Implications of TPP agreement on India.

The Trans-Pacific Partnership (TPP) agreement was signed on 4th Feb, 2016 between 12 Pacific Ocean Rim nations namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.

Even as it is touted as the world’s biggest trade deal to date, with signatory countries accounting for more than 50 per cent of global GDP, the TPP still has a long-drawn ratification process ahead of it. Signing of the agreement provides an opportune moment for India, which is not part of the TPP, to take stock and formulate its response to the trade challenges it now faces on both international and domestic fronts.

Analysis:

The TPP member states led by USA have agreed to discuss certain new issues such as labour, environment, e-commerce, competition and government procurement which are not covered under WTO. These new issues are of paramount interest to US and its coalition partners but serve not India’s interests.

USA seems to be deliberately promoting these new regional trading blocs with like minded nations as coalition partners because of resistance faced by it at WTO forum where the lot of developing nations are bargaining hard on emission issues, agricultural issues, public stock holding of food grains (India), rules of origin, labour standards, trade facilitation agreement thereby stonewalling the attempts of developed nations to get greater access to the markets of developing nations at reduced costs and enhanced transparency in operations.

The new issues that form the basis of TPP and TTIP would be used as a bargaining chip by USA to counter the issues raised by the lot of developing nations at WTO.

Though these new issues mooted in TPP and TTIP agreements provide for higher ethical standards of trade, India being a developing country is not yet geared to usher the regulatory changes as envisaged by these new rules for Indian manufacturers and traders lack the technical knowhow and expertise to rise to the new standards of global supply chain.

How will the implementation of TPP and TTIP agreements affect India and what can India do?

Even when the new regulatory regimes in TPP countries gets implemented, these countries cannot restrict the market access for non-TPP members such as India on account of higher labour standards, otherwise it would be considered as a potential violation of WTO provisions. However this remedy is prevalent against a state body/government and not against a private firm/MNC.

For instance, in 2006, the Sialkot sports goods manufacturing cluster in Pakistan came close to closure when Nike decided to stop sourcing footballs made in the area, on account of violation of its labour standards that prohibited child labour.

Despite significantly impacting international trade, these standards have escaped regulation under the WTO. This is because they do not originate from the ‘state’ but from private bodies, and therefore India should actively seek disciplines on private standards at the WTO to restrict their proliferation, which otherwise with the implementation of TPP and TTIP would readily proliferate.

However, these new trade regulatory regimes would result in loss of trade, and to counter this, India must enter into bilateral FTA’s of its own by tapping hitherto untapped markets of Africa and Latin America.

India also needs to identify its trade interest areas 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. There is no denying that India’s infrastructural deficiency, including port congestion and poor road connectivity, is one of the main hurdles in attaining this cost competitiveness. Addressing these will have the dual effect of not only making India’s exports cost-competitive, but will also make them more attractive for international lead firms to integrate India in global value chains.

India is not yet ready to accept and implement these higher trading standards because if it does, it faces the risk of laying bare its exporters to higher global standards for which they are not prepared and would perish in such circumstances. Such a measure would also be detrimental to domestic manufacturers who want to contribute to India’s Make in India initiative.

By: Abhinav