Two Indian analyses of the TPP

[Recursion]

http://www.eurasiareview.com/12072015-trans-pacific-partnership-india-and-south-asia-analysis/

India’s specific concerns over tariff-preference erosion will extend to the preferential accesses for its exports through the various bilateral and regional agreements it already has with many TPP members. These include bilateral agreements with Chile, Japan, Malaysia, Peru and Singapore. It also gets preferential access to the markets of Brunei and Vietnam through its agreement with the ASEAN (Association of Southeast Asian Nations). Significant preferential market access, in the form of zero or low tariffs currently available to Indian exports through these agreements, can be neutralised post-TPP. Furthermore, India’s existing trade agreements with these TPP members are much narrower than what the TPP will cover in terms of the number of goods that are likely to be made tariff-free. As a result, there will be several Indian exports, both agriculture and manufacturing and including final products, raw materials and intermediates that are expected to continue facing tariffs in these TPP markets, whereas these are likely to become duty-free for all TPP members.

Given that global tariffs are coming down through various regional and bilateral trade agreements, in addition to phased reductions through the multilateral process of the World Trade Organization, tariff-preference erosion from the TPP will be a relatively short-term effect. What can, however, be far more significant for the excluded countries are the effects of higher quality-standards being adopted under the TPP. These standards are expected to be implemented through strict norms for ensuring health and safety of plants, animals, people and the environment. The TPP will implement a series of common standards for its members in this regard. By and large, these standards are likely to reflect those already prevalent in the US and other major TPP member-markets.

High quality-standards, key to gaining market share, have several implications for exports from India and other South Asian countries. Indian and South Asian exports have struggled to meet high standards of developed country markets due to various factors including lack of adequate knowledge of standards, insufficient domestic capacities for standardisation and lack of awareness among both producers and consumers. Several exports from South Asia – agricultural products, fisheries and marine products, minerals, chemicals, leather, textiles and garments, jewellery, metals, mechanical and electrical items – will now have to comply with progressively higher standards in the TPP markets. Such compliance calls for the institutionalisation of higher quality-standards in their domestic markets, in the first instance. The quality standards of the TPP might be more demanding than the basic global standards as fixed by the ISO (International Standards Organisation), given the active role of private industry in fixing these standards. The challenge for India and other South Asian countries will be to continuously upgrade their domestic standards. This is going to be particularly difficult in the areas of food-safety management and carbon-emission norms. For India, these challenges are going to be particularly critical as it aims to integrate deeper in global value chains through ambitious initiatives like ‘Make in India’. High standards would be major imperatives for Indian producers both as suppliers of intermediates as well as processors of final products.

Several South Asian LDCs are yet to develop domestic testing and certification capacities for satisfying high quality-standards. The absence of such facilities is likely to reduce market access for their exports to the TPP markets. Such access will be less globally over time, given that more and more economies might shift to the standards being set by the TPP. Even for India, the largest economy in South Asia, certification capacities must expand far more beyond what is currently available with the BIS (Bureau of Indian Standards). At the same time, the standards for the domestic market will also have to be upgraded and enforced. Large gaps between the domestic and the TPP standards might force exporters towards suboptimal choices.

http://indianexpress.com/article/opinion/columns/riding-the-pacific-trade-windslabour-environment-and-ipr-standards-in-the-trans-pacific-partnership-will-influence-future-indo-us-agreements/

Will the TPP affect India? The short answer is: Yes, but the overall impact is uncertain at this point. It is important to understand that there are many channels through which the TPP can affect India. First, we can expect some trade diversion and significant foreign investment diversion. A large proportion of India’s exports is in services. With the anticipated reduction in barriers to trade in services among TPP members, there is the possibility that some of India’s services exports to those countries will be replaced by services trade within the TPP. In the case of goods trade, there should not be much of an impact as the large economies within the TPP already have very low tariffs on imports from all WTO member countries.

A key component of Make in India is attracting foreign investment. If the US manages to bring TPP nations closer to its own IPR regime and make them commit to an agreement preventing expropriation, it will make it difficult for India to attract foreign investment, especially given its history of retrospective taxation. In other words, some TPP nations will then become more attractive destinations for foreign investment flows.

While the US and India have started negotiating a bilateral investment treaty (BIT), this negotiation is going to be slow. This is because there is vast divergence between the two countries’ model BITs, especially on issues of IPR and market access commitments. Thus, significant foreign investment diversion, including a deceleration in foreign investment flows to India, is a possible consequence of the TPP. In addition, the TPP reduces India’s bargaining power in its BIT negotiations with the US, as it expands the set of options available to the latter.

The TPP will also provide a template for any future agreements with the US. So, if India has to successfully arrive at any economic agreement with the US in the future, the labour, environmental and IPR standards in the TPP will become the minimum requirements of such an agreement. This, through spillover effects, will also be true of agreements with other countries. For example, the Regional Comprehensive Economic Partnership (RCEP) is a proposed agreement between Asean nations and six other countries, including India. There is a large overlap in the memberships of the TPP and the RCEP, so that if the TPP is the first of the two to be put in place, the TPP standards will get into the RCEP through the common member countries. This is a possibility, even though the RCEP is being envisioned as a more flexible trade agreement that does away with a one-size-fits-all approach.

Just to get a view of the TPP from outside of the bloc. India is concerned that somewhat more-developed nations like Vietnam and Indonesia will no longer have a tariff anti-preference compared to India and will also be able to meet higher labor and environmental standards required by the TPP. A downside of this is that India may seek an economic rapprochement with China, which would more or less be the opposite of the US's intent with the TPP...

[1StrongBlackMan]

1. Posted to for later. n/t