TPP is the biggest Pacific nations free trade agreement block, including USA, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It is said that TPP is an attempt by USA to establish its non-defence hegemony and rebalance the Asia policy. In other words, TPP renders more of political significance than economic gains. TPP is the USA’s multi-faced economic interests in trade and investment in Asia –Pacific regime. TPP has three important issues. They are market access of goods and services, labour standards and standardization of environmental commitment. In other words, TPP proposed to link trade, economic and investment with labour standards, environmental protection and intellectual property rights.
India is not a member of TPP. Neither India showed interest to be a member of TPP, even though prominent members of ASEAN - Singapore, Malaysia and Vietnam - are, who owe big role in accelerating India’s new venture on Act Asia policy. In several think-tanks and media, concerns were expressed over the negative impact on India. Analysts spook threats on diversion of trade and investment owing to duty exemptions in the intra-region TPP trade. USA is depicted as the prominent threat to India for trade and investment diversion.
The main threat to India, which was snowballed by trade diversion with the birth of TPP, is the textiles exports to USA. Textile is the major item in India’s export basket. It accounts for 10-11 percent of India’s total export, about 40 per cent of which is sent to USA. Therefore, theoretically duty preferences in USA market to the TPP members will impart negative impact on India’s export of textiles to USA. Vietnam will be the main beneficiary of textile exports to USA. The rise in Vietnam export of textiles is likely to dampen India’s export of textiles to USA. For instance, Vietnam is the second biggest exporter of readymade garments to USA (after China). It accounts for 12 percent of USA imports of garment. India’s share is 4 per cent only. A duty preference to Vietnamese exporters may cut a big pie of India’s export of textiles to USA.
However, an insight of the trade diversion of textile exports from India to Vietnam for USA market may dilute the fear. The major obstacle of the duty preferences for textile exports in the intra-TPP region is the yarn forward rule. It is mandatory for the exporters to procure yarn, fabric and other inputs from any or combination of TPP partner countries to avail duty preferences. At present, Vietnam procures yarn and fabrics mainly from China. Given the present structure of procurement of yarn and fabrics, it will not be an easy task for the Vietnamese exporters to change the chains of procurement either domestically or any other TPP member countries. None of the TPP members are globally known for manufacturers of yarn and fabrics, which will supported Vietnam manufacturers of textiles to enjoy the duty preferences in USA market.
Alarms were raised in some quarters of think tanks that TPP may bring a blow to India’s export , which is already dwindling . It is an unrealistic forecast. There are two factors which will insulate India from having a dent to its exports. They are the export basket of India and the bilateral and multilateral agreements (free trade agreement) with some of TPP members.
USA is the one of the major export destinations of India’s products. It accounts for 14 percent of India’s total export. Nearly 45 percent of India’s export to USA consists of such products, which will offset the competitiveness stemmed from duty preferences in USA market. These Indian products are exported to USA on the basis of its intrinsic value of natural resources and artisans skills in India. These are textiles - mainly made of cotton, gems and jewelry and petroleum products.
Similar pattern of insulations will act as safeguards to India’s exports to Singapore, Vietnam, Malaysia and Japan – the four major export destinations of India in TPP. Together these four TPP members account for nine percent of India’s total exports. There are two products which account for a lump shares in India’s export basket to these four countries. They are petroleum products and meat exports. In total exports to Singapore, petroleum alone accounts for 55 percent. In case of Malaysia, petroleum and meat exports account for 30 percent. In case of Vietnam, meat exports alone account for 35 percent and in case of Japan, petroleum accounts for 34 percent.
Threat of investment diversion is overemphasized. A recent survey of Ernst and Young forecasted India as the most attractive investment destination over the period of three years. The survey downgraded China and pitched India to excel China’s potential to attract foreign investment. Owing to investors’ exuberance over India’s potential, which was triggered by Make in India (according to survey), TPP is unlikely to override investment potential of India, even though the major foreign investors in India are the TPP member, such as USA, Singapore and Japan. (IPA Service)
IS THE TPP REALLY A THREAT FOR INDIAN ECONOMY?
WE MUST NOT SPOOK INVESTORS ON BASELESS FEARS
Subrata Majumder - 2015-10-21 11:34
Professor Jagdish Bhagwati described TPP (Trans-Pacific Partnership) as “a political response to China’s new aggressiveness, built therefore in a spirit of confrontation and containment, not of cooperation”. What does it mean? It may unleash two theories of an economic block: One, a creation of an economic contingent by USA to nail the Chinese expansionism in Asia pacific region; and two, building up of a political alliance through economic partnership to thwart the Chinese aggressiveness. The comment of Professor Bhagwati seemed to have thrown an air of pessimism on the success of USA, as it was built up with the aim of confrontation and not of cooperation. With the absence of China in TPP, USA wants to write the global trade rules.