The world is descending into regionalism through the dictum of internationalism. The mandate of WTO and other multilateral arrangements has been eclipsed by the rise of various regional agreements such as TPP, TTIP, RCEP among others. These regional trade agreements have the potential to severely hurt India’s international trade ambitions. Is India prepared to tame the bull by its horns? Let us see what India can do to counter the ill-effects of such trade agreements.
INTERNATIONAL TRADE AGREEMENTS TO MAKE UP FOR THE LOSS THROUGH REGIONAL TRADE AGREEMENTS –
• First, we need to conclude the long overdue India-EU trade agreement. India’s traditional sectors will benefit significantly.
• Among the TPP members, India must open its negotiations with Peru immediately. This will give India the benefit of accessing Latin America’s most promising area, the Pacific Alliance, besides a foothold in the TPP region.
• The Indian initiative of promoting investment in the CLMV (Cambodia, Laos, Myanmar, and Vietnam) has been languishing. It’s important for our textile sector to integrate with its Vietnamese counterpart to draw advantage of the “yarn forward” regime. Extremely slow progress on the Asian highway has neutralised a potential advantage to the region.
• While the western front remains unpredictable, integration of the rest of the South Asian region is imperative for India to play a larger role in world trade. India has taken asymmetric responsibilities in the region to liberalise trade. However, the attitudes of personnel posted at the borders and the lackadaisical state of infrastructure need to improve. The relative lack of motivation of Indian industry to make investments in these countries demands greater attention.
• Africa deserves much greater attention. At least 13 African nations are good targets for institutionalizing trading arrangements. India must be prepared to take asymmetric responsibilities in this region too. These countries have been growing steadily and offer a promising market and opportunities of integrating along value chains.
• Iran offers a very promising market opportunity. Both countries decided to have a preferential trade arrangement but that has not moved much. Iran also offers the central point for connecting Russia and India through the International North-South Corridor (INSTC).
• A trade agreement with Eurasian economies, including Russia, is overdue. This will not only help in sourcing raw material but will also open up other central Asian economies for India.
INSTITUTIONAL DOMESTIC REFORMS-
• Development of a modern ecosystem for technical regulations.
• A well-developed modern technical regulatory system helps in manufacture of products of higher quality, helping greater value addition and consequent hope for better returns from the market.
• India has been losing its competitiveness on account of high factor costs and emergence of many cheaper producers of mass goods. Therefore, increasing the share of higher value-added products in our export basket is essential. This would, in any case, conform to the ‘Make in India’ philosophy. An evolved standards and technical regulatory regime helps in this direction. It comes handy in filtering out cheap, low-quality imports. It helps consumers the most in acquiring good products. Finally, it helps in integrating Indian products and services with global leaders.
• Therefore, an essential element of India’s trade policy agenda has to be a state-of-the-art technical regulatory system. This will involve adoption of international standards in line with the WTO agreement on technical barriers to trade, a mandatory standards regime in selected product areas, an enabling environment, institutional separation for different functions, and an accreditation system for conformity assessment bodies and testing laboratories.
• Unfortunately, the standards agenda is driven by the consumer affairs ministry, which has no external orientation. Therefore, involvement of the commerce and industry ministry in a much larger way is necessary. A complete recast of the Bureau of Indian Standards is overdue.
• While infrastructure has received some boost, there is hardly any specific focus on trade-facilitating infrastructure. Too many departments are operating in this area. Some, like the railways, enjoy a monopoly, leading to inefficiencies. We need to constitute a multi-agency trade infrastructure monitoring committee.
In an interconnected world, India should aspire for trade maximisation and upgrade itself with the new rules of the day to avoid virtual isolation. Every trade agreement that India aspires for needs acceleration in terms of conclusion. At the time when the world is entering the rat hole of protectionism, India cannot succumb more injuries through bureaucratic inertia and imprisonment by the medieval standards of trade. The world has moved on, we shall catch up soon.