The two mega agreements that have catapulted to the top of the list include the US-led 11 country Trans-Pacific Partnership (TPP) agreement and the Regional Co-operation Economic Partnership (RCEP), which includes the 10 countries from the Association of Southeast Asian Nations (Asean), plus six other nations including India, Brazil and China.
Interestingly, seven out of the 16 partners in RCEP are also negotiating in TPP and reports indicate that South Korea has expressed a desire to become a part of TPP. India has shown interest in joining that group. The third big preferential trade agreement will be between the US and European Union where negotiations are under way to create the Trans-Atlantic Trade and Investment Partnership (TTIP). Notable exceptions from these large free trade agreements are African countries that are building their own regional co-operation.
In a recent meeting of the Confederation of Indian Industry (CII), a short paper presented by Harshvardhan Singh, former Deputy Director General of the World Trade Organisation, states that TPP will be a reality within the next few years and it will have a deep influence on global trade. The paper is of the view that "the preparations for the kind of changes that will be required (post TPP) to equip the policy framework and business capability are extensive and time-consuming." In this background, Singh says, "it is advisable (for countries) to begin preparations as early as possible. Furthermore, since all non-members of TPP will be similarly affected, there is also a basis for them to link up and provide mutual support to each other, as also to press for the systems created by TPP to be inclusive."
A similar exercise is also being carried out by the Jaipur-based Consumer Unity & Trust Society (CUTS) International. In a short note prepared for industry interaction, CUTS states that given that India's trade dependency on countries and regions belonging to these three large external trade agreements - TTIP, TPP and RCEP - is very high, the "possibility of diversion of trade and economic activities from India to trading partners within these preferential trade agreements, as a result of deepening preferential arrangements between them, is going to have very serious implications for the Indian economy. The negative impact of such diversion would be of high intensity. This emerging scenario necessitates a through ex ante analysis of implications for the Indian economy as a result of these agreements and arrive at policy directions that would help India to mitigate and adapt to substantial changes that are underway in its external economic environment."
In short, both the papers are of the view that within the next couple of years, business in India is going to witness a major change in global trade environment that needs immediate attention. A few areas that are important, include the need for adopting higher standards, increasing their presence in regional value chains and better management of trade regulatory systems.
The Indian industry has not been very proactive in this approach. But slowly, with several large corporations in the country looking to expand their global footprint, keeping track of the developments in the large regional and multi-regional trade agreements will become very important.
Product standards are expected to be very high since the US is keen on TPP working towards creating high standards for products. In all probability, the US will push to harmonise its own existing standards for other countries, which are a part of TPP. While Indian standards have improved over the years - with some attention from standard-setting bodies such as the Food Safety and Standards Authority of India, the Bureau of Indian Standards besides other bodies like the National Accreditation Board For Certification Bodies, which have worked to improve Indian standards - there is still scope for improvement and the impact of these regional trade agreements can be substantial if the industry distances itself from these emerging mega trade agreements.
The writer is Principal Adviser at APJ-SLG Law Offices