There are now two mega regional trade agreements under negotiation and India is excluded from them. These are the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP). If and when concluded, TPP and T-TIP together will constitute 60 per cent of global gross domestic product and 40 per cent of global trade. Both are largely about establishing common standards, achieving regulatory coherence and harmonisation of procedures. Even if there is a delay in concluding the agreements, the trend towards their establishment in trade relations will continue. Once the two mega-deals become a reality, attempts to introduce their provisions into the World Trade Organization (WTO) are inevitable.
India is a participant in the ongoing negotiations on a Regional Cooperative Economic Partnership (RCEP), which brings together the 10 Asean countries along with six partners - Australia, China, India, Japan, Korea and New Zealand. These negotiations exclude labour, intellectual property rights and environmental standards and regulatory measures. But several of the RCEP partners are also participating in the TPP, including Japan, Malaysia, Singapore and Vietnam. They will undoubtedly try to migrate the features of the TPP into RCEP.
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India has bilateral Comprehensive Economic Cooperation agreements with Japan and Singapore and is close to concluding one with Australia. These countries' participation in the TPP will have implications for the competitiveness of our goods and services in these markets.
The conclusion, therefore, is inescapable: to maintain and promote India's exports to its major markets, its goods and services will have to conform to the higher standards laid down by them. This is especially so in the current phase of a slow growth in global trade, making competitiveness a key factor.
There cannot be complacency on grounds that we are a large and expanding domestic market, which does not require adherence to international standards. The globalisation of the Indian market and consumer choices now available generate preference for higher quality imports. Whether it is Make in India or Make for India, for domestic consumption or for export, conforming to international standards and best practices has become imperative. This also requires the strengthening and capacity building of our regulatory authorities and their compliance mechanisms so that they enjoy the reputation of a Reserve Bank of India or Securities and Exchange Board of India. A public/private partnership to achieve this is overdue.
One of the significant changes in the structure of global trade has been the emergence of regional and global supply chains through which overall trade has expanded. Countries have to become participants in these supply chains to become active and major players in global trade and investment. Modern infrastructure, transport facilities and efficient trade facilitation are indispensable. So is rigorous quality control. India has mostly been bypassed by these chains, which have become even more important as instruments for generating trade post the 2007-08 global financial and economic crisis. In this context, the WTO's Trade Facilitation Agreement would help India's participation in supply chains.
Technology and innovation have become the key drivers of modern economic growth and trade. Technological innovation is necessary to increase India's limited export basket. Technological innovation requires advanced skills. Most of India's highly skilled personnel are not in India but abroad, or if they remain in India, they are likely to be found deployed in the research and development centres of multinational companies in places like Bengaluru or Hyderabad. Unless we create a favourable ecosystem to generate and harness the skills that a knowledge society demands, we are likely to fall behind the front-ranking nations of the world. There are compulsions of ensuring inclusiveness in a highly unequal society. However, inclusion should be pursued by raising standards encompassing progressively larger sections of the population rather than by lowering standards to accommodate them. This is admittedly more challenging but necessary. Creating and maintaining islands of excellence can only be a temporary palliative.
India currently accounts for less than two per cent of global trade. Its negotiating clout is limited. If its negotiating posture is out of sync with the overall trends referred to, there is a danger of the country getting consigned to the margins of the emerging global economic and trade architecture.
Membership of the Asia-Pacific Economic Cooperation (APEC), could be a step towards reorienting our trade structure. APEC works through establishing benchmarks and sharing best practices among members on a voluntary basis. The corporate sector plays a more significant role in this body. Therefore membership would be of value in exposing India's corporate sector to evolving international norms and standards and establishing mutually beneficial collaboration with its counterparts. APEC is soon to embark on a study of a potential Asia-Pacific Free Trade Area proposed by China. This may, in future, subsume the TPP. This is all the more reason for India to be part of APEC sooner rather than later.
India's large and expanding market, its demographic profile and the quality of its high-end labour are important assets that could be leveraged in pursuit of a more salient and active role in the emerging regional and global economic architecture. But this requires a carefully crafted strategy. China has successfully done so to access both markets and technology. India should learn lessons from its willingness to accept and adapt to the demands of advanced markets, creating a critical mass of interdependencies which is, in turn, being leveraged for geopolitical advantage.
A former foreign secretary, the writer is chairman, Research and Information System for Developing Countries, and senior fellow, Centre for Policy Research