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‘To grow into a major trading power, India has to consider cutting tariffs’

Joshua Meltzer describes how the US-led new world trade grouping, the Trans-Pacific Partnership (TPP) is reshaping global trade relations and what it holds for India.

Written by Subhomoy Bhattacharjee | New Delhi |
Updated: August 18, 2014 4:52:29 pm

Joshua Meltzer is a fellow in Global Economy and Development at the Brookings Institution and an adjunct professor at the Johns Hopkins School for Advanced International Studies. In this interview with Subhomoy Bhattacharjee, he describes how the US-led new world trade grouping, the Trans-Pacific Partnership (TPP) is reshaping global trade relations and what it holds for India. 

What do you see are the advantages if India joins the TPP?

At the end of the day the free trade agreements or the WTO is less about getting market access opportunities and more about using them as pressure points to improve (one’s) own economy. The way I see it, the TPP is about carrying out some good reforms in the domestic market and using it as a guard against slipping up on efficiencies like cutting down some extraordinary tariff barriers.

What are the pre-conditions for India to join?

It is a high ambition agreement that seeks to set rules to guide trade in goods and services that includes cutting down tariffs, but also guide investment among countries. It is a 21st century platform to bring trade negotiations out of the vestiges of the last century. Also it is about setting high standards domestically among the member countries to make rules that benefit all involved. This includes improving the regulatory processes and in the course of negotiations allows space for making experiments with new ways of handling issues that gives them further confidence that had not been possible at the WTO.

Is it possible that over time the TPP would supplant the role of WTO, at least among the major economies?

It is a good question. That is how this process would seem to be translating itself multilaterally. The way it is developing, is becoming interesting. There are trans-Atlantic possibilities too opening up, with 20 countries expected to join by 2017, from the current 12. This would lead to large number of countries doing the trade negotiations through this forum — a new multilateral process than they had been doing till now. In turn they will bring those new perspectives and positions to the WTO — to the Doha round.

Asia is getting fractured into several competitive groupings? How do you see TPP doing among them? 

I don’t see the Regional Comprehensive Economic Partnership that includes India, China and most of Asean countries as a competition to the TPP. China for instance is considering the TPP and even for other countries which have overlapping memberships the standards on various issues are going to be similar. So there is going to be congruence. I would also like to say that TPP has to expand beyond its current region to take on a global profile. For instance I don’t see any reason why only Asia Pacific nations should be in, at this stage. The plans for extending the membership to Colombia is in that way a test case.

India at one stage was moving aggressively to cut tariffs. But that has got halted. Do you think the noise about TPP will again spur the cuts?

Absolutely. To grow into a major trading power India has to consider cutting tariffs big. India has some of the highest tariff rates for large number of goods. To raise exports, those barriers have to come down. With that sort of tariff structures on imports, India’s ambition to be a global trading power will not gel. If the government has an ambition to make trade big, I don’t see it going anywhere with those numbers.

To what extent has India hurt its place in the global trade dialogue by its stance on food subsidy at the WTO recently?

India has created new challenges for itself but I don’t think those are insurmountable. The TPP negotiations on several issues are still open so there is room for fresh ideas. The bottom line for India is that this is a grouping that matters. We heard the Indian commerce secretary saying India must also focus on new markets like Latin America but the big action is here. And even in South America, the dynamic part of the continent is coming over to new forums like these — not for getting market access but often to guide domestic reforms.

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