Trans-Pacific Partnership: Gateway of Opportunity for Indian Trade

While Obama will have to slug it out for TPP’s approval, India too should scrutinise the pact, writes Ashok Sajjanhar

Trade ministers from a dozen Pacific nations in Trans-Pacific Partnership pose for a “Family Photo” in Atlanta, Georgia, October 1, 2015. (Photo: Reuters)

Trade ministers of 12 Asia-Pacific countries engaged in negotiations to structure a Trans-Pacific Partnership (TPP) Agreement announced earlier this week in Atlanta, that they had concluded the deal after toiling over it for more than five years.

Talks on this ambitious project commenced in 2008 when the US decided to expand the scope, membership and content of the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or Pacific 4-P4), which was signed by Brunei, Chile, New Zealand and Singapore in 2006. Additional countries that joined negotiations over subsequent years included Australia, Canada, Japan, Malaysia, Mexico, Peru, the US and Vietnam, bringing the total number to 12.

Contentious issues like agriculture, intellectual property, services and investments delayed progress in the talks.

Dairy farmers from Ontario and Quebec protest to raise concerns about protecting Canada’s supply management system in the Trans-Pacific Partnership negotiations, September 29, 2015. (Photo: AP)

The Pact and what it offers

The deal represents the largest trade pact in two decades. It covers 40% of global economy and 50% of trade across the world. It will lower trade barriers for items ranging from beef and dairy products to textiles and data. But TPP is not merely a trade deal. It is much more. It establishes ambitious and far-reaching rules for labour, environment, competition, government procurement etc which have never before come under the ambit of any enforceable trade law.

One unstated goal of TPP was to neutralise China’s growing economic power. In 2013, China indicated its interest in joining TPP negotiations and so the members will have to deal with this issue in the coming months.

TPP has the potential to become a huge strategic asset for President Obama and Japanese PM Abe. It represents Obama administration’s ‘’pivot’’ to Asia to counter the rise of China. It is also a key component of economic reforms launched by Shinzo Abe.

Heralding a New Era

• Trans-Pacific Partnership is the largest trade pact in two decades that covers 40% of global economy and 50% of world trade
• One unstated goal of TPP was to neutralise China’s growing economic power
• Obama likely to encounter stiff resistance to get the deal through the Congress
• Pact contains certain subjects whose inclusion has consistently been opposed by India
• India needs to sort out its issues associated with Free Trade Agreement which are pending

Hurdles Ahead

TPP will need to be signed by leaders of all countries and approved by their legislatures. This could prove to be a formidable task as the deal has generated considerable opposition among powerful lobby groups and civil society organisations in the US and elsewhere. Obama is likely to encounter stiff resistance to get it through the Congress as several heavyweight presidential candidates have voiced strong opposition to it. Obama has however unambiguously positioned himself in its support by clearly stating that it is necessary for America to write rules for international commerce rather than letting countries like China do so.

US Trade Representative Michael Fromam (Left) participating in a news conference in Lahaina, Maui, Hawaii, July 31, 2015. (Photo: Reuters)

The pact is likely to face opposition in Canada and Australia which go to elections later this month. Critics see the deal as having been shrouded in secrecy and biased towards rich and influential corporate interests. For this reason the announcement has been greeted with dismay and anger in some quarters, and enthusiasm and satisfaction in some others.

The announcement has caught most trade policy analysts by surprise because very little has been shared by negotiators with the outside world and stake holders like civil society, think tanks, consumer groups and others. Only large corporates were able to provide inputs. Although text of the treaty is not public, Wikileaks has published several documents since 2013.

Implications for India

Many environmentalists, organised labour, advocacy groups etc have protested against the treaty, principally because of secrecy of negotiations, its expansive scope, and controversial clauses.

India will quickly need to examine implications and formulate its response to this development. This becomes critical as the other Mega-Trade Agreement viz Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU which represents 50% of global GDP and 30% of world trade might also see the light of day soon.

First, it should be noted that the pact contains subjects like labour, environment, competition, and government procurement, the inclusion of which has consistently been opposed by India in any multilateral trade deal. It will be useful to examine final provisions on these issues and others like IPRs in the text as soon as it becomes available. These will provide a ready template against which to assess our preparedness to meet these obligations. There are six developing countries in the grouping who have similar concerns on the above issues. If these countries find it possible to abide by revised rules, India could consider their suitability for us.

Secondly, India needs to ensure that its pending FTAs, for instance with the EU, are concluded expeditiously. A few issues remain with EU which should be settled quickly.

Japanese farmers holding placards against TPP participate in a rally against Japan’s Prime Minister Shinzo Abe’s administration in Tokyo, Japan, June 13, 2015. (Photo: Reuters)

The projected deadline for concluding negotiations of Regional Comprehensive Economic Partnership (RCEP) is 2015. Present status of negotiations is not known. Even if negotiations slip into next year, participating countries (ASEAN10, Japan, China, ROK, India, Australia, New Zealand) should strive to conclude the talks by early 2016.

India is on a strong wicket. Its economy is a bright spot in the international gloomy scenario. Its macroeconomic indicators are robust; its GDP growth rate is the highest amongst emerging economies; FDI flows have risen rapidly. It can take pro-active measures to give an impetus to complete pending negotiations while protecting its core interests.

(The writer is a former Indian Ambassador to Kazakhstan, Sweden and Latvia.)