The Trans-Pacific Trade Partnership or TPP as it now known as is set to rewrite international trade rules like never before. The controversial trade pact which has been shrouded in secrecy is expected to give the U.S. a shot at world domination when it comes to global trade and undermine China’s growing importance. In the works since 2005 TTP became a reality in June 2015.


A snapshot of TPP


TPP is an ambitious trade deal that encompasses 12 countries – Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, United States, Japan, Singapore and Vietnam. The highly publicized and opposed pact is expected to foster stronger relationships between the select nations and reduce tariffs. The end goal is to do away with tariffs all together. TPP is poised to make 11,000 tariff lines duty-free. Staunch supporters of the TPP also project that the deal will boost investment between member nations, enhance economic growth and bring about a more aligned approach towards regulatory issues. The combined GDP of these nations is said to be around $20 trillion.


How will the TPP deal affect India?


India is now on the sidelines. Outside and looking in. While the impact of TPP is yet to be ascertained, there is no doubt that the fast growing economy will be dealt some heavy blows. Given the flows of global trade, ripples can be felt from any one of the 11 countries. Foreign direct investment is projected to post a steep decline as the US is working towards getting TPP member nations to commit to its IPR regime. India’s retrospective taxation is another major factor that will put off foreign investment. Experts also claim that trade diversion will be common.


India majorly exports services to the rest of the world. With trade barriers between the TPP nations expected to be non-existent, India’s service exports will record a sharp fall. Exports of goods will not be affected as much as the economies within TPP mandate low tariffs for imports from WTO member countries.


The Indian apparel industry along with those of China, Sri Lanka, Pakistan, Bangladesh and other non-TPP countries will be adversely hit. Industry experts claim that the apparel supply chain will undergo a complete transformation as Vietnam will enjoy unparalleled access to the biggest market for apparels and textile, i.e., the US. India could work around the TPP by setting up facilities in Vietnam like China already has.


While India’s Foreign Trade Policy (2015-2020) has acknowledged the implications of this behemoth deal, a strategy is yet to be formulated. A strategy is clearly the need of the hour as Indian exports as other than TPP there are several other mega regional trade agreements that are being negotiated. One such example is the European Union. India also needs to look at ramping up the quality of its export goods as these trade deals comprise WTO-plus standards.