India must rise to the TPP challenge
To stay relevant in global trade, India needs to adopt broader standards in trade policy that go beyond markets and investments
Harsha Vardhana Singh Geneva
We live in a rapidly changing world, with evolution of technologies, production systems, business models, and multiple poles of economic prominence. Building on its domestic policy reform, India has benefited from expanding global trade and investment opportunities. Today’s world is a significantly interconnected and globalized one, with both external and internal conditions affecting our domestic performance and ability to meet key economic and social objectives. The global economic forces that brought major growth stimulus to India have continued to evolve, sometimes in unexpected directions.
Significant developments in the international economic system that can have a major effect on India’s potential for growth include:
- Emergence of a multi-polar world as a number of developing economies dominate in
- every continent.
- Increasing importance of supply chains and trade in tasks in international trade.
- New sources of foreign direct investment and increased links through Foreign
- Direct Investment.
- Mega-FTAs (Free Trade Area) being negotiated to create new disciplines for trade and investment regulation.
- Burgeoning of the middle class and its impact on demand and need for natural resources.
- Emergence of a more self-confident Africa as the external demand for natural resources increases and growth in the region
- gains momentum.
- Changes in China’s self-perception of the role it needs to play in order to help sustain harmoniously growing global markets that are important for its own domestic objectives.
- The response of the United States to these developments.
- Demographics and technology-related changes that reduce communications costs, improve possibility of timely response, produce new combinations of goods and services, and create novel synergies and competition.
- Dealing with the changes in geo-economics requires policy efforts in several areas such as macroeconomic policy, climate change, health and education, or investment policy. The evolving international trade policy regime ought to be an area of focus. Though limited, these developments are important components of a framework useful for assessing the evolution of geo-economics. An analysis of these matters will also help us prepare for addressing some of the other issues as well. Two of the above-mentioned factors are particularly important to show us the way forward for such preparations, namely the mega-FTA negotiations and the policy changes that are being adopted by China.
Mega-Free Trade Area Negotiations
The large Free Trade Agreement negotiations deal with established issues as well as new ones, which reflect major changes arising due to changes in technology and patterns of trade. As Jayanta Roy, a former Economic Adviser to India’s Commerce Ministry, summarizes in a recent article: “Trade and investment in today’s world takes place in an environment defined by highly integrated global production networks. Trade in intangibles as defined by management of knowledge, data, and support services (IT and ITES) is becoming increasingly more important. The impending automation of many manufacturing and services functions is already starting to re-define the relationship between labour and capital. Such drastic changes require a highly efficient trade and investment environment (low transaction costs), and strategic thinking from the policy-makers who manage this relationship.” An important example of mega-FTA negotiations is the Trans Pacific Partnership (TPP). Without going into details, consider the new issues covered by the TPP negotiations. In addition to greater market access, the list includes intellectual property rights, foreign investment, competition policy, environment, labour, state-owned enterprises, e-commerce, competitiveness and supply chains, government procurement, technical barriers to trade, transparency in healthcare technology and pharmaceuticals, and regulatory coherence. Those who have been following the discussions in the WTO Doha Round will see several new areas that would create problems for
Another important feature of these topics is that they are usually addressed through technical or other standards. If mega-FTAs such as TPP are able to devise the basis for standards within their framework, then they will in effect define such standards for much of international trade, and thus determine a major potential requisite for market access for all, including India. These standards are likely to be reflected also in the Transatlantic Trade and Investment Partnership (T-TIP), the ongoing negotiations between the US and EU.