Harbinger of change in global trade

The >formal signing of the Trans-Pacific Partnership (TPP) by the 12 member-countries of the mega-regional free trade agreement is a milestone for international trade and, by extension, the global economy. With worldwide trade having slowed sharply since the 2008 financial crisis and now faced with headwinds from China’s slowdown, the deal, yet to be ratified, could provide a much-needed fillip to growth. As the World Bank noted in a study in January on the macro-economic implications of the TPP, the pact could, by 2030, help boost the overall GDP of member-countries by 1.1 per cent. And given that the grouping includes two of the world’s three largest economies — the U.S. and Japan — and overall accounts for more than one-third of the world’s economic output, the spillover benefits would be significant. Moreover, given the diversity of the member-countries — from the mineral-rich, trade-intensive Latin American economies of Peru and Chile, to the NAFTA triumvirate of Canada, the U.S. and Mexico, ASEAN members Malaysia, Singapore, Brunei and Vietnam, trans-Tasman neighbours Australia and New Zealand, and Japan — the TPP also demonstrates a willingness to look beyond domestic political considerations and hammer out a far-reaching agreement that could act as a template for future multilateral trade deals. Yet, the pact is far from a done deal as it still needs to win legislative backing in the member-states. That may be far more difficult than the seven-year-long negotiations, with both the Democratic presidential candidates and two leading Republican contenders in the U.S., Donald Trump and Ted Cruz, opposed to it. Mr. Trump and Democrat Bernie Sanders >are the most vocal critics , arguing that the TPP will cost American jobs.

For India, the agreement provides an opportunity to reflect on its approach to multilateral trade talks, while underscoring the need to build a strong multi-disciplinary cadre of specialist free-trade analysts and negotiators. Though the World Bank projects a limited ‘trade diversion’ impact on non-members, including aggregate GDP losses of about 0.1 per cent by 2030, India could suffer market share losses in certain categories of exports as a result of preference erosion. With the South Asian Free Trade Agreement (SAFTA) having made little to no difference to India’s terms of trade in the neighbourhood, and the country having ceded substantial ground at the latest Nairobi meeting of the World Trade Organisation, it is high time the government proactively girded for the challenges ahead. Like China, where an editorial in the state-run

Global Times exhorted the Asian giant’s leadership to focus on strengthening its own economy than worry about the TPP, India too needs to aim at setting its house in order. From ensuring the creation of a domestic common market through adoption of the long-delayed Goods and Services Tax, to building its own multilateral bloc of emerging and developing economies that can act as a bulwark against TPP-like groupings, India has its task cut out.