The TPP imperative: High time India, China look to join the party

By: | Updated: October 6, 2015 4:47 PM

India could experience export gains of $500 billion a year from joining an expanded TPP or participating in a comprehensive Free Trade Area of the Asia Pacific (FTAAP), according to a report.

India China trans pacific trade partnershipFor now, India seems to have started the process to get its act together. As a first step, it has agreed to re-start talks with the EU for the Broad-Based Trade and Investment Agreement (BTIA). (Reuters)

After five years of negotiations, the United States and Japan have signed a landmark free-trade deal with 10 other Pacific Rim nations – Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – to form the Trans Pacific Partnership (TPP). It is now the largest regional trade accord that accounts for 800 million people and 40% of the world economy. The TPP is expected to reduce or eliminate tariffs on almost 18,000 categories of goods. Meanwhile, the US is also in talks with the 28-nation European Union to form the Transatlantic Trade and Investment Partnership (TTIP). However, there is great opposition within Europe to the alliance.

Though 12-nations have signed up, the tough part has just begun. First, the deal needs to be ratified by the legislatures in each of these nations. That’s going to be a time-consuming affair. In the US which is leading the TPP, many of President Barack Obama’s Democrat legislators fear the grouping would lead to loss of jobs. More importantly, Donald Trump who is in the US presidential race tweeted “TPP is a terrible deal.” Those are not great signs for the future success of the TPP. Hillary Clinton, the Democratic Party’s leading presidential candidate has yet to comment on it. The second part relates to the lowering of duties. That is going to happen gradually. In fact, the full benefits would not be visible for years.

While no one is saying it in so many words, the essence behind forming the TPP was to keep a check on China, the second-largest economy. As China is looking to form its own alliances, the US has got together its allies in the Pacific region to form TPP. South Korea is one major US ally in the Pacific Rim that is missing as of now.

India too is out of any of the groupings. According to a report by C Fred Bergsten of the Peterson Institute for International Economics, India could experience export gains of $500 billion a year from joining an expanded TPP or participating in a comprehensive Free Trade Area of the Asia Pacific (FTAAP), now being considered by the APEC. That could happen over a period of time, not immediately. For now, India seems to have started the process to get its act together. As a first step, it has agreed to re-start talks with the EU for the Broad-Based Trade and Investment Agreement (BTIA). India had pulled out of the BTIA after the EU put restrictions on 700 generic drugs. That’s important as the grouping is India’s single largest trading partner with $99 billion achieved in 2014-15. It is important that India is part of some of the bigger trade groupings in the longer term. Not being there would hurt the country’s interests.

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