TPP Vs RCEP Vs TTIP – Implication on India

TPP Vs RCEP Vs TTIP – Implication on India


PROLOGUE


(1) Meaning
(2) TPP Vs RCEP = Comparison + Characteristics + Concerns
(3) TTIP & India’s Stand
(4) Challenging Task In RCEP
(5) Political Competition & Practical Economics
(6) Maritime Dispute Factor= China Arm twisting & ASEAN Answer = INDIA
(7) Previous Homework @ WTO Meetings
(8) Impact on Doha Outcome
(9) Diplomatic Backgrounder so far
(10) Geopolitics of RCEP & TPP & Implications for India  (V imp)
• To choose from => Economic Vs Strategic Benefits
(11) Conclusion
(12) Important Excerpts in Pointers


NOTE
UPSC MAINS Connection
(a) IR Topics = Global + Regional + Bilateral Groupings involving India/India’s Interest
(b) NUMBERINGS OF HEADINGS ARE AMBIGUOUS = TYPO ERROR = SORRY FOR THAT

(1) MEANING

• The word ‘partnership’ rather than free trade in the title of these agreements signifies they will go beyond free trade disciplines.
• In the world of strategic affairs, competition is almost always a bad thing. Be it jostling over territory, contesting freedom of navigation or an outright arms race, strategic competition tends to be both costly and risky. In other domains, however, competition can be a very good thing.
• For example, in a market economy such as ours, competition leads to innovation and efficiency. What’s to be avoided between China and the United States is to be encouraged between Apple and Samsung.




(2)   RCEP Vs TPP- Comparison + Characteristics + Concerns

(A) Comparisons

(i) RCEP

• Led by ASEAN
• To gather together all non-ASEAN FTA’s
• Born out of ASEAN + 1 FTA’s (India + China+ Japan+ S. Korea +Newzealand + Australia)
• Negotiations expected to start in 2013 and to be concluded by 2015.
• Based on open accession clause, where membership can be expanded later as new countries sign FTA with ASEAN.

(ii) TPP

• TPP is led by the US
• Under ambit of US foreign policy objective of pivot toward Asia
• Born out of P4 agreement between New Zealand, Brunei, Singapore and Chile in 2005
• APEC + Non- APEC countries, both can participate however former encouraged.
• Negotiations started in 2011 and are likely to be concluded by October 2013

IMP NOTE
- Both may be competing for almost the same set of countries becoming its members and they also have similar agenda.
- Some of the ASEAN members are also members of the TPP besides having a network of FTAs at the bilateral level with many other countries.
- TPP is a platform which excludes many other countries especially the largest regional economy of China.
- Though in principle there is no bar against China to join the TPP, yet its many clauses on trade, labour, environment and capital account would prevent China from becoming its member.

(B) Characteristics

(i)RCEP
 Aim = Integrated Regional Eco Development i.e. deeper than existing FTA’s + support equitable eco development
 Areas = Narrower = Trade Liberalisation in Investment + Services + Goods + Tech Coop. + IPR + Dispute Settlement + (WTO+ issues)

(ii)TPP
 Aim = Establishing Regional FTA which can tackle 21st century challenges
 Areas = Wider = Trade Liberalisation in RCEP Areas + Env Protection + Labor etc. (NOTE = Most contentious from ASEAN + India + Chinese Perspectives )


(C) Concerns

                                (i)  RCEP
• May slow progress since having ASEAN way i.e. differential treatment depending upon level of member’s development
• Conflict Developing = Due to US-China Rivalry
• ASEAN + 1 FTA’s Have different features and are at different stage of implementation
(ii)TPP
 May divide ASEAN (since all are not participating in TPP) and hence undermines ASEAN Centrality
 Do not Involve India + China
 Cross-cutting/New trade challenges + addresses 21st century challenges


(1) TTIP & India’s View
• At the First Round of TTIP negotiations, EU has argued for specific rules on raw materials and energy which could address issues like market access and non-discrimination, government intervention in price setting of energy goods and security of supply.
• Even as India is not a member of TTIP, such proposals need careful examination. The question also arises why similar disciplines should not be developed for access to technology.
(2) Challenging Task
• ASEAN already has free trade agreements (FTA) of varying types with the six regional economies and the objective of RCEP is to combine those into one single comprehensive FTA that would harmonise the existing arrangements.
• On the other hand, the Trans-Pacific Partnership (TPP)=proposed regional free tradeagreement (FTA) that includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, NewZealand, Peru, Singapore, the United States, and Vietnam.

(3) Political Competition Vs Practical Economics

• Further, it is not the political competition between US and China that would influence a country to join one group or the other but it would be practical economics that might move a country to join one or the other grouping or may be both as some countries have already decided to do so.
• However, with Singapore, Vietnam, Brunei, Malaysia, Japan, Australia and New Zealandalready in the TPP negotiations, a certain level of political orientation in their decision to joinTPP may be perceived.
(4) China’s Arm twisting of ASEAN = India as a Solution

• Maritime disputes in South China and East China Sea may have had impact on some of the members of ASEAN’s entry into TPP + more inclination towards participation by India into the RCEP for counterbalancing China.
• Ex- Myanmar’s Proposal for Oil Gas Field to ONVL & China’s Opposition

.
(5) TPP Vs RCEP Interplay& Mutual Effects

• Ongoing debate on whether ASEAN members joining TPP would weaken the RCEP.
• However, it is also possible that pressure from TPP may have a positive impact on ASEAN and its partners to find a modus vivendi in intra-ASEAN plus 6 trade and economic differences and usher in the ASEAN Economic Community by end of 2015.


(6) PREVIOUS HOMEWORK @ WTO MEETINGS
(Copy Pasting from The HINDU)
• Contrast the above with the Doha Round of trade negotiations languishing for 12 years now with no sign of closure. Limited harvests being attempted on trade facilitation, agriculture (specially public stock holding for food security, an issue of importance to us) and developing country and LDC related issues for the Bali Ministerial of WTO in December 2013 appear to have only even chances of success.
• Even the elimination of agriculture export subsidies by 2013, agreed to in the 2005 Hong Kong WTO ministerial, is not likely to be implemented.
• Despite periodic assertions by G-20 summit meetings about the importance of successfully completing Doha, there is inadequate injection of political will and energy.
• Will the new Director General of WTO, Roberto Azevedo, be able to rekindle interest and momentum and help WTO retain primacy? In his inaugural speech earlier this month, he called for success at Bali as vital and for delivering on Doha to be part of any future agenda
(7) Impact on Doha outcome
• How will these mega deals, if they are successfully completed, influence the Doha outcome? Is India likely to be affected and, if so, what should be its strategy?
• There would be issues of concern in TPP and TTIP insofar as India is concerned such as going beyond TRIPs commitments, or binding commitments on labour and environment standards and those which may severely limit policy options at our stage of development.
• Trade majors can well present dressed up disciplines in specific areas in these mega partnerships for being parachuted into WTO.
• This is one reason we may need to carefully focus on RCEP which had its second round of negotiations from September 23-27, 2013 in Brisbane.
• The next round is to be held in Malaysia in January 2014.
• With the help of ASEAN, who are to play a lead part in the negotiations, we will need to ensure that the commitments drawn stay away from unreasonable constraining of policy options even as deeper liberalisation is attempted.
• There should also be sufficient flexibility for dealing with sensitive products and services. With concerns shown by Indian industry about concessions granted in FTAs already concluded by us, it will be challenging for our negotiators to deal with requests that come with a deeper liberalisation tag.
• The inclusion of China in RCEP with which India has no FTA at present but with which we already have a large trade deficit also needs factoring in.
• But if the negotiations succeed in a balanced outcome, the RCEP approach can be projected as more worthy of emulation.

(8) Diplomatic Backgrounder So Far

INDO-US
• US has been saying that India is an important part or an essential lynchpinof its Asia Pacific strategy. Joe Bidden, the US Vice President, during his visit to Mumbai in hisremarks invited India, though somewhat indirectly, to join America’s TPP effort.

INDO-JAPAN
• Prime MinisterManmohan Singh, after his visit to Japan in May this year, had remarked that India is studyingimplications of joining TPP and was generally non-committal on benefits or otherwise of thesame.

INDO-ASEAN
• Though India has concluded FTA with ASEAN in goods and services. FTA in services is yet to be operationalized.





(9) INDIA’S STAND

Economic Vs Strategic Benefits

Very little debate in India about the merits of RCEP versus TPP

• Evidently, India, like some of the ASEAN members, has options to join both.
• TPP would includethe largest economy besides many other fast growing economies.
• TPP= potential tobecome the largest FTA with the realisation of the proposed Trans-Atlantic Trade andInvestment Partnership (TTIP) that would include US and European Union.
• Since TPP is a livingagreement, India may decide to join the TPP later after looking at how it develops.
• India remains uncomfortable with some of the rules of TPP relating to environmental and labour laws and IPR issues which at the current level of development may have a negative impact on India’s trade
• RCEP does offer India a good opportunity to intensify its engagement not only with the ASEAN but also with its other partners in the rubric of ASEAN+6 which would further complement its Look East Policy
• India’s Concern=>China’s Inclusion in RCEP = Presently, Large Trade Deficit = So may further widens= Worrisome for India
• Even while moving towards RCEP, there were geo-politics involved when China was only keen to include ASEAN, Japan and South Korea (ASEAN+3) leaving out India, Australia and New Zealand.
• Japan, on the other hand prevailed upon China to forge the multilateral grouping based on ASEAN+6.
• We would also need to push for issues of our interest such as for commitments towards movement of professionals.
• India would be more inclined to go in for the economic benefits that can be reaped from joining RCEP rather than any intangible strategic benefits from TPP + TTIP.


(10) CONCLUSION
• As world trade governance witnesses new trends, we need to work out an appropriatenegotiating stance for RCEP.
• We should have credible options that also enjoy adequate support.
                  (11) SUMMARY= Important Excerpts + Pointers of whole Issue

• Game change: 3 mega-negotiations
– Trans-Pacific Partnership (TPP, 12 countries)
– Regional Comprehensive Economic Partnership (RCEP 16)
– Trans-Atlantic Trade and Investment Partnership (TTIP, 28)
• Huge potential: the tracks are positive-sum games with multi-trillion-dollar gains
• Positive dynamics: the tracks stimulate competitive liberalization and perhaps consolidation

Status
• TPP
– 16th rounds completed
– Japan to join (90 days?)
– Negotiators aim for 2013 finish
• RCEP
– Announced in November at ASEAN summit
– First round scheduled for May 2013
– Uncertainty about directions
• TTIP
– Announced in February
– Negotiations to begin in 2013
– Agree on many important issues, disagree on agriculture
Seeking a 21st century agreement
• New issues electronic commerce, state owned enterprises, connectivity, transparency
• Improve rules that limit business behind the border
• Balanced liberalization to address comparative advantage of emerging and advanced markets—agriculture; manufactured goods, services, investment, IPR
• Consolidate the “noodle bowl”
A contest of templates
• Asian templates address comparative advantage of emerging markets—manufactured goods
• Trans-Pacific/Atlantic templates address goods and comparative advantage of advanced economies—services, investment, intellectual property
• Both needed for 21st century trade
Many problems to solve!
• Services
• Investment: investor-state dispute resolution
• Intellectual property
• Government procurement
• Competitive neutrality of SOEs
• Labor
• Environment
• Agriculture (various products)
• Rules of origin (esp. textiles for Viet Nam)
An optimistic scenario
2010-2015: Competition
– Negotiations compete over templates 2015-2020: Implementation
– Other economies join, agreements implemented 2020-2025: Consolidation
– China/US/EU still lack FTA
– Create Free Trade Area of Asia Pacific?
– Launch new negotiations in WTO?
Getting through the politics
Questions
• US-China tensions: are the tracks a zero-sum political game—are they “containing China”?
• Race: will the tracks compete and divide the region in two?
• Regional politics: do the tracks contribute to “strategic mistrust”?
Jagdish Bhagwati describing the TPP as ‘a political response to China’s new aggressiveness, built therefore in a spirit of confrontation and containment, not of cooperation’.

PROFIT & LOSS TO Different MEMBERS
China = Most Profitable from FTAAP (TPP + RCEP)
b. •  Short run: US and China will compete
c. •  Other countries can join both TPP and RCEP
d. •  Long run: US and China will have strong incentive
e. to consolidate agreements (FTAAP)
f. •  “Third track” of US-China discussions are needed & now to build confidence for long-term cooperation
• US Benefits
(8) TPP is perceived to offer several economic, diplomatic, and strategic benefits to the US.
(9) Economically, it provide access to growing markets of Asia, stimulate US exports growth, protect IPR & even greater penetration into Asian markets
(10) Diplomatically, it will demonstrate US commitment and engagement in the region
(11) Strategically, the interest of the countries in the region for maintaining free flow of trade through SLOCs would increase and they would work together to reduce potential risks/threats to such trade.
 India = RCEP = Most Profitable
 Vietnam= Good Profit= Could be biggest winner
 Japan + ASEAN + Korea = profitable from TPP (12) + TPP (16) + RCEP respectively
Why such large gains?
•  More exports of manufactures (34%)
•  More imports of consumer and production goods (27%)
•  More inward FDI (2%)
•  Stronger links to international production chains
•  Big productivity gains
•  Momentum for reforms
The TPP will:
•  set standards for future trade
•  strengthen regional production networks
•  converge with RCEP (hopefully!)
Rahul Singh
References
(1) ASPI
http://www.aspistrategist.org.au/trade-partnership-competition-tpp-vs-rcep/
(2) Asia Pacific Trade Org.
www.asiapacifictrade.org
http://www.amchamvietnam.com/wp-content/uploads/2013/05/130328-2.2.e.-Petri-TPP-Vietnam-24mar13-v2-web.pdf
(3) The Hindu
o http://www.thehindu.com/opinion/lead/three-deals-that-can-change-the-world/article5207438.ece