TPP-11 Will Increase Competition For India's Textile And Apparel In Signatory Countries

Trade & Policy

TPP-11 Will Increase Competition For India's Textile And Apparel In Signatory Countries

The Trans-Pacific Partnership is finally moving ahead, a year after the US announced its withdrawal from one of the biggest trade deals in the world. TPP-11 as it is now called, will be a new deal, to be signed in March in Chile. The move by the remaining 11 members of the TPP agreement shows the commitment of these economies to free and fair trade. The agreement opens up the markets of the 11 countries to duty-free, quota-free trading within the bloc.

The members of TPP now include Australia, Brunie, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The 11 countries in the deal represent 13.5% of global gross domestic product - including the United States would bring that total to 38%. And the deal has the potential to expand members which could include Indonesia, the Philippines, South Korea, Taiwan, Thailand, United Kingdom in future negotiations.

Reportedly, US president, Donald Trump has stated that US could consider joining the group if the terms of the deal are more favourable to its economy. However, politicial experts in the US say that may not happen too soon. Japanese Prime Minister Shinzo Abe has painted the deal as a spur to growth and reform in Japan and a symbol of commitment to free and multilateral trade at a time when Trump stresses "America First" policies. Japanese Economy Minister Toshimitsu Motegi said the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), or TPP-11, would be an "engine to overcome protectionism" emerging in parts of the world. He added Japan would explain the importance of the deal to Washington in hopes of persuading it to join.

Speaking at the World Economic Forum in Davos, Switzerland, Canada's Prime Minister Justin Trudeau called the agreement the "right deal". Canada's trade minister said in a statement it included an improved arrangement on autos with Japan and the suspension of intellectual property provisions that had been a concern. The timing of the deal is significant for Canada, which is trying to diversify its exports. US, Canadian and Mexican negotiators opened a key week-long round of talks to modernise NAFTA.

Meanwhile, the US Wheat Associates and the National Association of Wheat Growers (NAWG) expressed concern the pact could put overseas demand for US wheat "at serious risk," saying Japan imports an average of 3.1 million tonnes of wheat from the United States a year. After TPP-11 is fully implemented Japanese import tariffs on Canadian and Australian wheat would fall by some US$ 65 per tonne, they said in a statement. "If nothing else, this announcement should serve as a rallying cry for farmers, ranchers and dairy producers calling for the new trade deals we were promised when the president walked away from TPP," said NAWG's president Gordon Stoner.

Australian Prime Minister Malcolm Turnbull said the new agreement would leave a door open for eventual US participation.

Canada, which wanted protection of its cultural industries, and Vietnam, which has worried about labour protection rules, will exchange separate side letters with other members on those topics at the time of the signing.

What first appeared to be a negotiating success later looked like a potentially hollow victory as reality sank in: Canada has embraced a new deal that makes significant concessions and will allow more foreign competition for its auto industry and supply-managed agricultural sectors, such as dairy, eggs and poultry. "In order to send Trump a message that we're free traders, we just undermined everything that's going on here," fumed Unifor president Jerry Dias.

"NAFTA is 24% of the world's GDP. We've got much more skin in the game as it relates to our trading relationship with Mexico and the United States, and we just signed a deal that we will benefit very little from but severely undermine what it is we are trying to accomplish."

Will the new TPP-11 give a boost to textile and apparel trade?

Vietnam was upbeat about TPP-12 when the world's largest apparel buyer - US - was part of the deal. It would've meant duty-free access to the US market for its apparel.

Consequently, this would have spurred industrialization in the country, and would have attracted more foreign investments from China and other textile and apparel manufacturing countries to Vietnam. TPP-11 somewhat dampens this progress. None of the other partner countries have an appetite for clothes that matches the US.

However, Vietnam's textile and apparel industry will still get a boost from the deal, just not as big a one as was expected when the US was also a part. Australia, Canada, Japan, New Zealand and Singapore depend largely on imported apparel, mainly from China. Vietnam's duty-free access will give it an edge over its competitors in these markets. And will surely attract some textile investments in its industry. At a time when apparel manufacturers are looking for new markets, Vietnam is better placed now. India and Bangladesh will face stiffer competition in the five TPP markets.

In future, if the UK too joins the trade deal, that would again give an instant fillip to textile industries of TPP countries, as UK again is an important importer of apparel.

Is India better off outside the TPP-11?

India's apparel exporters will face stiffer competition from Vietnam in some of the TPP countries. However, India's domestic apparel market itself is growing fast, and affords lucrative opportunities to its domestic manufacturers and also for imported apparel. The rocky road to GST has already resulted in apparel imports growing significantly from Bangladesh. The Indian textile and apparel industry would certainly want to protect its own market.

A new book titled "Trans-Pacific Partnership Agreement: A framework for future trade rules?" co-edited by Abhijit Das, Professor and Head, Centre for WTO Studies (CWS), Indian Institute of Foreign Trade (IIFT) and Shailja Singh, Legal Consultant, CWS, concludes that if India were to join the mega-regional Free Trade Agreement (FTA) called the Trans-Pacific Partnership (TPP) and adopt its norms, they would severely hurt the country's agriculture, manufacturing, services industry. The editors have studied and analysed the 5544 pages of the TPP text.

According to the book, if India were to conform to the TPP template of rules on market access in goods, it would pose severe challenges to India's manufacturing sector. The domestic industry may not be able to face import competition in a duty-free regime, it added. If India were to adopt TPP rules, it would require significant changes in the domestic regulatory regime.