Opinion » Lead

Updated: October 7, 2013 22:51 IST

Three deals that can change the world

V. S. Seshadri
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With new trade winds blowing across the globe, India must focus on getting the best out of the Regional Comprehensive Economic Partnership agreement to be concluded by 2015

There could be more vocal calls for changes in the governance of world trade if the three mega free trade and investment agreements under negotiations get to a successful closure. In July this year, the United States and the European Union began negotiating a Trans Atlantic Trade and Investment Partnership (TTIP) which they hope to conclude by 2015. The 28 EU members and the U.S. account for half of world GDP and 30 per cent of world trade in goods and services. TTIP is projected to add more than two million American and EU jobs.

The Trans Pacific Partnership (TPP) negotiations among 12 countries including the U.S., Australia, Canada, Mexico, Malaysia, Singapore, Vietnam and, most recently, Japan, have already been under way for over three years now with the 19th round completed in Brunei from August 23-30, 2013. The negotiations are due to conclude this year. These countries too contribute to around 38 per cent of world GDP and 25 per cent of global trade.

Formidable grouping

In March this year, the ASEAN Ten plus six dialogue partners (Australia, China, India, Japan, Korea and New Zealand) held their first round of negotiations for the Regional Comprehensive Economic Partnership agreement (RCEP) to be concluded by 2015. Covering 45 per cent of world population and a third of world GDP, this too is a formidable grouping.

The word ‘partnership’ rather than free trade in the title of these agreements signifies they will go beyond free trade disciplines. With many participant countries already bound by FTAs, or with average MFN tariffs already low as between EU and the U.S. who do not have an FTA, there is limited scope for further liberalisation in market access except in sensitive areas previously sheltered from competition like agriculture, textiles, footwear, automobiles, government procurement and services. Apart from bringing down such barriers, negotiations are to address many ‘behind the border’ regulations and standards.

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.

Many developed country participants however have made it plain that an objective in moving towards the TPP or TTIP is also to eventually explore if the ‘high standards’ of these agreements can be imported into the WTO corpus. U.S. Vice President Biden has said “our goal is for high standards of Trans Pacific Partnership to enter the bloodstream of the global system and improve the rules and norms.” The press statement of EU and U.S. leaders about the announcement of TTIP also talked about the negotiations contributing to the development of global rules.

The U.S. has in fact been promoting competitive trade liberalisation through other tracks once it became clear the Doha Round will not include issues like investment, competition policy and government procurement which were dropped from its agenda at the Cancun Ministerial in September 2003. Then U.S. Trade Representative Robert Zoellick famously wrote in Financial Times that the key division was between “can do countries and won't do countries” and went on to say “we will move towards free trade with can do countries.”

The reality was while Doha was a development agenda, domestic agriculture and industry interests in the U.S. (and in other developed countries) showed no appetite for making necessary concessions. Instead, the game moved towards ensuring that when emerging economies were showing signs of rapid growth, developed countries did not lose the lead. It was time to demand a more enduring value for technology and IPR. Enforcement of higher environment and labour standards was sought to be made a norm even on a trade platform. More assured access for trade and investment was demanded with firm commitments about reform.

Secret negotiations

In 2009, the U.S. took hold of an existing agreement that had only four small members (Brunei, Chile, New Zealand and Singapore) and assumed leadership in making it deeper in terms of liberalisation, broader in respect of issues covered (such as on supply chains, state owned enterprises and regulatory coherence) and wider in terms of membership under the banner of TPP whose negotiations are now proceeding most secretively. This served several objectives not least of which was to get a foothold in Asia where it was getting left out of free trade deals that had vastly grown in the 1990s and noughties.

When the TPP was being marketed as demonstration of increasing engagement between the U.S. and Asia, there were worries across the Atlantic. The U.S. was wary initially to soundings from EU for a similar partnership with several pending trade issues between them. But after a study process, President Obama and EU leaders announced the start of negotiations earlier this year. One round was held in July.

RCEP, the third mega deal that will span 16 countries, including three LDCs, may not be able to match the ambitions of TPP and TTIP even as the idea is to significantly improve over the FTAs that each of the six partner countries including India have with ASEAN as a whole. In any case, Environment and Labour Standards have not been mentioned in the Guiding objectives and principles. It can also be surmised that on issues like IPRs, it may not go beyond the WTO balance of commitments. There would also be special and differential treatment for developing countries that is absent in TPP.

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. We would also need to push for issues of our interest such as for commitments towards movement of professionals.

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.

As world trade governance witnesses new trends, we need to work out an appropriate negotiating stance for RCEP. We should have credible options that also enjoy adequate support.

(The writer is a former ambassador to Myanmar)

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