In hindsight, the US working within Trans-Pacific Partnership (TPP) perhaps would have made the global economy with like-minded partners stronger. Had the US continued with the TPP instead of disengaging, it would have provided a cohesive group, as it strives today to be at an arm’s length from China.
The TPP was envisaged as a counterweight to China’s rising influence. US President Donald Trump shunned the the pact, calling it a bad deal for his country.
However, abandoning it has not helped the US either. In 2017, the US decided to pull the plug on the TPP, and soon after got embroiled in a trade war with China in 2018.
The TPP, which was a free trade agreement with 12 nations having coastlines on the Pacific with 800 million people, making up 40 per cent of the world’s GDP, would have been a path-breaking plurilateral structure in today’s world. The agreement apparently had the potential to reduce up to 18,000 tariffs on various product lines, thereby boosting trade, economic growth, as well as political ties.
After the US exit, the TPP was formed with 11 economies and it is now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Trump had expressed concerns about China making a backdoor entry into the member economies of the TPP.
A global power like the US could have chosen to negotiate better and tried to impose stricter rules of origin clauses among others rather than exiting the pact. All the key players of the South China Sea dispute — Japan, Vietnam, Malaysia, Singapore and Brunei — had signed this deal.
Indian dilemma
While the US in recent times has expressed serious disdain for multilateral groupings, countries like India have vacillated over such global trade deals. On the one hand, India decided to not even participate in TPP discussions with China not being a party to it; and on the other, it chose to negotiate the RCEP where China was the fulcrum.
India, without having signed any bilateral trade agreements with China, suffers from a huge trade deficit with that country. The TPP in that context would have been a lesser evil for India when compared to the RCEP.
Perils of protectionism
In the current scheme of things, both the US and India have a huge role to play in global trade, if they handle the situation in a mature manner. It is important to remain open to global trade and not surrendering to protectionist tendencies.
Deglobalisation is not the way forward.
Though India’s ‘Aatmanirbhar Bharat’ and US’s ‘Make America Great Again’ aspire to be self-reliant — the fact remains that both economies must deal with producing goods and services at globally competitive rates and at a desired quality, while moving up the value-chain.
Despite the concerns that India and the US have on the TPP, they can still change their minds and think of joining and renegotiating with the newly formed the CPTPP.
The early harvest scheme (EHS) arrangement of which India has been fond of, can be replicated under the CPTPP as a trust building measure.
The Covid pandemic has sparked off a global depression, but revival will also hinges on all economies coming together.
Post-Covid, the importance of the CPTPP is likely rise among the existing members in its quest to further sideline China. Japan and the UK recently signed an FTA, which has the potential to graduate into the CPTPP later.
A well-planned negotiation with the CPTPP, by the US and India may probably breathe new life into plurilateralism while reviving economies in this new decade which is of crucial importance. One hopes that after the US elections, there is a change in mind in both nations.
The author is an economist with India EXIM Bank. Views expressed are personal