Outside the club: TPP has altered India’s bargaining power and negotiating positions

The conclusion of the Trans-Pacific Partnership has sobering trade implications for India.

By: Express News Service | Updated: October 7, 2015 10:41 am

Twelve Pacific rim countries have finally agreed on the Trans-Pacific Partnership (TPP), the largest regional trade agreement ever, which covers countries that account for 40 per cent of the global economy. The partnership between economic powerhouses like the US, Japan, Australia, Canada and Singapore on the one hand, and Vietnam, Malaysia, Peru, Chile and Mexico on the other, is part of an attempt to balance China, which isn’t part of the deal, and sets a new benchmark for trade agreements. Though the TPP still has to be ratified by lawmakers in the 12 countries — steering the agreement through Congress is likely to be President Barack Obama’s last big challenge — it holds significant lessons and warnings for India.

With the WTO floundering — the Doha Development Round has been stuck for years and a breakthrough doesn’t seem imminent — regional and bilateral pacts assume greater significance. But India’s progress on concluding trade negotiations hasn’t been great. Take for instance, the EU-India Broad-based Trade and Investment Agreement, under negotiation since 2007 — in contrast, the TPP has been concluded in five years. Sending a bad signal to other prospective trade partners, India had petulantly called off the talks over the EU banning the sale of some generic drugs. But by dithering on such negotiations, India risks costly isolation from important trade clubs. The TPP, for instance, will likely affect India’s exports to the 12 Pacific countries. According to one estimate, trade worth $2.7 billion will be diverted away from India. This number could increase to $3.8 billion if South Korea joins the club. The costs could be even higher if India is unable to participate in global supply chains due to the TPP’s rules on standards, labour and environment policies. Further, standardisation of intellectual property regimes across the TPP countries and rules on expropriation may make it more difficult for India to attract foreign investment over, say, a Vietnam.

The TPP has altered India’s bargaining power and negotiating positions. Take for instance, the bilateral investment treaty under negotiation with the US. The TPP has set a benchmark of sorts for this agreement. Spillover effects of this will be evident in the Regional Comprehensive Economic Partnership negotiations between the Asean and six other countries, including India. Now, Delhi must help industry understand how to adapt to a post-TPP world. Further, it needs to urgently strengthen its negotiating teams and re-establish its credibility to conclude big-ticket agreements.

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