US President-elect Donald Trump’s decision to withdraw from the ambitious Trans-Pacific Partnership (TPP) between the US and 11 others and focus more on bilateral deals will ease pressure on India, China and others to conclude the 16-nation Regional Comprehensive Economic Partnership (RCEP), aimed at countering the TPP, at the earliest.
However, analysts feel the move to dump the mega trade deal could erode the US’ credibility as a reliable trade partner and bolster China’s influence, at least in Asia and even Latin America — a scenario that may not exactly be in India’s interest. China’s recent overtures to some countries suggest it is conscious of both challenges and opportunities posed by a US administration under Trump. Recently, even before Trump’s message on pulling out of the trade deal, TPP member Malaysia stuck deals worth $34 billion with China.
Even Philippines President Rodrigo Duterte has shown signs of antagonism towards the US over the latter’s criticism of his controversial anti-drugs campaign. Also, over the week-end, Chinese President Xi Jinping renewed pledge to the Free Trade Area of the Asia-Pacific (It has been pushing for such a pact since 2014) at the APEC CEO Summit in Peru. China is also aggressively courting Latin American nations to strengthen trade.
The TPP between the US and 11 other Asia-Pacific nations represents roughly 40% of global gross domestic product and one-third of world trade.
Opportunities for India at RCEP
Despite apprehensions of growing Chinese clout, India will likely benefit in a world without the TPP, said analysts. India will have more time to persuade or coax potential RCEP partners to make better offers on services and investments (the focus areas of its interests), should they want India to commit more in goods.
Garment industry to benefit
The Indian textile and garment industry could breathe easy, as fears of key competitor Vietnam gaining duty-free access to the US abate. Vietnam has already beaten India as the world’s third-largest garment exporter and the threat had appeared more real, given that the US accounted for 22-30% of India’s garment exports in recent years and Indian exporters have to pay duty in the range of 14-32% for the shipment of textiles and garments there.
This apart, the US withdrawal will also mean potential Chinese investments in TPP nations like Vietnam and even Malaysia to take advantage of the duty-free access to the US market, may not materialise in a big way, said noted textile expert DK Nair.
WTO system may gain
Although Trump even advocated a US pullout of the WTO during his presidential campaigns, the fact that he hasn’t included it in his initial action plan suggests he is perhaps giving it a second thought, said analysts. Jayant Dasgupta, former ambassador of India to the WTO, said the Obama administration focused more on the plurilateral agreements like the TPP and Transatlantic Trade and Investment Partnership (with the EU), and virtually killed the multilateral WTO trading system. Trump’s decision may see an American comeback to the WTO in the true sense, if not in immediate future. For its part, India has reaffirmed its commitment to the WTO system over other plurilateral trading arrangement.
Prospects of India-US trade deals
The fact that Trump says he would focus more on bilateral trade deals holds opportunities for both India and the US to explore such an agreement, said Dasgupta. However, he added the problem is in bilateral deals, the US usually wants to force its own standards on the other partner in every area — a fact India has to bear in mind.