During his first stint as US President, Donald Trump issued a memorandum on Jan. 23, 2017 — asking the U.S. Trade Representative to pull out of the Trans-Pacific Partnership (TPP) talks and signatories, which led to the formation of the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) in March 2018. Currently, the CPTPP consists of 12 countries – Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the UK. The combined GDP of the bloc is estimated at over $15 trillion with the entry of the UK. The CPTPP thus accounts for over 15% of the global GDP.
The US had joined negotiations related to the TPP in 2008 ,and President Barack Obama had given the TPP a strong push. The idea of the TPP began 2005 trade agreement between a small group of Pacific Rim countries comprising Brunei, Chile, New Zealand, and Singapore. Four countries – Canada, Malaysia, Japan and Mexico then joined the talks. The Obama Administration had dubbed the TPP as an important component of the ‘Pivot to Asia’ strategy. After several rounds of negotiations, an agreement was signed in 2015, followed by a pact in 2016.
The deal was never approved by the US Congress. Donald Trump and most labour -unions held the view that the result of free trade agreements (FTAs) such as TPP is that American manufacturing jobs are offshored to low-wage nations (Vietnam or Malaysia). There was also a strong perception that it was the North American Free Trade Agreement NAFTA (1994) that resulted in the closure of factory plants and job losses in the Midwest. Two members of NAFTA – Canada and Mexico are also signatories to the CPTPP.
The U.S. already had high trade deficits with some of the TPP members (predominantly, Japan and Vietnam). Critics believed that TPP would increase such deficits by providing foreign exporters with a soft landing in the U.S. markets without ensuring mutual advantages in services and investment. It was perceived as a move that would favour the multinational companies at the expense of the small and medium companies in the U.S.
The Investor-State Dispute Settlement (ISDS) provision of the TPP would have enabled foreign investors to challenge governments at the international courts. This, critics argued, compromised the sovereignty of the United States, allowing corporations to challenge the environmental or labour laws of the United States. The arguments against TPP were bipartisan- Democrats (labour unions, progressives) objected to it because of employment and remuneration matters and the Republicans opposed it because it was an overreach by globalism. In the 2016 U.S. presidential race, both candidates, Donald Trump (Republican) and Hillary Clinton (Democrat) had similar views regarding the TPP. Bernie Sanders, another Democrat fervently opposed the TPP. While supporting Trump’s decision to pull out from the TPP Sanders said: “For the past 30 years, we have had a series of trade deals … which have cost us millions of decent-paying jobs and caused a ‘race to the bottom’ which has lowered wages for American workers.”
Joe Biden, who replaced Donald Trump in 2021, was also cautious vis-à-vis the TPP. Biden had unequivocally stated that the US could only join a re-negotiated agreement which took into consideration labour and environmental issues.
The US did sign a deal with countries in the Indo-Pacific referred to as the ‘Indo-Pacific Economic Framework’ (IPEF). Donald Trump referred to this as the TPP+2. and had said that his administration would pull out of the same.
The debate regarding India’s entry into the CPTPP
In the aftermath of the recent shifts in the economic landscape, due to the economic policies of Trump 2.0, there have been discussions regarding India rejoining RCEP. While there is a realisation that ties with China are sensitive and joining RCEP could further raise the trade deficit with China. Economists and policymakers have recommended that India should consider joining the CPTPP.
For India, joining the CPTPP will be a loss as the elimination of tariffs on dairy, grains and meat could result in exposing Indian farmers to European agribusinesses of Australia, New Zealand and Canada as well. Influential lobbies –especially in areas like the dairy sector are likely to oppose India joining the bloc.
India in 2020 had exited the RCEP negotiation rounds at the last moment, because it faced resistance from several lobbies – especially in the agriculture and dairy sector.
The tariff-binding schedules of CPTPP would reduce India’s leeway regarding tariffs for protecting certain industries. The cost of joining the CPTPP is high in domestic reforms to modernize customs, competition, open up SOEs, and harmonize IP, which is both expensive administratively and politically.
More realistic alternatives for India
India might enjoy the strategy of flexibility during the plurilateral or South-South collaboration (e.g., BIMSTEC, IPEF, IMEC, INSTC, I2U2, BRICS, QUAD) instead of banking on one large FTA for example, India is negotiating a trade deal with the US amidst Trump’s 50 percent tariffs, India is also negotiating an FTA with Canada, Mercosur and GCC and has already concluded an FTA with the UAE, Australia, EFTA and the UK. On the contrary, it is reviewing its existing FTAs with ASEAN and Japan due to trade deficits.
Joining the CPTPP may be an uphill task, but it cannot be ruled out given the geopolitical and economic changes underway. At the same time, India is already a signatory to the IPEF and could utilise this, as well as other existing FTAs to its benefit.
[Photo by Rakesh Mondal on Unsplash]
Tridivesh Singh Maini is a Faculty Member at the OP Jindal Global University, Sonipat (India).
Sarva Chakrabarti is a first year MBA student at Symbiosis International University, Pune (India) with an interest in trade policy. The views and opinions expressed in this article are those of the authors.
