The Trans-Pacific Partnership agreement (TPP) has been signed in Auckland on February 4 by 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.
The TPP contains detailed obligations on so-called new issues such as labour, investment, environment, e-commerce, competition and government procurement. These issues are not covered under the World Trade Organisation’s (WTO) multilateral umbrella.
There is an increased likelihood of the U.S. pushing the TPP as the negotiating template for new issues at the WTO, since it better reflects the interests of its own domestic lobbies. As new issues are not likely to be in India’s overall interest, the country must firmly resist such attempts.
India also needs to closely watch the regulatory regimes in TPP countries, ensuring that these countries do not violate their WTO commitments in the process of implementing the TPP. The WTO does allow a member to deviate from its obligations with respect to a free trade area; however, such a deviation is not unqualified. If a TPP country restricts the market access for non-TPP members such as India on account of higher labour standards, a potential violation of WTO provisions may arise.
The TPP attempts to regulate and, legitimises this regime. TPP may lead to proliferation of private standards. such standards have existed as a parallel regulatory regime in international trade for some time now.
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. Disciplining such private standards at the WTO is much needed and is something that should be urgently pursued.
Impelled by the looming onset of TPP, 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 help mitigate some of the export losses that India may face in leather goods, textile, and plastics on account of trade diversion due to TPP.
India also needs to identify its trade interest areas. There have been several instances of biopiracy 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.
By not being part of the TPP, India will certainly incur losses on account of trade diversion. Yet, joining the TPP is not an option for the country. This would entail very heavy costs. Medicine prices, for instance, would see steep increases.