Two trade agreements, led by the U.S. and China, are only superficially about trade. Given the strategic subtext, India would do well to jostle for space at the table.
Two strategic agreements currently being negotiated by the world’s trading giants will likely determine the global balance of economic power for years to come: the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP). The TPP and RCEP are not radically different instruments — they are both free trade agreements (FTAs) designed to lower tariff and non-tariff barriers to trade between countries that conduct the bulk of global commerce.
The TPP negotiations are led by the U.S. and involve 11 other nations that share a Pacific Ocean coastline. Seven of those countries — Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam — are also party to RCEP negotiations. RCEP comprises the ASEAN nations and six others: India, China, Japan, Korea, Australia and New Zealand. In addition to trade in goods and services, both agreements cover the critical area of intellectual property rights. RCEP is the more modest of the two, seeking to implement and build on World Trade Organization (WTO) commitments incrementally.
Committing beyond WTO
TPP seeks to frame a new agenda for global trade, requiring countries to commit beyond their existing multilateral obligations under the WTO as well as the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TPP negotiations broke down earlier this month, after countries were unable to find common ground over IPR protections the U.S. sought to introduce, especially in cyberspace.
In contrast, RCEP negotiations have seen progress, albeit haltingly. The Press Trust of India reported last week that ministerial delegations from RCEP member countries will meet in Malaysia in August to “finalise modalities”. RCEP is an important agreement for India, as it involves many, if not all, of the country’s major trading partners.
Their basic nature aside, both agreements reflect a competing political dynamic. The Trans-Pacific Partnership has become the centrepiece of U.S.’s Asia policy, with the Barack Obama-led administration investing considerable political and diplomatic capital in it.
Revealingly, Singapore’s Foreign Minister K. Shanmugam, in his visit to the U.S. in June, also agreed that the TPP had little to do with economics and Singapore was pushing it — although it had a free trade agreement with the U.S. — for strategic reasons.
RCEP is not a China-led process, but involves Beijing as a key player. China is acutely conscious of RCEP’s political significance — earlier this year, Commerce Minister Gao Hucheng suggested China will “continue to unswervingly push forward and quicken the pace of China’s free-trade agreement strategy”. If such a comprehensive regional agreement were to be inked ahead of the TPP regime, it would be a shot in the arm for China.
The RCEP story would underline three crucial conclusions: first, that China is willing to engage actors within a pluri-lateral setting, and set aside competing political interests, especially around South China Sea concerns, for overall economic gain. Second, that Beijing leadership is capable of absorbing multilateral instruments into domestic law to secure regional interests even if it goes against established economic policies, especially on IPRs; third, and most important, China is comfortable with conceiving and implementing international norms while it emerges as a hegemon in the Asia-Pacific. These conclusions, if affirmed, would signal a decisive shift in the regional locus of power from the U.S. to China.
What does this political narrative mean for India, with its renewed ambition to ‘Act East’? Regrettably, the discussion around FTAs and mega-regional agreements in India has focused solely on their economic aspects, with scant attention paid to the underlying strategic dimensions. The TPP has invited reflexive criticism for ‘rewriting’ rules of global trade.
As highlighted in the infographic, the RCEP is different, but no smooth ride either. Keen to protect their digital economies, Japan and South Korea have sought strong IPR protection measures. India, meanwhile, has dug its heels in, suggesting it would not budge from the bare minimum that is required for TRIPS compliance. This is a commendable position to take but does not serve any strategic purpose. Indian government is yet to articulate a strategic vision for the Asia-Pacific region that combines economic and political interests.
On the foreign policy front, it has moved closer to the U.S., but wants to remain invested in RCEP. At the same time, it does not want to be seen as being too close to China, whose IPR and cyber policies leave a lot to be desired. If this reflected a “multi-alignment” policy, India’s negotiating line in RCEP would have been calibrated to respond to specific concerns from across the table, but the draft text does not seriously evaluate whether domestic IPR policy can accommodate RCEP provisions.
IPR protection in cyberspace, as highlighted through the infographic, is one of the most important themes — and a major source of disagreement — in both TPP and RCEP. TPP provisions would require a major restructuring of India’s IP enforcement framework, and may not be immediately feasible. But Japan’s prescriptions suggest that it is possible for India to find a middle ground in RCEP. Many of Japan’s concerns relate to legal standards — how Internet applications should be classified, the nature of procedural guidelines on intermediary liability, the scope of technology protection measures, and the range of penalties imposed.
These concerns are already accounted for in Indian law. With some creative diplomacy, New Delhi could propose treaty language that resonates strongly with the Indian position. Enforcement of IPR claims is anyway conducted bilaterally, which allows the Indian government to interpret RCEP provisions on a case-to-case basis.
To be sure, Indian negotiators have acknowledged the strategic importance of RCEP. Last year, the Commerce Minister Nirmala Sitharaman rightly suggested RCEP negotiations must move from a “narrow, bilateral benefit” paradigm to a “balanced, regional benefit” model. India’s negotiating position, which currently speaks to no one in particular, must reflect this reality.
Even if India were to successfully navigate its way through RCEP, larger questions remain. By hitching its wagon to RCEP, is India tipping its hat to China’s primacy in the region? Why is India not part of TPP negotiations, even if as an observer? Joining the TPP club may be political anathema, but India’s policymakers would do well to learn from Chile, a TPP negotiator, which has successfully resisted several U.S. changes to the draft treaty text. Chile’s IPR laws in particular are in sharp contrast with the U.S. position, but that has not deterred its leadership from actively pursuing negotiations. After all, if you’re not on the table, then you’re on the menu.