Even as the members of the World Trade Organisation (WTO) get ready to put up an acceptable agenda for the next Ministerial meeting at Bali in December this year, many of them are in the process of creating some large and distinctive free trade agreements (FTAs) that can have a tremendous impact on global markets.
The US, for instance, has taken the initiative to forge a broad-based trade agreement, the Trans-Pacific Partnership (TPP) Agreement, involving 10 other Pacific-Rim countries. The US is of the clear view that the agreement will help improve the US economy through generation of new job opportunities while, at the same time, get the TPP countries to include issues such as labour rights, environmental protection, and transparency in the agreement.
It is just over three years since the TPP was formed and negotiations commenced, but the countries involved have concluded 17 rounds of negotiations, the most recent of which was held last week in Lima, Peru. The next round of negotiations to be held in July will include Japan, which has recently agreed to join the TPP. With the entry of Japan, the TPP countries will account for nearly 40 per cent of the global gross domestic product and about a third of world trade. Beijing has recently expressed its interest in joining the group after a thorough study of the impact. These negotiations are expected to end by next year.
While the European Union is not part of the TPP, Washington and Brussels have decided to launch negotiations for Transatlantic Trade and Investment Partnership (TTIP) Agreement. The TTIP would also be unique in its own way, since it will look at an ambitious agreement that will lead to harmonisation of standards across the two partners.
India is part of another mega-agreement that is being conceived. This is the Association of Southeast Asian Nations (Asean)-led Regional Comprehensive Economic Partnership (RCEP) consisting of 16 members. The RCEP will bring together six East Asian partners of 10-member Asean community — India, Australia, New Zealand, besides China, South Korea and Japan.
The important aspect of these three mega FTAs is that they are not meant to be run-of-the-mill agreements. They are expected to be ambitious and will cover more than just reduction in tariffs. They will address a range of other areas, which are at present not completely under the ambit of the trade agreements.
The TPP, for instance, is clearly billed to be WTO-plus. For instance, Japan, which will join midway, may have to reduce tariffs on its highly protected product — rice. Besides, the TPP will also include social issues that the US has been pushing in trade agreements, such as labour laws, which countries have been opposing at the WTO.
What does this mean for Indian industry? Surely, it means that it now needs to play a much larger role in understanding the emerging dynamic situation in world markets owing to the highly ambitious and comprehensive agreements. Indian Industry will have to work towards building competitiveness in specific sectors of interest. As a senior negotiator said at a recent conference, there is a need to understand sectors that India wants to build in global markets and move out of sectors where it is not competitive.
The RCEP will be a big challenge. Nearly all the countries in these negotiations already have an FTA with India. Therefore, they will seek far greater opening from India in a comprehensive fashion. Industry will have to build adequate database on its current level of competitiveness in various sectors to help negotiators conclude a worthwhile deal.
It is pertinent to note that India has already negotiated several FTAs and is in the process of negotiating many more. However, industry has not yet absorbed the full impact of these agreements. In fact, in case of several FTAs, industry is not even taking the benefit of lower duties to capture new markets.
There is need to put together a strong stakeholder group in the country to conduct a real analysis of the benefits and challenges of the existing FTAs while, at the same time, responding to the opportunities that can emerge in the forthcoming agreements.
The writer is Principal Adviser at APJ-SLG Law Offices
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
