Should India stay out of TPP: implications and way ahead

Context

• Trump’s announcement in January to withdraw from TPP, which came just as the deal was set to be ratified, certainly shook the endeavour at its core.
• But many relevant players, eager to prevent the TPP from crumbling, soon began to discuss moving forward without the US.

What is Trans-Pacific Partnership (TPP)?

• The Trans-Pacific Partnership would create a free-trade zone among 12 (now 11) nations around the Pacific, making it the world’s largest.
• The countries within its scope account for 40 per cent of the world’s economic output.
• Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam is part of TPP.
• It is the negotiations, which lasted five years, were undertaken with great care and diligence.

Why did U.S stepped down from TPP?

• The Trans-Pacific Partnership was the creation of years of negotiations that culminated in late 2015 with the endorsement of the 12 nations’ trade chiefs.
• TPP was a trademark achievement for President Obama, who had pushed for a United States foreign policy “pivot” to the Pacific rim.
• The goal was to bind Pacific nations closer through lower tariffs while also serving as a buttress against China’s growing regional influence.
• The proposal, which was never put to a vote in Congress, ran into an election year when the benefits of international trade agreements were roundly questioned.
• United States lawmakers predicted the deal would lead to a loss of jobs and competitive wages.

TPP implications on India

• India’s decision to stay out of TPP is to achieve the geo-economic goal it has set for itself.
• India is trying to tackle the various tariff, non-tariff and market access issues that are likely to arise out of TPP.
• Doing so, India will be protecting country’s trade ambitions, especially exports.
• India by being not a partner to TPP, will find it difficult to access this huge global trade structure unless its domestic capacity and standards improve.
• Therefore, the implications of the TPP for India would be the imperative to develop a strategy to deal with the expected adverse impacts while preparing it to join the TPP in the long term.
• As TPP includes other developing countries, it is expected that the trade disciplines and standards will be implemented in these countries other than non-TPP members, affecting India’s trade once TPP gets implemented.
• The potential impact of TPP on India will be on three fronts, namely:(a) trade diversion; (b) drop in FDI; and (c) geopolitical exclusion.
• Therefore, India should consider being a part of this global infrastructure.
• India should actively seek disciplines on private standards at the WTO to restrict their proliferation.
• The TPP attempts to regulate and, according to some experts, legitimises this regime.
• A number of studies have predicted that the TPP will lead to proliferation of private standards.
• However, the fact is that such standards have existed as a parallel regulatory regime in international trade for some time now

What should India do?

• India should conclude, on a priority basis, its ongoing free trade negotiations.
• These include the India-EU Bilateral Trade and Investment Agreement and the mega Regional Comprehensive Economic Partnership with the Association of Southeast Asian Nations, China and others.
• Benefits from these agreements will aid lessen some of the export losses that India may face in leather goods, textile, and plastics on account of trade diversion due to TPP.
• Aiming to diversify export destinations to hitherto intact markets like Latin America and Africa would also help.
• India also needs to detect its trade interest areas and propose alternative negotiating templates.
• One such area is biopiracy, protection of traditional knowledge, and the link between the WTO’s Trade-Related Aspects of Intellectual Property Rights agreement and the Convention on Biological Diversity.
• There have been several instances of biopiracy in the past, of Indian traditional knowledge, such as the patenting of the wound-healing properties of haldi (turmeric).
• Being among the 12 mega biodiversity-rich countries, India needs to bring this issue to the negotiating table in its own free trade agreements.
• On the domestic front, India should accelerate the process of making its products more cost-competitive.
• India should resist any attempt to converge its domestic public standards with the dominant private standards in TPP countries.
• If India’s public standards are harmonized with foreign standards, they will be equally applicable to domestic and export sales on account of the ‘national treatment’ principle of the WTO which prohibits less favorable treatment to imported products.
• The harmonized standards may result in most producers not only being excluded from export markets.

Conclusion

• By not being part of the TPP, India will unquestionably suffer losses on account of trade diversion.
• But joining the TPP is not a good route for the country, it will involve heavy cost to India.
• Starting with medicine prices, for instance, would see steep increases. T
• That is precisely why mitigating such projected losses from the TPP should be a government imperative.
• This can only be achieved by a cohesive trade policy approach on the international as well as domestic front, aimed at protecting and promoting India’s trade interests.