India Anxious to Expedite Free Trade Talks

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By Nayanima Basu

Oct. 20 — With the Trans-Pacific Partnership negotiations winding down before domestic ratification votes begin, the Indian government is pushing to conclude the China-led Regional Comprehensive Economic Partnership (RCEP), fearing substantial trade diversion even as it is aggressively working to finish trade negotiations with the European Union (EU).

India's Ministry of Commerce and Industry seem to have stepped up its efforts and is now actively seeking to come back to the negotiating table, a senior official involved in the negotiations told Bloomberg BNA on the condition of anonymity.

The Narendra Modi-led government, since coming to power in May 2014, has been reluctant to further the pending trade pacts that were initiated by the previous Congress-led government.

Although the actual TPP text has not been released publicly, the Indian government has developed an action plan to counter any challenges arising out of the pact, the official said.

The Indian government is “worried’ that apart from the Comprehensive Economic Partnership Agreement (CEPA), which India has with the 10-member Association of Southeast Asian Nations (ASEAN), it is not party to any other plurilateral trade deal, the official added.

Trade Diversion

According to a study by the Peterson Institute for International Economics, India would lose exports of $50 billion annually by way of trade diversion due to the TPP. However, it also said if India joined the TPP at a later stage, shipments from India could surge by $500 billion per year.

The administration is now planning to push the talks leading up to RCEP with all its members within the set deadline of December 2015, although some countries have sought to extend the deadline to the end of 2016.

According to an internal study done by the Ministry of Commerce and Industry, India might lose $2 billion to $3 billion of its total trade in the next decade because of TPP.

Another official at the Ministry of External Affairs in India is now also “lobbying hard” to obtain the coveted membership in the Asia Pacific Economic Cooperation (APEC). The official said APEC membership would enable Indians counter such plurilateral pacts as the TPP.

RCEP is being negotiated between the 10 ASEAN economies and its six free trade agreement partners: China, Japan, South Korea, Australia, New Zealand and India.

Australia, Japan, New Zealand, Brunei, Malaysia, Singapore and Vietnam are all trade partners in TPP.

U.S. Trade Representative Michael Froman had stated, while concluding the TPP, that the final contours of the pact will be known only by 2016.

Domestic Reforms

Experts have maintained that although India will face the challenge of trade diversion in the next decade, it would not be adversely impacted by the trade agreement.

However, the government is looking to put the domestic reforms on track with regards to boosting manufacturing, promotion of services with skill development and rolling out an effective intellectual property (IP) protection regime.

“Indian interests are not affected by its exclusion from the TPP. TPP is not a standalone entity but is happening in a wider global architecture. Unless domestic issues are tackled—production and services—we will not be able to address the challenge of TPP,” said Rajeev Kher, former commerce secretary with the ministry of commerce and industry.

He said the issue is not whether India should join TPP, albeit at a later stage, but it should keep an eye on TPP areas such as labor standards, environmental protection, government procurement and intellectual property rights, among others.

Indian exports to TPP countries reached $84 billion and imports $76 billion in 2013, according to official estimates.

Some analysts argue that India should give due credence to the RCEP and various other bilateral trade negotiations, the most important being the free trade agreement with the EU.

“TPP per se will not have much impact on the country. The tariff impact is also minimal. But domestic issues need to be looked at like e-commerce and the digital economy. There is a need to address the agrarian crisis and reform the input markets like land, labour and logistics,” said Bipul Chatterjee, deputy executive general, CUTS International, a trade advocacy group.

To contact the reporter on this story: Nayanima Basu in New Delhi at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com