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.
Discussing new issues
The TPP contains detailed obligations on so-called new issues such as labor, investment, environment, e-commerce, competition and government procurement. These issues are not covered under the World Trade Organization’s (WTO) multilateral umbrella. However, as the recent Nairobi Ministerial Declaration stated, “some” members want to explore and discuss new issues and architecture at the WTO. 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. But this may only be accomplished with a high degree of preparedness and smart coalition-building with like-minded allies.
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 labor standards, a potential violation of WTO provisions may arise, which India should not shy away from pursuing using the WTO’s dispute settlement mechanism.
India should actively seek disciplines on private standards at the WTO to restrict their proliferation. The TPP attempts to regulate and, according to some experts, legitimizes this regime. A number of studies have predicted that the TPP will lead to proliferation of private standards. However, the fact is that 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 labor standards that prohibited child labor. 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 the 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. Aiming to diversify export destinations to hitherto untapped markets like Latin America and Africa would also help.
India also needs to identify its trade interest areas and propose alternative negotiating templates. One such area is biopiracy, protection of traditional knowledge, and the link between the WTO’s Trade-Related Aspects of Intellectual Property Rights agreement and the Convention on Biological Diversity. There have been several instances of biopiracy in the past, 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. Addressing these will have the dual effect of not only making India’s exports cost-competitive, but will also make them more attractive for international lead firms to integrate India in global value chains.
The government should launch a comprehensive initiative to enable Indian exporters to not only comply with standards prevalent in the importing market, but also demonstrate the compliance through appropriate conformity-assessment procedures.
India should resist any attempt to converge its domestic public standards with the dominant private standards in TPP countries. If India’s public standards are harmonized with foreign standards, they will be equally applicable to domestic and export sales on account of the ‘national treatment’ principle of the WTO which prohibits less favorable treatment to imported products. The harmonized standards may result in most producers not only being excluded from export markets, but also being edged out of the domestic market, undermining the Make in India initiative in the process.
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. That is precisely why mitigating such projected losses from the TPP should be a government imperative. This can only be achieved by a cohesive trade policy approach on the international as well as domestic front, aimed at protecting and promoting India’s trade interests.
(The author is an assistant professor at the Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi.)