Divergent opinions were expressed over the impact of TPP on India. One team of think tank aired the apprehension for negative impact on India for not joining the club. They feared that TPP will negate India’s prime exports of textiles and pharmaceutical products to USA , the main market for India. The other team believes that India is well insulated by the stringent conditions, mandated for the TPP members to avail the benefit of preferential duties. Further, India will be out of the clutch of USA’s bully for stringent patent regulations and high labour , which do not favour India’s trade and manufacturing activities, sync with Make in India vision

TPP is a biggest Pacific nations’ free trade block, comprising of USA, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It is an attempt by USA to establish its political hegemony and rebalance its pivot Asia policy. Through TPP, USA has multi-faced economic interests in trade and investment in Asia-Pacific. TPP has three important issues. They are market access of goods and services, labour standards and standardization of environmental commitment. TPP proposed to link trade, economic and investment with labour standards, environmental protection and intellectual property rights.

India is not the member of TPP. Neither India showed interest to become member of TPP. Paradoxically, the countries, who owe big role in accelerating India’s new venture of Act Asia policy, are prominent members of TPP. They are Singapore, Malaysia and Vietnam. Given the active membership of these three countries in TPP, who are complimentary to India and USA being the main market for them also, concerns are looming large over the negative impact on India’s exports to USA. Analysts spook threats of trade and investment diversion, spearheaded by the loses of trade competiveness due to preferential tariffs in the intra-region trade in TPP. USA accounts for 14 percent of India’s world export.

Textile is the biggest threat of trade diversion for India. It is the single major item of India’s world export. It accounts for 10-11 percent of India’s world export. USA accounts for 40 percent of India’s total export of textiles. With the duty preferences provided to TPP members in USA market, threats are shrouded for a negative impact on India’s export of textiles to USA. Vietnam will be the most beneficiary and will unleash tough competition to India’s export of textiles in USA. Vietnam is the second biggest exporter of readymade garments to USA (after China). It accounts for 12 percent of US imports of garment. The surge in Vietnam competitiveness due to duty preference will decimate India’s export of textiles to USA, the trade analysts point out.

But, there is a lag in this threat. In TPP, the duty preference for textile trade is governed by yarn forward rule. This rule will act barrier to Vietnam and savior to India. Under the rule, it is mandatory for the TPP members exporting textiles to its members, to procure yarn, fabric and other inputs from any or combination of TPP partner countries. At present, Vietnam procures yarn and fabrics mainly from China. Given the existing structure of logistic and low cost procurement of yarn and fabrics from China, it will not be an easy task for the Vietnamese exporters to divert its procurement from China to domestic market or to any other TPP member countries. Further, none of the TPP members are globally known for manufacturers of yarn and fabrics.

Besides, India’s basket of exports and bilateral and multilateral agreements ( free trade agreement) with some of TPP members , will insulate it from the dust of TPP. Nearly 45 percent of India’s export to USA consists of those products whose competitiveness are unlikely to be castigated by duty preference in TPP. India exports those products, which warrant special preferences by the USA consumers, because of their high value additions by the natural resources and Indian artisans’ skills. These products are gems and jewelry, textiles and petroleum products. Together, these three product groups accounted for 43 percent in exports to USA in 2014-15.

India has FTAs with Singapore, Japan and ASEAN, comprising of Malaysia and Vietnam. India is already gaining market accessibility in these countries with the duty preferences under FTAs

Threat of investment diversion is overemphasized. A recent survey by Ernst and Young forecasted India as the most attractive investment destination over the period of next three years. The survey downgraded China and pitched India to excel China during these periods.

Owing to investors’ upbeat on India’s potential for investment, which was triggered by Make in India (according to survey), TPP is unlikely to outnumber India, even though the major foreign investors in India are the TPP members, such as USA, Singapore and Japan

In fact, it is a blessing in disguise for India by not joining TPP. India will have an upper hand in challenging US insistence on patent rights and drafting its own policy of Intellectual propriety rights, giving priority over the national interest. There was a pressure to do way with the Section 3(d) of Indian Patent Law. USA and Western countries claimed that it is an embargo on business-friendly patent regime. Section 3(d) empowers India to reject the patent rights of a new product, which does not embrace much changes in the substances by discovery. If it is removed, the poor people will be deprived of their essential drugs at affordable prices. Rejecting patent rights of Swiss firm for “Glivec” – a cancer drug – was a case in point. Had India joined TPP, it would have been a tough task to stonewall the US pressure.

Summing up, by not joining TPP, India need not succumb to the pressure for linking its trade and investment with stringent patent rights and high labour standards. Staying out of TPP club, it is a leg up for India. It gives flexibility to provide essential drugs at affordable prices to its poor people and accelerate Make in India, without succumbing to high labour standards. (IPA Service)