The Trans-Pacific Partnership (TPP) pact signed between the US, Japan, Canada, Australia and eight other countries could have a far reaching and, possibly, adverse impact on India’s economic potential and strategic goals, experts in India and the US said.
In particular, the TPP could hit the Indian auto components, pharmaceuticals and textiles and apparel sectors hard, said a senior India-based executive at a large consulting firm.
Then, the pact could also undermine India’s position as one of the most important strategic counterweights to China and result in a slight – the operative word here is ‘slight’ – reduction in the economic and strategic benefits in the form of government-directed investments into this country and easier access to defence technology, said a US-based strategic analyst.
There is, however, a tremendous opportunity waiting for India if it does join the TPP or some other regional trade agreement. The US, Australia, Canada and New Zealand, the "big” countries in the TPP are all favourably disposed to India and would welcome New Delhi's participation.
It could in fact be a $500 billion opportunity. But will India, which has shied away from regional trade pacts, seize the moment when the time is right? The government will have to negotiate a political minefield – in the face of almost certain opposition opprobrium – as politicians try to portray it as a sell-out to the US.
The NDA government will have to redouble efforts at hard selling India to avoid any permanent damage from the TPP to India’s global standing. A senior government official said the government had taken note of the trade agreement, the biggest regional trade pact ever signed, and dismissed any possibility of it having any adverse impact on India. A detailed assessment of its impact can be made only after the text of the agreement is officially released after about one month.
“The TPP is not expressly anti-India but the country may suffer some serious collateral damage from it,” the US expert said.
The pact, guided by US interests, is clearly aimed at countering China’s rise and its emergence as a new pole, a la the erstwhile Soviet Union, and a counter to US – and European – influence.
US President Barrack Obama did not even try to disguise the aim of the TPP. “When more than 95 per cent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy... We should write those rules, opening markets to American products while setting high standards for protecting workers and preserving our environment.
India has good economic ties and rising strategic convergence with most of the signatories to the TPP. Many of the TPP signatory states are also large importers of Indian pharmaceuticals, textiles and auto components. Cheaper alternatives from TPP member states, as a result of lower tariffs, could squeeze Indian exports out.
Further, with a large bloc of powerful nations lining up almost openly against China, India’s strategic line – which fights shy of officially identifying China as a strategic threat – might find lesser sympathy in otherwise friendly foreign capitals.
“India will have to proactively reach out to important TPP members such as the US, Japan, Australia and others to ensure that its voice is heard and its interests are accommodated,” the US expert said.
“India is slowly moving in a strategic direction that suggests a long convergence of interests with these countries. This is quite a break from the past. That is why the US and Japan are showering so much attention and promising large sums of money in the form of investments. The TPP will give the US more options in its new “rebalance” to the East policy and, to that extent, reduce India’s bargaining power,” he added.
And finally, both experts agreed, there is no guarantee that the US Congress, which must ratify the TPP, will allow the pact to go through given the murmurs of protest from influential sections of US industry as President Obama, who pushed vigorously for the deal, enters the lame duck phase of his presidency.
That, they said, could be India’s best hope.
Arnab Mitra is a senior journalist based in Delhi. He writes on business and politics.