GS3 (Impacts on Indian economy)
Many multilateral trade treaties are being discussed around the world such as TPP, RCEP etc. What are these trade treaties? How can they impact the present international trade structure as evolved under WTO? How can they impact India?
Best answer
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TPP, TTIP and RCEP are plurilateral agreements that seek to liberalise trade regimes by reducing tariff and non-tariff barriers within a regional bloc, thereby leading to an increase in volume of trade and investment activities in the regional bloc.
Trade structure under WTO is multilateral and not plurilateral. Thus, it is more inclusive when it comes to sharing benefits of a liberalised trade regime with all its members. On the other hand, TPP, RCEP AND TTIP will: –
1. Shift the trade flows from “non-member to member” regime to “member to member” regime within the respective regional bloc.
2. Competitiveness in terms of price and quality may be compromised in a bid to derive benefits of low tariffs within the regional bloc rather than better quality outside the bloc.
3. Increased participation in Global Value chains
4. Traditional industries, SMEs may be the worst hit
5. Standards with respect to labour, environment, IPR may be set higher, resulting in non-member countries losing out on trade.
Impact on India:
1. India may lose out on trade as it not a part of TPP, TTIP
2. As a part of RCEP, it may gain from an agreement on services but lose out in terms of its agricultural trade.
3. Trade deficit with China may increase.
4. High standards in terms of IPR, labour and environment may become a norm or the default minimum. Thus, non-member countries will have to work towards enhancing capabilities in these areas.
5. Better cooperation with ASEAN due to RCEP
With plurilateral agreements fast gaining ground, India cannot choose to stay away from them. Rather, it must put across its concerns and pursue its interests to get the maximum out of RCEP, “obstructionist” claims notwithstanding. It must simultaneously work towards enhancing its standards of production by enhanced Bureau of Indian Standards certification system. In this way, competitiveness as well as protectionism will be balanced for a favourable business environment.
