an aspiring major player in a global economy. This will call for a much more proactive stance in trade agreements.
India’s regionalism efforts remain largely un-coordinated and free trade agreements (FTAs) were put into motion with modest success. India also invested a lot of negotiating energy in FTAs with industrialised economies like Japan and the European Union (EU). These agreements follow the old model of trade negotiating strategy, i.e. focus on tariffs and try to keep the sectors that are most sensitive out of the tariff reduction schedule. Deeper engagement on technical standards and related barriers, trade facilitation, or on the regulatory aspects of services market access, i.e. the issues that define effective market access in this production chain related integrated global economy are not a part of such agreements.
India shied away from the Trans-Pacific Partnership (TPP) feeling it could not meet its global standards. Our policymakers and trade experts were thrilled when President Donald Trump pulled the US out of TPP in January 2017, perhaps signaling the death of TPP. India was also happy with the slow progress in the Regional Comprehensive Economic Partnership (RCEP), of which it is a member. From the recent WTO Ministerial it is clear that the days of consensus approach to trade negotiations are over, and the world is moving towards plurilaterals.
TPP is being resurrected. But India is unwilling and totally ill-prepared to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) comprising the 11 original members of TPP, excluding the US. They are: Japan, Australia, New Zealand, Brunei, Singapore, Malaysia, Canada, Peru, Chile, Mexico, and Vietnam. Philippines, Indonesia, Korea, Thailand, and Sri Lanka are preparing to join in the next round. CPTPP will be signed in Chile in March. The CPTPP will incorporate the original TPP agreement, with suspension of a limited number of provisions, while still seeking to maintain the high standard of the agreement. The suspended provisions are rules — included earlier in the TPP at the US insistence — have now been put on hold, but could be reinstated in the future.
From 40 per cent of global GDP, or gross domestic product, the latest trade deal — without the US — now covers about 14 per cent, and involves the livelihoods of 500 million people. It is estimated that the net benefit of CPTPP to all its members from liberalisation of trade in goods and services is roughly 0.3 per cent of their combined GDP or $37.3 billion, in the medium term. So, the 11 members will still be better off with the CPTPP than without it.
At Davos, President Trump indicated that the US will consider joining CPTPP if the US will stand to gain from it. So, we may witness a total revival of TPP making it the largest global value chain. How can India with its exports in slump ignore CPTPP? Why is it afraid to fulfill the strict requirements of elimination of tariffs and other barriers to trade and investment, a WTO-Plus intellectual property right (IPR) regime and trade in services, adherence to competition policy, trade facilitation, state-owned enterprise (SOE) reforms, investment policy, and government procurement? Labour and environment policies are also on the agenda though how far these will be enforced is not yet clear. Also, India does need to move swiftly on most of these policies on its own to fulfill its objective of becoming a major global player
India and Singapore are deadlocked in RCEP on the issue of liberalising the movement of natural persons. Indian negotiators seem to think that movement of people, with all its security and sociological concerns, and issues related to migration, are somehow as simple as the movement of inanimate goods and services. If that were so, there would not have been any issues with the movement of economic migrants from Bangladesh to India. It’s high time India with 1.2 billion population move away from Mode 4 of GATS, or General Agreement on Trade in Services, to diversification of professional services. Otherwise, RCEP can be signed only if it excludes India.
India has no choice but to ensure that it is not left out of CPTPP/TPP/RCEP that constitutes its major trading partners. Just reliance on non-CPTPP/TPP/RCEP countries is also not an option. According to a study by the Peterson Institute, Indian exports will gain $500 billion a year by being an active member of TPP. We need to ensure that very soon we work towards meeting the trade standards of CPTPP/TPP.
It is high time that India develops a bold and wellfocused 21st century regionalism to regain its lost export momentum. The CPTPP/TPP gold standards should be the window of opportunity for helping to achieve that. If we don’t act fast, three years later there will be a TPP, and an RCEP without India. Indian industry and services will be left out of all major regional and global value chains with no hope for export revival. High sustained growth with jobs will remain a dream. We cannot afford to let this happen. We need to act now.