New Delhi: A group of 12 Pacific rim nations led by the US on Monday hammered out the largest mega regional trade agreement which is expected to set higher standards for goods and services.

Although the deal aims at sidestepping China in setting rules of international trade, it is also expected to impact India.

The Trans-Pacific Partnership (TPP) is a trade agreement under negotiation among 12 nations: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam, which comprise 40% of the world’s gross domestic product (GDP).

The other two large regional trade agreements being negotiated are the Transatlantic Trade and Investment Partnership (TTIP) between the US and the European Union, and the Regional Comprehensive Economic Partnership (RCEP) between the Association of Southeast Asian Nations and its four free-trade partners, including China and India.

In addition to greater market access for goods and services, the areas of negotiations covered by TPP include intellectual property rights, foreign investment, competition policy, environment, labour, state-owned enterprises, e-commerce, competitiveness and supply chains, government procurement, technical barriers to trade, transparency in healthcare technology and pharmaceuticals, and regulatory coherence.

Most experts, however, say that overall, a much larger impact of TPP would be through standards or non-tariff measures. Harsha Vardhana Singh, former deputy director general of the World Trade Organization, in a discussion paper on TPP last year, said the inclusion of two of the largest economic markets (the US and Japan) in this group implies these norms will effectively become global standards.

“In this situation, to adequately benefit from international markets, other countries such as India will have to improve their capacities both for developing policies and the capabilities of their producers to upgrade standards in line with the higher requirements. Some other countries have already begun to do so," he added.

Speaking at an event in April, Sujata Mehta, economic relations secretary in the foreign ministry, had said that agreements like TPP and TTIP will have huge implications for India.

“From an Indian perspective, we would hope that the result would not be states accepting restrictions through trade instrumentality which they otherwise would not be willing to accept in the relevant forum or relevant discipline," she said. “In other words, trade should not be an arena for settlement of debates on other issues which are not strictly related to trade."

“They may endanger food safety, they may curb access to medicines by putting constraints on the pharmaceuticals sector and eventually may have an impact on sovereign issues. The net outcome will be blurring the local, domestic, regional and global," she added.

The big regional trade deals are expected to allow foreign investors to have their grievances against governments arbitrated by dispute-specific panels under the investor-state dispute settlement (ISDS) mechanism clause, she said. “What impact it would have on other investment promotion agreements is a matter of grey area," she said.

There are different estimates on the material impact on India not being part of the TPP.

The Peterson Institute for International Economics (PIIE) in a report released in September said that if China and the rest of the Asia-Pacific Economic Cooperation (Apec) forum join a second stage of the TPP that continues to exclude India, India’s annual export losses will approach $50 billion. However, many analysts claim such projections are exaggerated.

Quoting a study by the East-Centre, Abhijit Das, professor at the Indian Institute of Foreign Trade, said trade diversion as a result of India not joining the TPP will not be more than $4-5 billion over 10 years. “India is not in a position to undertake obligations finalized under TPP with respect to intellectual property rights such as evergreening of patents," he added.

Indian Pharmaceutical Alliance secretary general D.G. Shah said the branded medicines industry will be a major beneficiary of the trade pact, while the generic drugs industry in India will suffer. “It (branded medicines industry) will be able to improve its price realization in the low-priced markets. It will be able to delay generic competition in all markets, including the US and the EU. The generics decline will be discernible from the end of 2017. The full-blown impact of these mega trade deals will be felt by 2020," he added.

D.K. Nair, secretary general of the Confederation of Indian Textile Industry, said the TPP will adversely impact the textiles industry because of the yarn forward provision. The yarn forward rule requires clothing to be made from yarn and fabric manufactured in one of the free trade partners to qualify for duty-free treatment under the trade pact. “At present, we export yarn and fabric to Vietnam which then makes the textiles and exports to countries like the US. Now, because of the yarn forward rule, they will be under pressure to develop local production," he added.

While Vietnam will have zero-duty access to the US market for textiles, Indian players will have to pay 14-32% duties, which will make them uncompetitive, Nair said. “We are in favour of India joining TPP. We should also fasttrack the RCEP negotiations so that the textiles industry can have some advantages in the Asian region," he added.

Lobby group Confederation of Indian Industry in a statement on 1 September said India should join the Apec forum, which accounts for nearly 60% of global GDP. This, it said, would provide a pathway for greater integration into the region’s economy.

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