TPP impacts on export companies in India

What is Trans Pacific Partnership (TPP) & How does it impact export companies in India

February 05, 2016
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For all the export companies in India. These TPP would change the face of quality standards that they follow. Read through to know what will be the relation of India to Foreign Trade post TPP.

Trans-Pacific Partnership is an agreement between US and eleven pacific countries which reached a point of forming this partnership. which directly means that these countries will exclusively share limited FTA’s ( Free Trade Agreement ) which will allow these countries to reduce the trade barriers and improve imports between these countries by having the high set of standards on environment, labour and more product specific standards imposed on non-TPP countries.

Before going any further, It is better to learn few terms relating International Trade and its partnership negotiations.

TTIP – Trans-Atlantic Trade and Investment Partnership

TTIP is a Free Trade Agreement (FTA’S) negotiation between the US and other EU ( European Unions ) countries “Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.” 

This negotiation was earlier called as TAFTA.

RCEP – Regional Comprehensive Economic Partnership

RECP is a Free Trade Agreement (FTA’s) negotiation in between Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar (Burma), Vietnam, Australia, China, India, Japan, South Korea and New Zealand.

TPP – Trans-Pacific Partnership 

TPP is a Free Trade Agreement (FTA’s) negotiation between US and Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore & Vietnam.

The fact is that TPP & TTIP collectively amounts about 50 % of Global Trade. which excludes India, China and Brazil & others. To be the default, Standards that would be formulated in next 2-5 years or earlier in TPP and a possible assumption of the formulation of rules by TTIP in 2019 will definitely impact countries that are not in the trade pacts. Which can only resolve by requesting membership or policy changes.

The post-TPP or TTIP FTA’s will incur government of India to access the International trade and replace existing policies amid concerns raised by WTO members on subsidies provided for exporters in India.

It is believed that standards set by TPP or TTIP will be much higher than the standards set by RECP

How TPP will impact India:

The main cause of TPP impact would be market access for goods & services all framed under FTA’s of TPP Members.

1. Reduction in Tariff’s:

Post- TPP, Due to the free trade agreement, The membership will help reduce unwanted barrier thereby cutting cost while import and exports. which will, in turn, become attractive to add products from TPP member into value chains cutting down products from Non- TPP countries which will have higher standards and procedures.

2. Rule of Origin:

FTA’s between any country will have its rule of origin to ease out policies & procedures for the TPP member nations & Rule of Origin will favour fewer tariffs.

3. Access to Funds:

India will get an impact of less access to FDI Investment gradually due to post TPP impact of adding services centres, manufacturing units across TPP partnered countries by liberalising cross-border operation by providing good connectivity between production/service centres. Experts suggest that investment will slowly move away from India once TPP comes into effect due to above said reasons.

4. Imposing new packages of trade policy:

TPP not only will restrict market access to goods & services. But also covers IP Rights, FDI, Competition Policy, Environment, Labour, transparency in tech & pharma industry between TPP members, technical barriers to trade & regulatory changes will also be negotiated between these TPP nations indirectly impacting India.

5. Higher standards set post-TPP

TPP Members will set higher standards on many criteria would give an impact on already struggling India on meeting up the standards of the global market.

These are the five considerable direct impacts that India will experience in next 2-5 years for export companies in India.

Conclusion: Even though all these factors seem to be the threat to India’s economy. Experts continue to predict India’s growth will be surging in the world’s economic position to number 3 in coming two decades competing with china directly.

Source : http://www.iisd.org/ & https://en.wikipedia.org

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