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Trans-Pacific Partnership (TPP) And Its Relevance To India, An Overview

Trans-Pacific Partnership (TPP) is a secret free trade agreement between the 12 Pacific Rim countries on various economic policy matters. Driven by the US, it is an expansion of Trans-Pacific Strategic Economic Partnership Agreement (TPSEP) signed in 2005. The current membership includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States.  Together, they represent 40% of global economy, $1.5 trillion in goods, $242 billion in services, 26% of world trade 1 and 800 million people. It is undoubtedly the largest regional trade agreement to take place in the recent times further reinforcing the general global trend in proliferation of regional economic, military, cultural blocs and agreements as opposed to the post WW II scenario of universalization tendencies.

Trans-Pacific Partnership (TPP) and its relevance to India

Need for Trans-Pacific Partnership (TPP)

This is a logical step in the US policy of “Asia Pivot” to contain a rising and potentially belligerent China. It is seen as a center piece of economic balancing and platform for regional integration by US strategic think tanks. This also represents a paradigm shift in US foreign policy from concentration on the Middle East to Asia.

Apart from Chinese angle, the rise of “21st century issues” like Intellectual property rights, environmental & climatic change negotiations, Labour Laws, Foreign investments, tariff & non-tariff barriers pharmaceuticals, e-commerce, clearances etc which sprawl across boundaries. WTO over time has become cumbersome and hence a new agreement was required.

Issues Involved

TPP has a serious transparency issue. The official documents were never made public and much of the analysis till date is based on leaked documents and few summaries/disclosures made by authorities like by US Trade Representative (USTR). It also threatens to impose stricter copyright terms, expanded terms, escalated protection of digital locks, greater liabilities on internet intermediaries, greater threat to whistle blowers, lack of public inputs and coerces the other nations to adopt inequitable laws.

Relevance for India

Though India is not a signatory, the ramifications for India are quite huge. India has already signed Free Trade Agreements (FTAs), both bilateral (with countries like Japan, Malaysia, and Singapore etc) and multilateral (like India-ASEAN FTA, agreements with MERCOSUR). India cannot be isolated from changes this huge.

Now this obviously raises the question- Should India join the TPP or not? What are the ramifications?

If India does not join the TPP then it will most likely witness diversions in trade and investments. This is especially pertinent since India textile exports consist of nearly 30-35% of US market. On top of that, decline in outsourcing services can also be expected due to easier movement of people, knowledge in FTA countries. This dip in precious for-ex is inevitable forcing India to look for other pastures.  The “Yarn Forward Rule” 4 included in the terms, rules out the inclusion of any party outside the TPP signatories for availing duty preference. Thus it will render Indian products uncompetitive in relation to cheaper goods and services from South East Asian nations.  This will create problems in market access and thus impacts Indian exports like crops, sugar, processed food, manufactured goods, fruits and vegetables. Corporations would be interested to reap the benefits of TPP and will be diverted to other nations hurting “Make In India” initiative.

If India joins the TPP, it will have the advantages like boost in exports and bilateral trade (but in the long run), prevent a loss of 0.3% of exports, does not suffer tariff disadvantage keeping the goods competitive, will also lead to jump in employment especially in sectors like textiles, leather, dairy etc. But these come at the cost of meeting the global high standards (especially in light of poor quality manufacturing), accepting US standards in IPR (much stricter than TRIPS under WTO- translating to ever greening of patents affecting the generic pharmaceutical industry of India), loss of bargaining power in negotiations, loss of flexibility in decision making pursuing national interests (affecting India First policy),

While it may be difficult to come to a conclusion on whether or not to join, We do need improvements in efficiency, capability and capacity.

References:

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About Krishna Koundinya

Krishna is an MBA and Entrepreneur with a keen Eye for Economics and Geo Politics.

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  1. Hi there, just planned to say, I loved this post. It had been funny.
    Continue posting!

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