Experts welcome caution on large blocs like IPEF  

Sensitive sectors, evolving domestic policies on emerging areas behind guarded approach, they say

india US trade pact
Commerce and industry minister Piyush Goyal has stated that a broader consensus on certain aspects of the IPEF trade track has yet to emerge among all the 14 members.

India’s decision to pull out of the trade negotiations pillar of the US-led Indo-Pacific Economic Forum for Prosperity (IPEF) for the time being should be viewed as an instance of abundant caution, trade experts have observed. That the 14-member grouping has a holistic and all-encompassing outlook on trade liberalisation may have influenced Delhi as it chose not to make binding commitments on issues like digital economy, data flows, labour and environment standards, public procurement — all of which the trade pillar entails. In all these areas, the domestic policies are either still evolving and or haven’t been fully tested yet.

There are precedents of India’s cautious approach to being part of powerful trade blocs. It was not keen to join the yet-to-be-ratified US-led Trans-Pacific Partnership that sought to exclude China. The ambitious partnership came unstuck as the US itself withdrew from it in 2017. In November 2019, India opted to stay out of the 16-nation Regional Comprehensive Economic Partnership or RCEP where China is virtually in the anchor role, citing the need for an outcome that takes care of the interests of all partners and sectors. Such wariness about regional trade blocs is not consistent with India’s aggressive pursuit of bilateral free trade agreements with virtually every trading partner that matters.

Also read| Indo-Pacific Economic Framework for Prosperity: What IPEF holds for India

Commerce and industry minister Piyush Goyal has stated that a broader consensus on certain aspects of the IPEF trade track has yet to emerge among all the 14 members and that India will wait for final contours of the framework on this pillar to emerge before taking a final call. However, he told FE in a recent interview that as far as India-US trade is concerned, “sky is the limit.” He indicated that India is very much open to a free trade pact with the world’s largest economy, and is keen to expand bilateral trade from the current $159 billion to a whopping $500 billion in the next six to eight years.

“This reluctance (to join trade pillar of IPEF) stems particularly from the fact that like the RCEP from which India had withdrawn before the agreement was concluded, the IPEF members are strong votaries of across-the-board trade liberalisation, and do not favour excluding certain sectors from the agreement,” Biswajit Dhar, professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, said.

Also read| India at IPEF–Trade pillar exit pragmatic, but…

It s believed by certain quarters that the social clauses of the trade pillar (labour and environment), made India opt out of it, but others don’t agree with this notion. RV Anuradha, partner, Clarus Law Associates, said: “I don’t believe this (social clauses) to be case, since it has already been reported that India is already negotiating labour and environment chapters in its FTAs with the UK and the EU.”She, however, added that it is crucial to have meaningful dialogue on what these areas would mean in an FTA. “We should not dilute the neatly crafted balance of those agreements in a rush to include environment and labour in our FTAs. Whether in the FTAs with the UK, the EU, the US or under the IPEF, it is time for a deeper meaningful discussion on environment and labour in a trade agreement,” Anuradha said.

Of course, India has pulled out of only the trade negotiations pillar; it is still a part of the remaining three pillars of the IPEF — supply chain, tax and anti-corruption and clean energy.India was not included in another US-led partnership — the Minerals Security Partnership that aims to reduce dependence of member nations on strategic minerals. But the IPEF includes other major economies like Japan, South Korea, Australia too. This apparently has caused some concerns, given that the partnership might cover areas like renewable energy and electric vehicles, where domestic policies are still being formulated and there is lack of absolute clarity on the way things are moving.

According to Dhar, Delhi opted out of the trade pillar of IPEF because of its concerns about sensitive sectors. “Except in the CEPA with the UAE, India has been able to exclude its “sensitive” sectors in all the trade agreements it has concluded thus far. In other words, the government has always been keen to retain the policy space to address the needs of these “sensitive” sectors, which it has been able to do in the existing trade agreements,” he observed.

Nagesh Kumar, director at Institute for Studies in Industrial Development (ISID), noted that another concern may have been the target of ‘high-standard’ trade commitments in the IPEF trade pillar. “A large and growing part of global trade comprises global value chains. Regional free trade agreements have become key factors for integrating with these regional and global value chains as they are often structured across the region harnessing the ease of trade between members of trade blocs usually on a preferential basis,” he said.

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