International Relations Prelims cum Mains

US floats idea of rejoining Asia-Pacific trade pact

Details :

The news:

  • US President Donald Trump said the United States would only join the Trans Pacific Partnership (TPP), if it offered “substantially better” terms than those provided under previous negotiations.


News summary:

Exit of US from TPP:

  • The United States entered Trans Pacific Partnership (TPP) negotiations in 2008. However, in 2016, US government abandoned attempts to push the pact through US Congress.
  • President Trump’s election campaign in 2016 opposed multilateral trade pacts and argued bilateral deals offered better terms for US businesses and workers.
  • US walked away of the pact in early 2017, citing concerns about US jobs.
  • Even before official withdrawal last year, U.S. participation in the pact was seen as increasingly unlikely due to opposition in the US Congress.


Recent development:

  • Recently US President said the United States may join the TPP. However, he said the United States would only join if the deal were substantially better than the deal offered in past.
  • Impact of US-China trade war:
    • President Trump is struggling to get support from other countries for his recent threat to impose import tariffs on China and the U.S. farm lobby is arguing that retaliation by China would hit American agricultural exports.
    • Many economists say the best way to combat a rising China and pressure it to open its market is through multilateral trade deals like the Trans-Pacific Partnership, which create favorable trading terms for participants.
  • Policymakers in the Asia-Pacific region responded to Trump’s initial announcement about the possibility of the US rejoining the trade deal with skepticism.


Additional information:

About originally proposed TPP:

  • The Trans-Pacific Partnership (TPP) was a trade agreement among 12 Pacific Rim countries.
  • The 12 nations include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
  • The aim is to ease the flow of goods, services and investments among them, and to strengthen the rules on labour standards, environmental issues, origin criteria and intellectual property.
  • The TPP, a deal which will cover 40% of the world economy. As per the World Bank the pact could help boost the overall GDP of member-countries by 1.1% by 2030.

Exit of US and current status of TPP:

  • President Trump pulled the US out of the pact in early 2017, citing concerns about US jobs.
  • The other 11 countries forged ahead with their own agreement without US participation, and in the process eliminated chapters on investment, government procurement and intellectual property that were key planks of Washington’s demands.


Potential impact on India:

  • The World Bank projects a limited ‘trade diversion’ impact on non-members, including aggregate GDP losses of about 0.1% by 2030
  • The Trans-Pacific Partnership (TPP) is likely to indirectly impact India’s exports in several industrial sectors such as textiles, plastics, leather, clothing, cotton and yarn as It has set very high standards for the international trading regime
  •  The operations and the production methods of India’s public sector units (or SOEs) could also be constrained due to the TPP.
  • Country’s regime on investment, labour standards, intellectual property rights (IPR), government procurement and State-owned enterprises (SOE) will also be affected.
  • Some of the TPP standards are higher than that of the WTO norms, including on IPR and possible ever-greening of patents, which could hurt India’s pharma sector.

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