India’s World – Fallout of US leaving TPP

US President Donald Trump has formally withdrawn America from the Trans Pacific Partnership, a flagship trade deal with 11 countries in the Pacific rim. With the US opting out of the TPP, the only remaining countries in the trade deal are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico Peru, New Zealand, Singapore and Vietnam. TPP was the world’s largest trade deal agreement involving 12 nations accounting for about 40% of the world’s economy. The TPP was expected to eliminate more than 98% of tariffs in the region. Beyond market access, the TPP was to create a single set of trade and investment rules among its member countries making it easier and simpler for them to trade in the region. TPP was one of Mr. Barack Obama’s signature efforts. It was aimed at increasing America’s influence in Asia and check China’s military and economic ambitions.

Analysis:

There was a lot of criticism about the secrecy with which TPP was being negotiated. Nothing was made public. There were mounting concerns regarding job losses in US, exports being made to the country, US firms investing in other countries.

Some sections of the Democratic Party and organized workers and labour groups had opposed the fast track authority very fiercely when it was first granted and the administration of Barack Obama had to reach across the isle to the Republicans to get that fast track authority because within the Democratic Party there were so many opponents. Though the issue was opposed right from the beginning, it gathered momentum because of Presidential elections in the pipeline as majority opinion was heard.After the financial crisis that hit the US economy from which it has still to recover in a robust manner, people were filled with a sense of insecurity and rising inequality was also a reason for that.

Activism and outward looking policies, there is an inward looking attitude from Trump. America’s influence in the world will not be affected much as long as NATO is there. Strategically, TPP’s failure might reinforce doubts about American credibility in the region amid a rising China. TPP signatories Malaysia and Vietnam, have been signaling that the agreement is essentially dead without the US, whose inclusion was the reason why the agreement which initially began as a pact between just four countries, Brunei, Chile, New Zealand and Singapore had importance.

US can take advantage of the asymmetric power distribution much more through bilateral negotiations and in the past, their trade negotiations with both Japan and South Korea conducted by USTR (United States Trade Representatives) have been extremely fierce and eventually they did get compromises both in terms of market openings in these countries in the sectors which were not sufficiently open to the US and also in terms of getting more investments from these countries in the US rather than export so that job creation can be done in US.

Many countries are interested in taking China as a member of TPP. From India’s point of view any arrangement that has China and not US might end up unbalanced as it will have to be aware of Chinese hegemony. Therefore, US was required by nation like Indonesia and India as a balance. RCEP is supposed to slow down. China is very much in presence for many countries as it is the largest trading partner for most of them.

Conclusion:

For India, US opting out of TPP is good because it would have made India’s exports less competitive as it slashed tariffs and gave countries like Vietnam and Malaysia preferential access to markets in the United States and Japan. TPP was to introduce standards for trade liberalization and introduction of new rules which were far more stringent than those that India is comfortable with.

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