Why India is losing out on CPTPP
On his first day in office in 2017, President Donald Trump announced the United States’s (US) withdrawal from the TransPacific Partnership (TPP). Given the pivotal US role in negotiating the 12-nation trade accord, pundits wasted little time in predicting the demise of the agreement. Four years on, TPP is alive and well. Even as heavyweights such as China, the United Kingdom and South Korea clamour to enter the mega trade deal, India and the US maintain their distance, and risk being left out in the cold.
Signed in 2016, TPP brought together the likes of the US, Japan, Canada, and Singapore under the banner of a single trade accord. Given that the original 12 founders accounted for close to 40% of global trade, TPP’s size was rightly seen as a game-changer. TPP, unlike its humbler cousin — the Regional Comprehensive Economic Partnership (RCEP) — also represented the sweeping economic ambitions of its architects.
While it negotiated the elimination of tariffs on goods and services, TPP also sought to harmonise everything from labour and environmental standards to intellectual property regulations among member-states. Given the economic leverage of TPP members, the implications were clear: The economic rules of the game in Asia would be written within the grouping while outside powers such as China would be reduced to accepting these standards as a fait accompli. The partnership was also an attempt to shift the economic centre of gravity in Asia away from a rising China and towards a US-led coalition.
The trade accord’s grand ambitions were dealt a heavy blow when the US withdrew. With the Americans out, the remaining members rechristened the agreement as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Recent months have seen a flurry of activity surrounding the accord. The UK announced its intention to accede to CPTPP and shortly afterwards, Washington’s worst fears were realised, as China also sought entry to the trade compact.
Should Beijing find a seat at the CPTPP’s high table, it could use its position as Asia’s chief trading nation to ensure that the rules of the regional economy, from digital trade to environmental standards, reflect Beijing’s writ. In doing so, China would achieve a longstanding strategic goal: Isolating and undermining the US footprint in Asia.
However, Beijing’s entry is far from certain. Interested parties must agree to reforms before they meet CPTPP’s exacting standards. However, China has increasingly backed away from reform and doubled down on the Chinese Communist Party’s commanding role in the economy. Even if Beijing were to clear these technocratic hurdles, its entry would require the unanimous approval of the existing members. Given Japan and Australia’s recent clashes with China, Beijing’s candidacy is likely dead in the water. However, even if Beijing were to fail, it may succeed in sowing divisions within the compact. Malaysia, a founding member, has welcomed China’s candidacy while potential entrants like South Korea are vulnerable to Chinese pressure. Should Beijing’s advances be spurned, it could still lean on weaker members to advance its ideology and interests within the accord.
For India and the US, the risks of staying out of CPTPP are apparent. The truth is that Beijing has gained the upper hand in the battle for economic influence in Asia. It is the largest trade partner for most countries in a region that is desperate for economic growth and infrastructure investment. While a number of countries, especially in Southeast Asia, may welcome Quad’s more muscular military deterrent against Chinese aggression, they have been sorely disappointed by the perceived absence of a comprehensive Quad economic strategy. Should investment-hungry nations in Asia conclude that the US left CPTPP with neither shore in sight nor destination in mind, they will have little choice but to turn to Beijing.
Further, New Delhi and Washington may be left on the outside looking in as crucial issues such as data localisation and environmental standards are debated and decided. While both can rely on allies and partners to make their cases for them, this is a clumsy strategy and will be cold comfort to policymakers in both countries. While India’s push to negotiate new bilateral trade agreements with the UK and Australia is a welcome change, New Delhi will still lack a forum to influence major economic debates that a multilateral accord such as CPTPP provides.
However, as with RCEP, India has recognised that the sweeping economic concessions required to join CPTPP are a bridge too far. India seems caught in a bind, with no good ways out.