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India needs to prepare towards a higher regulatory regime as mega-regional groups like the Trans-Pacific Partnership (TTP) and Trans-Atlantic Trade and Investment Partnership (TTIP) look to set a new rules paradigm, said Commerce Secretary, Mr. Rajeev Kher.
Speaking at the Partnership Summit organised by the Confederation of Indian Industry (CII) in cooperation with the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry and the Government of Rajasthan in Jaipur from January 15-17, 2015, Mr. Kher noted that most developing countries are not in a position to affiliate to these rules.
The mega-regional groups are profiled as a potential new pillar of trade governance, complementary to the multilateral trade system. However, there is a huge trade and economic reforms agenda in India that can be guided by the rules being negotiated in the TPP. Mr. Kher stated that India’s participation in the negotiations of Regional Comprehensive Economic Partnership (RCEP) comes out from the recognition that Asia as a manufacturing hub in the world would be crucial for India’s aspirations of achieving greater linkages in the manufacturing and services value chains.
Trade ministers from Australia and Malaysia – two countries that are part of both the TPP and RCEP negotiations, also noted the lower level of ambition of the RCEP as compared to TPP. While both the TPP and RCEP are responses to perceived problems facing the Asia-Pacific trade system, they are also competing proposals, differentiated by their goals, membership and level of ambition. Regional governments’ choices between the mega-regional deals reflect competing visions for the Asia-Pacific trading system.
Andrew Robb, Minister of Trade and Investment, Australia said that when TPP and RCEP regions come together the benefits of seamless regulations can be shared across the whole region. Mr. Mohamed, Minister of International Trade and Industry, Malaysia said that the TPP will lead to greater value chain integration while expressing concerns that the country had over some issues like state-owned enterprises, investor-state dispute settlement and loss of sovereignty on some non-trade areas.
Global value chains (GVCs) have revolutionised not just international commerce but also trade policy making. GVC participation leads to job creation in developing countries, provided it occurs with increased and high-skill based value addition. So, to gain a part of GVCs, we need an education system based on skill development.
Making this point, Harsha Vardhana Singh, former DDG of the WTO, said that mega-regionals are an indication of the change that is taking place in the world and the upgradation taking place much faster than expected. Due to the trade-investment-services-GVCs-technology nexus, higher standards will be incorporated into the mega-regional framework, including the ever-changing private standards. Giving an instance of the IT sector, he said that as soon as privacy and data transfer standards are upgraded India’s competitiveness in the sector could be eroded, unless adequate reforms in the services sector are not put in place.
Later, Ms. Gao Yan, Vice Minister of Commerce, China, said that while China is getting used to the ‘new normal’ of lower growth and higher reforms, standards are being constantly upgraded to reflect innovation driven growth. China attaches great importance to the TPP and TTIP negotiations and are open towards joining both mega-regionals, she said. Both China and India are part of the RCEP, one of the most important regional agreements in Asia, and China looks to work constructively with India towards conclusion of the agreement, she said. China has attached great importance to boosting the development of its services industry and services trade. These two areas converge when it comes to the liberalization of the services trade through China’s FTA strategy.
Earlier, Mr. Sunil Kant Munjal, Chairman, Hero Corporate Services Ltd., said that India needs to keep a realistic eye on the WTO-plus regimes that have emerged due to the impasse in the WTO Doha Round and the changing reality of how trade and investments are conducted across the world. He said that through the RCEP, India has the opportunity to proactively engage in the mega-regional rule-making exercise, while preparations need to begin for the kind of changes that will be required to equip the policy framework and business capability to work in a ‘high standard’ world trading system.
The EU and the US make up 40% of global economic output and their bilateral economic relationship is already the world’s largest. They began negotiations on the TTIP in 2013, and negotiations between the US and eleven other nations across the Pacific are at an advanced stage under the TPP with a growing membership each year. The European Union and the United States have their eyes on more than just removing tariffs. Tariffs between them are already low (on average only 4%) so the main hurdles to trade lie 'behind the border' in regulations, non-tariff barriers and red tape.
It is interesting to note that none of the large emerging economies, including India, Brazil and China are part of the US-centric mega-regionals. Instead, India and China are part of the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) that was launched among the ASEAN members and its FTA partners towards the end of 2012.