Mains Paper 2: IR | Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
From UPSC perspective, the following things are important:
Prelims level: Particulars of the CPTPP
Mains level: Particulars of the CPTPP and, related concerns for the member countries and future members.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP)
- Recently, 11 Asia-Pacific countries, including Japan, Australia and Canada, has signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in Chile
- The CPTPP is, in effect, the original Trans-Pacific Partnership(without the USA) struck during the Barack Obama presidency
Low tariffs in the Member countries of the CPTPP
- The countries signing the agreement have agreed to bring down tariffs on cross-border trade by as much as 98% after domestic ratification
- The countries account for more than 13% of the world economy
- More countries are expected to sign the CPTPP in the future, and there is hope that a post-Trump U.S. may join the bloc
Criticism of the CPTPP
- The CPTPP, as it looks to expand influence by adding other countries into its fold, will need to address other problems as well
- One of the points of criticism of the TPP was the alleged influence of special interests in dictating its broad framework
- The TPP text, which has in large part been incorporated into the new deal, had also been flayed for mandating labour and other regulations that increase the bureaucratic burden on businesses
- Many have cited the size of the agreement to contend that the benefits from tariff reductions may be cancelled out by the massive increase in regulatory requirements
Will other countries join the CPTPP?
- While there may be no hard and fast rule to gauge the net benefit of the agreement, addressing these concerns will only strengthen the chances of more countries joining it
- A simpler trade agreement can also help the cause of transparency and lower the chances of lobbying by special interests in the future
Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests
From UPSC perspective, the following things are important:
Prelims level: TPP, NAFTA, APEC
Mains level: TPP deal and its effects on India and world
TPP deal finalized after the US exit
- Trade ministers from 11 Pacific Rim countries said they reached a deal to proceed with the free-trade Trans-Pacific Partnership deal
- An accord was reached on “core elements” of the 11-member pact
- The deal was in doubt after US President Donald Trump abandoned it
- In January this year, Mr. Trump pulled out of the deal
- Leaders of the 11 countries remaining in the TPP had been due to meet and endorse a deal
- The TPP member countries are trying to find a way forward without the U.S., the biggest economy
What is the USA’s stand now?
- The U.S. president lambasted the World Trade Organization and other trade forums as unfair to the United States and reiterated his preference for bilateral trade deals
- He said that he would not enter into large trade agreements, alluding to U.S. involvement in the North American Free Trade Agreement and the TPP
China supporting Free Trade
- Chinese President Xi Jinping said that nations need to stay committed to economic openness or risk being left behind
- He urged support for the “multilateral trading regime” and progress toward a free-trade zone in the Asia-Pacific
- China is not part of the TPP
Impact of Open Trade
- Open trade has an unequal impact on workers
- There are also concerns over automation in manufacturing that could leave many millions in a wide array of industries with no work to do
- All this is going on on the sidelines of APEC summit being hosted in Vietnam
- APEC operates by consensus and customarily issues non-binding statements
- APEC’s members are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Taiwan, Thailand, the U.S, and Vietnam
Trans Pacific Partnership
- The Trans-Pacific Partnership (TPP), or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), is a trade agreement between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States (until 23 January 2017) and Vietnam
- The TPP began as an expansion of the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4) signed by Brunei Darussalam, Chile, New Zealand, and Singapore in 2005
- The TPP contains measures to lower both non-tariff and tariff barriers to trade and establish an investor-state dispute settlement (ISDS) mechanism
- The agreement will enter into force after ratification by all signatories if this occurs within two years
- APEC members may accede to the TPP, as may any other jurisdiction to which existing TPP members agree. After an application for membership is received, a commission of parties to the treaty negotiates conditions for accession
The TPP agreement (which India is not a part of) was reached in October last year and the member countries have 2 years to ratify the pact.
- Commerce Minister Sitharaman has expressed concerns over the mega-regional free trade pact, also called as the Trans-Pacific Partnership (TPP).
- The TPP has set very high standards for the international trading regime.
- Hence, this pact is likely to indirectly impact India’s exports in several industrial sectors such as textiles, plastics, leather, clothing, cotton and yarn.
- Besides it is also expected to affect the country’s regime on investment, labour standards, IPR, possible evergreening of patents.
- The investor-State dispute settlement mechanism adopted by the TPP was also a concern from India’s point of view.
- 12 other Pacific Rim countries have signed Trans-Pacific Partnership (TPP) agreement which covers about 40 per cent of the world economy.
- The final agreement was signed in Atlanta, US which was under negotiation for five years and was delayed repeatedly by negotiations over drug patents.
- It should be noted that China being world’s second-largest economy has been not part of the agreement.
- TPP agreement will pave way creation of a new economic bloc with reduced trade barriers between the 12 nations involved.
These 12 countries are: Singapore, Malaysia, Vietnam, Brunei Darussalam, Japan, Canada, United States, Mexico, Peru, Chile, Australia and New Zealand.
What is the TPP?
Trans-Pacific Partnership (TPP) is a trade agreement between several Pacific Rim countries concerning a variety of matters of economic policy.
The aims of the TPP include the lowering of barriers to trade in goods and services, reducing tariffs to zero by 2015. In addition, the TPP hopes to promote investment and job creation in member states.
How does it come into reality?
TPP initially called the Trans-Pacific Strategic Economic Partnership Agreement, the pact began as a 2005 trade agreement between Brunei, Chile, New Zealand and Singapore in an effort to integrate their economies, drive growth and create unified regulations.
In 2008, during the Bush administration, the U.S. joined talks to expand the agreement, along with Australia, Peru and Vietnam. The U.S. trade representative under Obama, Ron Kirk, declared the American interest in forging a broad-based regional pact.
Then, in 2010, under the new name the Trans-Pacific Partnership, Malaysia entered the discussions, followed by Canada and Mexico in 2012.
By 2013, Japan began participating in the talks. South Korea and Taiwan have subsequently announced their interest but not formal participation.
Though all of the negotiating parties belong to the Asia-Pacific Economic Cooperation forum (APEC), the TPP is a separate initiative but with similar goals as APEC’s proposed Free Trade Area of the Asia Pacific.
Why the Trans-Pacific Partnership Matters?
The Pacific accord would phase out thousands of import tariffs as well as other barriers to international trade, like Japanese regulations that keep out some American-made autos and trucks.
It also would establish uniform rules on corporations’ intellectual property, and open the Internet even in communist Vietnam.
It eventually would end more than 18,000 tariffs that the participating countries have placed on American exports, including autos, machinery, information technology and consumer goods, chemicals and agricultural products as varied as avocados in California and wheat, pork and beef from the Plains states.
The trade ministers who negotiated it predicted the overall economic and political heft of the 12-nation group would turn the accord into a model for future trade agreements.
It would overhaul the system for settling disputes between nations and foreign companies, while barring tobacco companies from using that process to block countries’ antismoking initiatives.
It also would enforce higher standards for labor conditions and environmental protection, including wildlife-trafficking.
How will it benefits to USA ?
Expanding the orbit of U.S. free trade is a major foreign policy goal of the Obama administration, and as a part of its desired international “pivot” toward Asia, it hopes to increase its economic presence in the region.
Supporters of the partnership say by lowering barriers to trade and increasing avenues for economic globalization, the enlarged $2 trillion zone of diminished tariffs would stimulate employment in U.S. and provide an incentive to invest abroad.
Agreement hopes to show China that the U.S. will remain a committed economic partner for the nations of the Pacific Rim, without excessively provoking Beijing.
Who opposes the TPP?
Opposition to the proposed agreement and to the perceived influence of multinational corporations in the process has been led by public health advocates, labor groups and environmentalists and politicians.
Some U.S. legislators have voiced concerns that the TPP requirements would prevent access to medicine in developing countries, due to excessive patent protection. Doctors Without Borders argues against “dangerous provisions that would dismantle public health safeguards enshrined in international law.”
Many activists also focused criticisms on the intellectual property section of the proposed partnership, which, according to WikiLeaks, could have “wide-ranging effects on medicines, publishers, internet services, civil liberties and biological patents.”
As a trade agreement, the TPP would require House and Senate majorities and then the president’s signature. Domestic American opposition has concentrated their skepticism not just on how “free” the agreement would be but also on problems with the “fast track” congressional voting procedure.
Japanese producers in the anime and manga industry say the TPP could damage their business by allowing companies to halt imports of intellectual property, in order to protect local distributors of licensed merchandise.
Rice farmers, as well as beef, poultry and pork producers, have mounted firm resistance to the pact, which would dramatically decrease import tariffs.
Geopolitically, China is concerned that the partnership is designed to exclude its economic activities, while some American officials have expressed doubts whether the market-oriented pact would ever be compatible with Beijing’s command economy.
In Europe, analysts view the TPP as a trade regime that could set a precedent for the nascent Transatlantic Trade and Investment Partnership (TTIP).
Published with inputs from Arun