By Pradeep S Mehta
Synopsis
Such preferential deals will give India an advantage over other countries, and help particularly to reduce trade diversion. The world is, indeed, facing a recession. But there is still some demand that India can meet. For this, we need trade agreements beyond the WTO sphere.
Even though reportedly a decision has not yet been taken, not joining the trade pillar of the Indo-Pacific Economic Framework for Prosperity (IPEF) would be a mistake. First, it is bad signalling at a time when the world is appreciating India's high growth rates. Second, it would adversely impact the international reputation of Prime Minister Narendra Modi. The third setback would be towards achieving India's goals of becoming first a US$5 trillion economy, and then a US$10 trillion one in the near future. GoI needs to revisit how trade liberalisation, including through IPEF, will help India's growth.
Furthermore, if India wishes to become a developed country in the next 25 years, it should vigorously explore every opportunity to expand its exports and grow. Other than being a member of the World Trade Organisation (WTO), India currently has 16 free trade agreements (FTAs) and six 'shallow' preferential trade agreements (PTAs) and is exploring many others, including one with the US.
Such preferential deals will give India an advantage over other countries, and help particularly to reduce trade diversion. The world is, indeed, facing a recession. But there is still some demand that India can meet. For this, we need trade agreements beyond the WTO sphere. We cannot stand on the ramparts of Red Fort with a false sense of comfort, but need to go to Chandni Chowk and bargain to get the best deal.
At the same time, India should appreciate that exports are only one part of the trade-led development story. A coherent trade policy should not just help enhance competitiveness and exports, but also stimulate domestic reforms and help achieve other national development goals.
While the Modi government seems to have re-evaluated India's stance on trade-related issues in FTAs to an extent, it still hesitates to engage on newer issues (as well as legacy issues seen as red lines) in multilateral, plurilateral and other innovative platforms like IPEF. This 'one step forward, two steps back' approach is perilous for India's trade.
Not Just This But That Too
Other factors on which India needs better understanding of the situation: China is not a member of IPEF. Because of China, India did not accede to the Regional Comprehensive Economic Partnership (RCEP), even though many in the policy sphere disagree with that decision. Despite that - and other thorny issues between the two countries - India's bilateral trade with China is growing. Trade deficit with China is a problem, but that's another issue altogether. In fact, India should also apply for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which has many of India's trade partners towards the east as its members. China is not yet a member of CPTPP, but an aspirant. Vietnam has received many concessions in terms of timelines. So, there is scope for India too.
It is GoI's declared policy of not just 'Looking East' but also 'Acting East'. Most IPEF - and CPTPP - members lie in Southeast and East Asia. Therefore, India, too, needs to engage through these accords. Importantly, the commerce ministry has set up two think tanks to advise GoI on regional trade agreements (RTAs). On Sunday, the commerce ministry announced plans to launch a trade promotion body in addition to a trade negotiations body. Thus, India's institutional software is in place to deal with any exigencies.
India has accepted the supply chain pillar in IPEF - the conveyor belt for trade - and this cannot be isolated. So, why the hesitation on trade?
Social clauses in IPEF, being seen as 'discriminatory', should not be such a barrier, considering that India has agreed to the same in the EU-India FTA.
Climate change and border carbon measures will be an imperative for us to look into any FTA, and soon at the WTO.
Why is India afraid of the digital economy also being covered by IPEF? Our domestic regulatory framework needs to be progressive. A large number of US companies have opened their R&D centres in India and employed thousands of our bright youngsters to work in them without having to move outside the country. We are, after all, a net exporter of IT-enabled services with a growing potential.
IPEF is a 'soft' agreement, because the US cannot conduct a new trade deal without the approval of the US Congress, which is currently not so inclined. Thus, all conditions will be best endeavours.
Knock on the Door and Join
Combining flexibility with ambition, IPEF has been conceived by its founding members as an instrument to prepare their economies for the future. On similar lines, an Americas Partnership for Economic Prosperity (APEP) is being envisaged by the US with Latin American and Caribbean countries. These are welcome initiatives, and India would do well to play its part in these important conversations as a rule-shaper on forward-looking trade-related issue. One hopes that good sense will prevail and India's policymakers agree to all the pillars of IPEF so that India can march ahead to become a developed economy by 2047.
This Article can also be viewed at: https://economictimes.indiatimes.com/
Synopsis
Such preferential deals will give India an advantage over other countries, and help particularly to reduce trade diversion. The world is, indeed, facing a recession. But there is still some demand that India can meet. For this, we need trade agreements beyond the WTO sphere.
Even though reportedly a decision has not yet been taken, not joining the trade pillar of the Indo-Pacific Economic Framework for Prosperity (IPEF) would be a mistake. First, it is bad signalling at a time when the world is appreciating India's high growth rates. Second, it would adversely impact the international reputation of Prime Minister Narendra Modi. The third setback would be towards achieving India's goals of becoming first a US$5 trillion economy, and then a US$10 trillion one in the near future. GoI needs to revisit how trade liberalisation, including through IPEF, will help India's growth.
Furthermore, if India wishes to become a developed country in the next 25 years, it should vigorously explore every opportunity to expand its exports and grow. Other than being a member of the World Trade Organisation (WTO), India currently has 16 free trade agreements (FTAs) and six 'shallow' preferential trade agreements (PTAs) and is exploring many others, including one with the US.
Such preferential deals will give India an advantage over other countries, and help particularly to reduce trade diversion. The world is, indeed, facing a recession. But there is still some demand that India can meet. For this, we need trade agreements beyond the WTO sphere. We cannot stand on the ramparts of Red Fort with a false sense of comfort, but need to go to Chandni Chowk and bargain to get the best deal.
At the same time, India should appreciate that exports are only one part of the trade-led development story. A coherent trade policy should not just help enhance competitiveness and exports, but also stimulate domestic reforms and help achieve other national development goals.
While the Modi government seems to have re-evaluated India's stance on trade-related issues in FTAs to an extent, it still hesitates to engage on newer issues (as well as legacy issues seen as red lines) in multilateral, plurilateral and other innovative platforms like IPEF. This 'one step forward, two steps back' approach is perilous for India's trade.
Not Just This But That Too
Other factors on which India needs better understanding of the situation: China is not a member of IPEF. Because of China, India did not accede to the Regional Comprehensive Economic Partnership (RCEP), even though many in the policy sphere disagree with that decision. Despite that - and other thorny issues between the two countries - India's bilateral trade with China is growing. Trade deficit with China is a problem, but that's another issue altogether. In fact, India should also apply for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which has many of India's trade partners towards the east as its members. China is not yet a member of CPTPP, but an aspirant. Vietnam has received many concessions in terms of timelines. So, there is scope for India too.
It is GoI's declared policy of not just 'Looking East' but also 'Acting East'. Most IPEF - and CPTPP - members lie in Southeast and East Asia. Therefore, India, too, needs to engage through these accords. Importantly, the commerce ministry has set up two think tanks to advise GoI on regional trade agreements (RTAs). On Sunday, the commerce ministry announced plans to launch a trade promotion body in addition to a trade negotiations body. Thus, India's institutional software is in place to deal with any exigencies.
India has accepted the supply chain pillar in IPEF - the conveyor belt for trade - and this cannot be isolated. So, why the hesitation on trade?
Social clauses in IPEF, being seen as 'discriminatory', should not be such a barrier, considering that India has agreed to the same in the EU-India FTA.
Climate change and border carbon measures will be an imperative for us to look into any FTA, and soon at the WTO.
Why is India afraid of the digital economy also being covered by IPEF? Our domestic regulatory framework needs to be progressive. A large number of US companies have opened their R&D centres in India and employed thousands of our bright youngsters to work in them without having to move outside the country. We are, after all, a net exporter of IT-enabled services with a growing potential.
IPEF is a 'soft' agreement, because the US cannot conduct a new trade deal without the approval of the US Congress, which is currently not so inclined. Thus, all conditions will be best endeavours.
Knock on the Door and Join
Combining flexibility with ambition, IPEF has been conceived by its founding members as an instrument to prepare their economies for the future. On similar lines, an Americas Partnership for Economic Prosperity (APEP) is being envisaged by the US with Latin American and Caribbean countries. These are welcome initiatives, and India would do well to play its part in these important conversations as a rule-shaper on forward-looking trade-related issue. One hopes that good sense will prevail and India's policymakers agree to all the pillars of IPEF so that India can march ahead to become a developed economy by 2047.
This Article can also be viewed at: https://economictimes.indiatimes.com/