India and TPP: Opportunities and Challenges

Abstract

Actively promoted by the United States, “Trans-Pacific Partnership Agreement” (TPP) is likely to be an economic and trade integration agreement with the highest standards and the most extensive scope in the Asia-Pacific region. However, few people have always associated TPP with India despite the strong desire of India to enhance the economic ties with the countries in the Asia-Pacific region. In August 2013, the Vice-President of the United States Joseph Robinette Biden extended an invitation to Indian President Manmohan Singh to join the TPP when he visited India. Afterwards, India seems to be clearly interested in the TPP. But what does the role of India probably mean to the TPP and even the process of developing integration of this region? And what opportunities and challenges will India face when in TPP? With the qualitative and quantitative analysis of the politics and economy, this paper holds that the invitation made by the United States to India doesn’t mean India is important for the TPP, but more coming from political concerns other than economic benefits; besides, the TPP itself may bring India more challenges than opportunities in economy and India is likely to reap more actual benefits when in the RCEP, but the TPP offers India more strategic choices, so it is a possible choice for India.

1 Introduction

Since the United States joined the negotiation of the Trans-Pacific Strategic Economic Partnership Agreement (P4) initiated by New Zealand, Singapore, Chile and Brunei, the “Trans-Pacific Partnership Agreement” (TPP), as a new high-level economic and trade rule in the future Asia-Pacific region, has attracted extensive attention across the world. Thereafter, with Canada and Australia and other big powers joining the negotiation, especially Japan officially joining the negotiation in July 2013, the TPP has been an important regional cooperation mechanism with its members accounting for 40 % of the global GDP and about 30 % of the world trade. At present, promoted by the United States, the TPP negotiation is continuously making progress, and if the target is successfully achieved, it will have an important effect on both regional economic integration and the economic and political strategic structure in the Asia-Pacific region. Major media in India also published and reported that TPP would be one of “three deals that can change the world”.¹

From another perspective, TPP is also widely considered as one of important strategic dimensions of the United States in returning to the Asia-Pacific, an important means to lead working out regulations and balance Chinese influence in the economy. As the biggest power in the South Asia region, India is continuously raising its regional influence in the entire Asia-Pacific region, and is considered by the United States as an important base of the strategy to balance China’s influence in this region (Panda 2012). In addition, India is also pursuing the “Look East” strategy of regional integration, trying to strengthen the economic and trade relations with the countries in the Asia-Pacific region. However, few people have associated TPP with India. Moreover, India has been keen to become a member of APEC but this goal has not been achieved, although there are many people think that the United States should take effective measures to help India to join the APEC.²

In August 2013, the United States Vice-President Joseph Robinette Biden extended an invitation to Indian President Manmohan Singh to join the TPP during his visit to India.³ India seems to be clearly interested in the TPP, and Singh once expressed that India is now studying the policy implication of joining the TPP after his visit to Japan in May. Many comments suggested that India should join the TPP, although India feels uncomfortable at some rules of the TPP, such as the contents with respect to the environmental and labor laws, intellectual property rights, which have negative impacts on India’s trade in the current development stage. But there is a real possibility for India to choose to join the TPP. But what does the role of India probably mean to the TPP and even the process of developing integration of this region? And what opportunities and challenges will India face when in TPP?

2 Analysis on India’s Regional Integration Strategy

The TPP leaded by the United States offers an opportunity to develop the regional economic integration for countries in the Asia-Pacific region, but it also complicates their strategic choices on FTA. Since the 1990s, India has always wanted to be connected with the economically fast-growing East Asia through the so-called “Look East” strategy, to establish its status as a regional power in Asia. However, India has made limited achievements in regional integration so far at a slow rate. Currently, India has signed the CEPA with Singapore, Korea and Japan, FTA with ASEAN and Thailand, and has completed negotiations with Malaysia. It means that in the Asia-Pacific region, in addition to the centers of China, Japan and ASEAN, there emerges a trade structure layout centering on India, though India’s influence is still weaker (Yang Xiaoping and Wu Zhaoli 2013). Therefore, if we want to understand the opportunities and challenges facing India on TPP, we first need to review and analyze the contents and features of India’s regional integration strategy.

2.1 Approaches and Contents of India’s Regional Integration Strategy

In the early of 1990s, India was once wandering in the international order at the end of the cold war with foreign policies characterized by variability and instability. But from the end of 1990s, India took an all-around and pragmatic diplomatic policy and started the “Look East” strategy in order to strengthen the economic ties with fast-developing East Asia. The core of India “Look East” strategy is to put itself on the fast track of the East Asia for economic growth, especially to be integrated into the economy-energy supply network of the Southeast Asia. With the drive of India “Look East” strategy, the economic cooperation between India and countries in Asia, and even the countries in pan-Asia-Pacific region such as Australia and New Zealand becomes more active, and India’s regional integration strategy was developed under this background.

Under the background of regional economic integration in the world and between Asian countries in particular, India also starts regional economic cooperation with neighboring countries. On the one hand, due to the weak drive from multilateral trade liberalization of WTO, the negotiation enters long-term coordination and discussion and it is hard to reach agreements in a short time. As one of WTO founders, India wanted to take active part in the multilateral trade agreements but failed to achieve the goal due to different interest relationship among the members. Since Doha Round of World Trade Talks came to a deadlock, WTO has been suffering the risk of marginalization caused by bilateral and regional trade agreements. On the other hand, with the spread of regionalism, countries outside of the region tend to suffer a “domino effect” of trade diversion. India wants to develop the export market blocked in the international market with the help of regional economic integration progress. The sanitary and phytosanitary measures, technical trade barriers, procedural barriers, provisional measures and others implemented in EU and the United States have huge impacts on India. India has strengthened the economic relations with neighboring countries, first to start trade liberalization cooperation with neighboring countries at the similar stage of economic development, such as SAFTA, Sri Lanka, BIMSTEC, and next to sign regional cooperation agreements with countries at a more leading stage of economic development, such as Thailand, Singapore, Korea and EU, etc.

After 2000, the policies made by the Indian government mainly focused on improving the technological level, developing the backward manufacturing industry and expanding export. India proposed that the annual growth rate of manufacturing should be raised to 12 % above to ensure the annual economic growth at 8 % above. In order to promote the competitiveness of the manufacturing industry, the Competition Act issued in 2002 in India puts a ban on hindering the production, supply, distribution, storage of individuals and enterprises as well as transfer and merger of goods and services, and it also disallows enterprises to abuse their advantages in commodity and market fields.

The core of national manufacturing fostering strategy issued in 2005 and the five-year plan report for India’s economic development issued in 2007 is also on developing the manufacturing competitiveness. Driven by these policies, the international competitiveness in mobile communication, civil aviation, automobiles, household appliances and other industries in India has been improved significantly. These policies will promote the domestic competition and improve the consumers’ satisfaction, thereby enhancing India’s international competitiveness at last.

2.2 Features of India’s Regional Economic Cooperation

As a great power in the South Asia and a large developing country, India has some important features in its regional economic cooperation. And these features must be taken into account when we analyze its regional integration strategy.

Firstly, India has developed its export strategy guided by service and technology sectors. India’s comparative advantage in foreign trade lies in export of finance, software and other service sectors, while manufacturing exports are concentrated in the field of resource-based raw materials. This situation is determined by its dual structure of the labor force (Xin Lu 2011). India has numerous low-skilled laborers while training a large number of top talents in finance and IT field. With this endowment, India exports high-end knowledge intensive services with a coexistence of low-end manufacturing resource-based exports. This feature of India caters to the needs of vertical intra-industry trade in the trade and investment of the East Asian countries. In 2005, the merchandise trade of India only accounted for 1 % of the market, ranked at 29; but in service exports, the market share reached up to 23 %, ranked at 11 globally. Although India’s merchandise exports tend to be diversified in variety, the engineering sector still accounts for the largest proportion, about 23 % of total export. In the process of free trade agreement negotiations, India has incorporated liberalization of the service sector as an important negotiation topic, to promote export of financial, education, IT, telecommunication and other services to its free trade partners, so as to benefit from the service trade.

Secondly, India is attempting to modify the existing trade policy to encourage export of high value-added products and promote trade in the cooperative region. India is changing the practice of exporting raw resources and guiding enterprises to export relatively high value-added products. For example, it restricts the direct export of iron ore and rough gem materials, etc. and encouraging enterprises to export more processed steel products and processed gem products. In the field of software, it also encourages the export of the software and programs that can create more brand values rather than simple acceptance of outsourcing. The Indian government expects to open up oversea markets a step further through FTA, to increase the export scale to $450 billion by 2014. India may have less expectation in achieving a surplus in goods trade than obtaining a surplus in the service.

Thirdly, India encourages attracting foreign capital investment. In addition to the retail sector, foreign capital investment and production are allowed in most sectors in India. Especially for the manufacturing sector, no restriction is laid on the investment proportion to foreign investors. Therefore, since 2000, foreign investment in the manufacturing sector has increased greatly, especially in the automotive, electrical and electronic, petrochemical and other sectors at a significant growth rate. Moreover, special economic zones (SEZ) policy is adopted to encourage private investment and foreign capital. In 2009, the growth rate SEZs’ export has reached 120 %. The export share of SEZs has increased from around 5 % in 2002 to 26 % in 2009. IT, engineering, medicine, and chemical sectors take a major proportion of SEZs’ export. As far as the whole nation is concerned, foreign direct investment inflows grow at an average rate of 18 % since 2000, and amounts $36.88 billion in the fiscal year 2012–2013. In order to attract foreign capital, India further abolishes or raises the investment upper limit of foreign investment in major industries. For instance, the multi-brand retail and defense manufacturing limits are raised to 74 % and 49 % respectively; in the field of insurance and state-owned banks, the limit is raised from about 20 to 49 %; while in the communications field, single brand retail and tea planting etc., foreign investment limit has been directly abolished (see Table 6.1).

Table 6.1 India’s newly revised foreign direct investment limit (%)

Fourthly, India carries on pragmatic and gradual free trade negotiations. Since 2000, India has come to be aware that too extensive regional cooperation lacks efficiency and will become a burden. Thus, India marks Asia as an important area for free trade negotiations, meanwhile it promotes trade liberalization process together with other countries. Being the first part of “Look East policy”, India has successfully signed trade agreements with more than ten Asian countries and regional organizations (see Table 6.2). Consequently, after 2000, the trade has increased significantly between India and countries that have signed free trade agreements. In 2009, India published a 5-year foreign trade policy plan to strengthen the incentives for development of new products and new markets and provide tax free policy for engineering products. In May 2011, the aim is set to improve export proportions of machinery, pharmaceuticals, chemicals, electrical and electronic products by means of export strategy plan, strengthening product strategy, market strategy and technology and R&D. For the partners with which comprehensive corporation agreements cannot be reached immediately, India firstly reaches liberalization of some products through “framework agreements” or “preferential trade agreements” and gradually steps to the ultimate aim of free trade agreements or comprehensive cooperation agreements. Both tariff liberalization between India and Thailand, and the preferential trade agreement with Chile present these features.

Table 6.2 An overview of agreements signed between India and major countries and regions

Overall, like other powers, Indian foreign trade policy is also affected by international political and economic structure, as well as institutions and interest groups in the nation. It is noteworthy that India is still lagged behind in terms of regional integration compared with other powers in the Asia Pacific region. Therefore, the implementation of its open foreign policy is relatively lagged. Because India has just begun to actively promote liberalization of economic reform since the 1990s, the reform is fully not carried through and the licensing system is not completely abolished, foreign and domestic investors are still hampered by the omnipresent bureaucracy and are confronted by serious problems due to corruption and inefficiency. But on the other hand, India is faced with the urge of speeding up the opening up policy. Because India is relatively more in need of fixed rules of international integration to be able to carry through its reform, preventing hinder from conservative interest groups.

3 Potential Role of India in the TPP

There are two questions that come across our minds while thinking about the invitation made by the U.S. Vice President Joe Biden to India to join the TPP: First, does it imply that India will play an important role in the TPP? Secondly, what does it mean for the U.S. “pivot to Asia-Pacific” strategy if India is recruited?

We don’t think there is much benefit for TPP members with joining of India, while more likely having marginal effect, “only enhance the TPP’s transformative potential”. But taking a view from the strategic objectives of the U.S. to promote the TPP, the TPP containing India is beneficial for strengthening the relationship between the U.S. and India, thereby favoring the U.S. in achieving the goal of the “pivot to Asia-Pacific” strategy.

The purpose of the TPP establishment by the U.S. can be understood from two layers of meaning. First, in terms of economic interests, the U.S. expects to strengthen economic ties with the rapid growing East Asian region and increase its trade and investment interests, rather than being excluded from the East Asia integration process (Gordon 2012). In 2011, the then Secretary of State Hilary Clinton said in a speech: “One of the most important tasks of American statecraft over the next decade will therefore be to lock in a substantially increased investment – diplomatic, economic, strategic, and otherwise – in the Asia-Pacific region” (Hilary Clinton 2011). Second, the U.S. adopts the pivot to Asia-Pacific as its political strategy. The establishment of open trade agreements has never been solely for the economic purpose. In addition to increasing the economic interest of the U.S., the U.S. wishes to establish Asia-Pacific free market leading rules through TPP in order to limit competition coming from the Chinese development model (Meltzer 2012). The American theoretical basis of new global economic governance is against the “distortion of competition” in “State capitalism”, in practice it is reflected in TPP, the so called high level regional cooperation plan. This constitutes the basic plan and roadmap for Obama’s global economic governance in his next term (Changhong 2013). In this sense, TPP is the key carrier of the American strategy described above (Meltzer 2012).

From the perspective of international trade, India’s participation in the TPP seems to be insignificant. This can be concluded from the relative trade share of India compared with other TPP partner countries of the U.S. India accounts for a small share in the U.S. foreign trade. In 2010, exports from the U.S. to India amounted to $19.2227 billion, accounting for only 1.17 % of its total export. In 2010, imports from India to the U.S. amounted to $29.531 billion, accounting for merely 1.56 % of its total import that year. In 2012, exports to India and imports from India amounted to $21.6276 billion and $40.518 billion respectively. In the same year, exports and imports between the U.S. and other 11 TPP members amounted to $289.004 billion and $843.579 billion respectively (Williams 2013). Therefore, compared with other 11 TPP members, India’s proportion in the U.S. export and import is smaller, only 3.14 % and 4.8 % respectively.

The reason that the U.S. courts India and invites India to join the TPP is not due to the economic interests brought by India to the TPP, but because the U.S. expects to capitalize on India as strategic supporter in its pivot to Asia-Pacific strategy. The U.S. and India have a lot of common points on Asia-Pacific affairs. For instance, they both want to have a stable and secure Asia and balance the growing influence of China in Southeast Asia to benefit from the East Asian development. The U.S. hopes to give India the opportunity of opening up the market, establishing friendly U.S.-India relations and helping India becoming a great power in the region. Earlier, the U.S., Australia and India all states that the “Indo Pacific” region (where from the Indian Ocean to the Pacific Ocean) is the world’s new strategic center. Although India is in support of the concept of “Indo Pacific”, it only joined the RCEP, rather than the TTP. In addition, the BRIC cooperation is in conflict with the U.S. regional interests and framework design, the U.S. is not willing to see India coming together with China and Russia (Panda 2012). Therefore, from the U.S. point of view, the political significance of India joining the TPP is much larger that the economic significance.

4 The Potential Impact of TPP on India: Challenges and Opportunities

We have analyzed the role of India from the TPP and the U.S. perspective in the previous section. In this section, we will examine the existing opportunities and challenges of TPP from India’s perspective.

First of all, it will have certain influence on India whether it joins TPP, which mainly embodies the ‘trade diversion’ effect generated from TPP. Although the specific degree of trade loss depends on the results of the TPP negotiations, but to be sure, India’s loss is not too large, because India has signed FTA with some of the current members of TPP, including Japan, Malaysia, Singapore and ASEAN as a whole. Secondly, India is also working for FTA negotiations with Australia, Canada and New Zealand. Therefore, India would negotiate with the relevant parties in the process in order to reduce adverse impacts from TPP. The biggest loss in the export market of India may come from the United States. Although China has taken the place of the United States and become the largest trading partner of India in 2011, the United States is still India’s largest export market. Vietnam and Malaysia, members of the TPP, will compete with India for American market in textile and clothing and other industries on which the United States imposes higher tariff rates. Textile is one of India’s biggest industries, so it may cause a more obvious affect on the employment of India. In addition, India’s superior industrial sectors in the service industry, such as IT and telecommunications sectors may be in a weak position as the result of the TPP.

In terms of investment, India will be also under some adverse effects. The Multi-National Corporations will make more investment in TPP member economies rather than in India, because they can provide a better supply chain infrastructure and more conducive environment to trade and invest. India’s competitors like Vietnam and Malaysia will again become beneficiary countries. Considering India’s backward infrastructure construction and lack of competitiveness and the investment environment in Malaysia will be improved after joining TPP, India enterprises may thus increase investment in these countries. But considering these TPP members will improve environment in terms of the constraint in state-owned enterprises, deregulation and facilitation to trade and investment, India will also benefit from TPP to some extent.

Some industries in India may be of benefit if Indian joins the TPP. First of all, the competitive service industries will get more overseas market share. India’s export of services is in a leading position in the world, especially in software development, capital, financial services and tourism. India has become the second biggest software superpower, only after the United States and the largest outsourcing service country of the world (Mao Xiaoxiao 2013). Indian outsourcing industry mainly services Europe and the United States market. The entry of TPP can be more convenient for service export. Secondly, India may achieve earnings in terms of energy security. At present, energy products’ shares are the highest in India import commodity structure, petroleum and coal products together accounted for about 35 %. India has always been in the hope of increasing the import of coal and natural gas from Indonesia, Vietnam and Myanmar, thereby reducing energy import dependence on Middle East. The accession to the TPP is expected to obtain imports of cheap oil shale gas from America and Canada, as well as increased imports of coal and other resources from Australia.

However, what India faces more is still the challenges for it to join the TPP. As a trade agreement with high standards, TPP is very strict in government procurement, labor standards, environmental protection, supply chain management, supervision and coordination, investor state dispute settlement mechanism and other conditions. There have been many concerns in FTA talks ever since for India for there are many difficulties in promoting solving the issues such as the backward manufacturing tariff protection, the reform of government management, the opening of investment field to the outside world, etc. Moreover, TPP also involves such non-trade issues as environment and labor laws as well as protection of intellectual property rights. To join TPP not only means that India must take reform measures greatly, but also seriously limits the domestic policy space. For instance, TPP requirements on intellectual property rights may lead to greater adverse effects on pharmaceutical industry and health department for India. India is a big producer and exporter for generic pharmaceuticals. Accounted for 8 % of global pharmaceutical sales, ranking fourth in the world, India is the world’s fifth largest producer of bulk pharmaceuticals. It is known as the “pharmaceutical paradise” for the world’s poor, producing pharmaceuticals valued of $10 billions annually that is not protected by trademarks, especially pharmaceuticals for cancers and AIDS treatment.⁴ In India patent law, the third chapter (fourth term) does not give existing pharmaceuticals two patent rights, unless efficacy is much higher than the original pharmaceutical. Transnational pharmaceutical company, Novartis, had sought to challenge the law, and appealed to the India Supreme Court. The lawsuit lasted for 7 year and recently ended up with defeat. Once accepted the existing provisions of TPP, the country will be deprived of the ability to take similar guarantees.⁵ The Indian scholars pointed out that the strategic target of American trade representatives and the pharmaceutical giants is to prevent other countries from adopting Indian public health care model, and to isolate India in the Asia-Pacific region. However, these are preliminary understanding. With the role and scope of TPP more and more clear, India may take more striking position from its point of view.⁶

5 India’s Trade-Off Between TPP and RCEP

India has become a RCEP member, but the possibility for it to join TPP cannot be ruled out. So it is necessary for us to make a comparison on the significance of these two trade agreements for India. We can analyze the economic and trade interests of India involved in TPP and RCEP through the calculation and comparison on trade complementarity between India and the ASEAN countries, China and the United States as well as other TPP partner countries.

5.1 Scope of TPP and RCEP Members

As for members under the agreements, TPP covers the U.S., Canada, New Zealand, Chile, Peru, Vietnam, Singapore, Mexico, Malaysia, Brunei, Australia and Japan, while RCEP covers China, Japan, Korea, Australia, New Zealand, India and ten ASEAN countries. Countries involved in both these two agreements are Vietnam, Singapore, New Zealand, Malaysia, Brunei, Australia and Japan. Namely, except the U.S., Chile, Peru and some other countries, RECP covers most of the TPP members. Besides, India has reached free trade agreements with Korea, Japan, Malaysia, Singapore and ASEAN and is promoting the signature of free trade agreements with Canada, New Zealand and Australia. Because China, member of RCEP, has not joined TPP, the important difference between TPP and RCEP is that the two regional agreements involve the United States factors and China factors respectively at present. The former one does not involve China, but the latter regards China, the world’s second largest economy, as an important role. Once RCEP completed, it will covers the area with half the total population in the world and its GDP will account for 1/3 of the world gross GDP. This is of great significance for India to plan its bilateral, multilateral, regional and sub-regional open up and cooperation, so as to improve the ability to resist the international economic risks.

According to the data of the Indian Trade Ministry, we can find that, the current TPP members constitute 23.95 % of the export market of India, 16.79 % of the import source, 19.52 % of the total trade. In contrast, the RCEP members account for a little smaller share of 22.26 %, a larger share in the imports up to 26.02 %, and 24.59 % of the total trade. From these data, to be a TPP member is more helpful for India to export, but from the trade positions in whole especially the import point of view, RCEP means more to India.

At the same time, we have summarized the situations of India’s major trading partners that have not yet become the members of TPP in the Asia Pacific region. These members account for 14.78 % of India’s export trade, up to 20.82 % of the import share and 18.48 % of the total trade with substantial trade deficit with China, Korea and Indonesia. By contrast, India has a trade surplus with TPP members in general (except Japan, Malaysia and some ASEAN countries). There are ever more mutual trade barriers between members of RCEP than that of TPP when we consider that the RCEP are mainly composed of developing countries, so India will get more opportunities to improve the balance of trade in RCEP (see Table 6.3).

Table 6.3 Positions of 12 TPP countries and RCEP member countries in India’s trade

In the contest of TPP and RCEP in promoting the Asia-Pacific regional integration, the choice of India can be largely understood as how to choose between the United States and China. From the perspective of economic geography, as India’s neighboring country, China is obviously of far more significance in economic cooperation than the United States across the distance of an ocean. As for India’s economic development especially the development of border area China means much for India. For the border trade, the transportation distance can be shortened through the improvement of infrastructure in the border area on the one hand, thus leading consumers and producers to gather in the area, to strengthen the free flow of commodities and elements and efficiency of agglomeration free flow of goods and factors and to form clusters benefit of the market integration; on the other hand, under the effect of increasing returns to scale, the competitive advantage and the modes of labor division and specialization in the border area between the countries will be self-reinforced, forming a circular causality accumulating effect so as to attract more consumers and producers to concentrate in the border area (Li Ling and Chang Yaqing 2012). Yunnan is the most convenient channel for India to communicate with China and Southeast Asian countries over land.⁷ India is investing a lot of money in the “border area development plans” with the aim to develop the China-India border area, and the amount as well as the number of projects is generally on an increasing trend.

The money invested is increased from 50 million rupees during 1998–1999 up 592.8 billion rupees during 2008–2009, accounting for 74.38 % of the total investment in all India’s border areas; the number of the projects invested in China-India border area is increased from 150 during 1998–1999 to 666 during 2008–2009, accounting for 54.65 % of the total at borders.⁸

From the China-India bilateral trade, China as India’s first largest import source with imports amounted to $54.3 billion in 2012, $15.9 billion higher than of the United Arab Emirates, the second largest import source of India. The total volume of foreign trade between India and China reached $6,782.7 billion. The empirical analysis on comparison of India’s trade and investment relationship with China, Korea, Japan, Singapore and other Asian with the western countries led by the United States shows that the correlation coefficient with Asian countries is far higher than that of the western countries (Choongjae Cho 2013). Five “10 + 1” free trade agreements and their implementation have laid favorable conditions for RCEP, which is one of the reasons why it is easier to build RCEP than TPP. India’s joining RECP appears to be more effortless.

5.2 Differences in Scope and Opening Standards

India has signed free trade agreements with Japan, Korea, ASEAN and other countries, and each of the agreements specifies different rules. If India joins RCEP, these agreements can be integrated and optimized to build a highly qualified FTA. Although the degree of openness among RCEP member countries is higher than two free trade agreements respectively between India and other countries in some respects, most countries have experienced common researches and negotiations with India, so India is not passive to accept rules developed by other countries, with consideration of comfort and feasibility of each member country to make the process progressive and transitional. However, there are tougher conditions for joining TPP with a strong sense of protecting the United States interests. To comply with the above terms required by TPP, there are still a lot of difficulties for India to face. At the same time, the existing TPP members have not sent clear signals to India. According to official scholars in India, a statement noted in November 2011 that TPP is open to Asia-Pacific countries, but did not make it clear which areas are receivable. India does not belong to APEC members in the Asia-Pacific region, so the necessity of joining TPP for it is still quite fuzzy. For the United States dominated TPP with distinctive tough opening requirements, the standards of the United States must be met. The consensus document approved in TPP provides ten general principles for the establishment of RCEP, such as special and differential treatments. Even if the document offers special and differential treatments to some individual member countries, such countries will be the ASEAN countries.

Meanwhile, India means far less in TPP than the ASEAN countries. In addition, the potential advantage of RCEP is to open the service sector. To liberalize services is a very sensitive issue in most countries, but in India, it is the comparative advantage of it. If RCEP takes measures to promote the broader industry liberalization, the development of the industry with the great potential can produce effect faster. Because RCEP fully accepts the conditions in each member country and accepts the identities and situations of all the developing countries without involving the issues of labor and environmental standards, India can better utilize the platform of RCEP. India can improve its investment environment and competition rules to ensure the export competitiveness. In this respect, India shares similar interests and subjects with some of the RCEP members (Seshadri 2013).

5.3 India’s Concerns in Protecting the Manufacturing Industry

While actively promoting FTA, India attaches great importance to the protection of the domestic manufacturing industry. So when it strengthens the rules of origins continuously, India is increasing types of goods in sensitivity and exceptive sectors to open product domains and ranges cautiously. In establishing FTA with Thailand and Singapore, India is reluctant to talk about the tariff liberalization and take tariff or quota systems for sensitive goods to reduce imports or even exclude them from understood objects. India’s manufacturing industry is weak in the construction of roads, ports and other infrastructure as well as factories, so the government and the enterprises of are very negative to open such industry. As the case of India-Thailand FTA, Thailand once gained surplus with India’s trade, but from the second year after the implementation of the tariff liberalization, Thailand’s trade surplus with India turned into a deficit, especially in 2006, the deficit was up to $500 million and even rose to $21.6 billion in 2011. India still faces a large amount of trade deficit of $4 billion after signing India-Singapore FTA, so we can learn from the lessons of the experience of Thailand and Singapore that is making possible efforts to enlarge its exceptive and sensitive products, strengthen the rules of origins and strictly control the opening of the product market so as to maximize the protection of its domestic manufacturing. The reason why the free trade agreement negotiations between India and Thailand come to a deadlock is that India only accepts only 60 items among the 150 zero-tariff products additionally listed and delivered by Thailand to India. The promotion of TPP is not helpful to improve the trade deficit, while it only can pose more resistance. After reaching the tariff liberalization with Thailand, India is deeply troubled in the negative consequences caused by FTA with a huge community response. India cannot provide protections for its fragile agriculture, fruit, spices, wheat, rice, edible oil, wine, automobile parts and other industries.

However, the introduction of technology and the expansion of foreign capital investment is India’s one of important premises to join in bilateral and multilateral agreements. India’s FTA with developed countries (such as Japan and other countries) is of this kind. The FTA signed by India and Singapore in June In 2005 covers the finance, investment and communication of human capital and so on. While CECA between India and Singapore involves the full opening of talent flow in finance, communication, IT, design, construction, biology, aerospace and medical sectors, etc., leading Singapore’s FDI massively flows to the financial field in India. In the FTAs of India with Korea and Japan, the first is to open IT, medical, accounting, engineering, legal and other fields. In the regional exchanges and cooperation with the United States, India is intended to expand investment and technology introduction. In the economic cooperation with the United States, India strives to back away from the issues of the trade liberalization, but to emphasize the human capital and investment exchange, which obviously makes it a big conflict with the intention of TPP to realize zero tariffs on all goods in the region including agriculture, manufacturing and services industry in the 10 years.

In short, for India as a developing country, RCEP is a more realistic choice obviously, helping it successfully achieve its “Look East” strategy easier. Although TPP has a larger economic scale with more ambitious, RCEP will contribute more significantly in the trade liberalization once set up if we take that there are more trade barriers between the RCEP partners at present into account. India has always hoped but failed to be an APEC member, the realization of RCEP is conducive to achieve its aims of “Look East” strategy without requirements to compromise in intellectual property and environment. To join TPP, an agreement with high standards, there are apparently more challenges for India to face in the opening degree. An article of India’s former ambassador to Myanmar V. S. Seshadri noted that for the rules of TPP and TTIP, the India’s concern is how to avoid the mandatory commitments in TRIPs including intellectual property, labor and environmental standards, which will form serious restrictions on India’s policy choices in the current stage of development. He believed that RCEP cannot match up with TPP and TTIP in ambitions, which are even lower than that of WTO, but RCEP pays more attention to the interests of the developing countries; if RCEP can achieve a more balanced result, then it will be a path that is worthy of India’s efforts to support. Of course, he also mentioned India faces important challenges in RCEP negotiations. For example, India has not reached FTA with China, but it has a big trade deficit with China, which is a factor that should be actively considered in involvement in RCEP. India should promote RCEP to accept the commitment in its favor such as the cross-border flow of professional services.⁹

6 Three Attitudes of India Towards TPP at Present

Whether to join TPP or not is still a tradeoff relating to a large of interests for India, with strategic considerations involving many political and economic factors. At present, the government of India has not yet made a formal position. But summarizing from India’s domestic scholars point, the attitudes can be summed up as three possible ones as follows.

6.1 TPP Does More Harm than Good for India

As a developing country, India’s backward domestic reform and lower opening degree will cause relatively greater price to join TPP. Therefore, many India scholars hold negative attitudes and doubts on TPP. According to them, it will be unlikely for India to get more gains from TPP, but on the contrary, India may put it into practice at a great cost with great possible opposition at home. India tends to “put the real economic interests before vague strategic interests”.¹⁰

Dr. V. S. Seshadri, India ambassador to Myanmar, believes that the negative effects of the India could be affected by TPP, but the current accession to the TPP will be more adverse. Through such incremental FTA strategy as RCEP, India will be able to protect their interests better and get the APEC membership more easily (Seshadri 2013). Associate Professor Pinaki Dasgupta from Indian Institute of Foreign Trade holds similar views. He said: “TPP in India is not too to be accepted, for the text of intellectual property rights respected by the United States trade representative needs great adjustment to the domestic law by the contracting parties. The United States’ position can be interpreted as making efforts to isolate India loose standard patent system.” At present, the leakage of TPP negotiating text shows clearly that India’s patent system is opposed to TPP target.

6.2 TPP Is an Economic Coup for India

In this view, joining the TPP for India is an important strategic opportunity. The United States scholars think it of great significance for the United States-India relations to let India join the TPP, because strengthening economic and trade relations of both sides is better than any of the high-level visits.¹¹ Dr. Jagannath P. Panda of India believes that along with the increasing India’s influence in the Asia Pacific region, America will take India as the main competitors with China in local area so as to meet the need for a larger “trans Pacific Partnership Program” beneficiaries. Therefore, they think, India’s joining the TPP will be an “Economic Coup”. Even if India still take RCEP as the main ways of integration, now it is invited to join TPP and then have greater freedom, especially flexible bargaining chips in RCEP.¹²

6.3 Keeping Waiting and Seeing

According to this view, the price of joining TPP for India can be seen in the short term, but strategic significance to strengthen India-USA relations has been affirmed. India may be considered to select a proper opportunity to join in TPP after weighing the advantages and disadvantages. India ambassador Kishan S. Rana argued that, although India has been interested in becoming the member of the APEC, there has been no progress over the years. TPP is not very significant for India because of its too much intervention in domestic policy. At the World Trade Organization (WTO), India once made efforts to remove the similar new standards from a trade agreement negotiation. Therefore, it is more sensible for India to pay close attention to further development of TPP currently.¹³ He said: “because TPP is a evolving agreement, India can observe carefully what its development will be before deciding whether to join or not. India will be more likely to join in because of the economic interests with a mission rather than any invisible strategic interests”.

Dr. Jagannath P. Panda from India’s Defense Research and Analysis Research Institute suggests that, India is destined to join the RCEP. He holds an open attitude to the accession. If India did not join the TPP, it will lose a large share of the market.¹⁴ Dr. Armit Singer, The National Marine fund of India, states that if Indonesia, Philippines, Laos and Thailand are to join the TPP, then the TPP will be likely to undermine the prospects of RCEP. He thinks that TPP and RCEP will become a carrier struggling for trade dominance between China and the United States in the Asia Pacific region. While the victory of TPP over the APEC means the United States strategic victory against China. Singer argues that, “Considering China is rising as a trading power, India tries to maintain its economic and strategic position in Asia and even all the globe through its Look East strategy. TPP is a perfect tool for India to strengthen its influence in the whole Asia Pacific area. The current negotiation is an ideal opportunity for India, in which some of the controversial issues can be modified according to their own preferences, and India may seek opportunities to join this club” (Amit Singh 2013).

Like other Asian countries, India also seems not ready for the developments and is lacking a clear position for the rise of China and American coping measures. At present there are four kinds of attitudes on the United States “pivot to Asia-Pacific” strategy in India: Soft Nationalists; Great power Realists; Hard Nationalists and Bandwagoners.¹⁵ The final strategic choice of India may also depend on the struggle of the four viewpoints (see Table 6.4).

Table 6.4 Four domestic viewpoints on policy preferences in India

It may meet the interests of India to cooperate with great powers outside the region such as the United States so as to balance the rising Chinese influence. But the rigid target of “rules consistency” in TPP does not meet the goal of “creating multiple, inclusive and open security architecture in Indo-Pacific region”. India has refused for a long period of time to put unrelated items of trade into the multilateral negotiations. Some scholars have observed that: “India agrees to abide by international law and freedom of navigation and a peaceful settlement of the conflict, but more and more evidence shows, the determining factor of India’s ideal ‘Indo-Pacific’ regional architecture is the need of the domestic economic restructuring and the principle to continue to abide by Strategic Autonomy” (Chaco (Australia) 2012). So according to some scholars in India, India is likely to take a more cautious strategy, such as the non-aligned movement instead of standing in the America’s side (Kan (India) 2013). The report Non-Alignment 20 by scholars from India Research Center in 2012 puts forward similar strategic suggestions on India in twenty-first century foreign strategy, noting: “The most basic criterion of India dealing with external relations is to ensure creating the best environment for domestic economic development…. India must be integrated into Asia, and China is the most vital…. India must handle carefully the relationship with China based on the changing regional and international environment: for regional level is mainly on the problem of Tibet and for the global level is on the worries of India’s joining the other Unions…. In view of the fact of the trade deficit with China, India should not overestimate its ability to negotiate with China. The policy on China should be to seek a balance between competition and cooperation” (Khilnani et al. 2012).

7 Conclusion

From the perspective of economic and trade interests, TPP seems to be of no great importance to India, though India’s advantages in services trade can play better. In this battle between TPP and RCEP on Asia-Pacific regional integration plan, India seems not to be a pivotal voter. However, TPP is really an opportunity for India if it wants to strengthen strategic ties with the United States. However, if one consider from the current domestic development situation of India, RCEP may be more suitable for the realization of the implementing “Look East Policy” with lower cost. India is more likely to choose ways to protect its national interests in RCEP, rather than to join the U.S. dominated TPP just for the strategic interests of so-called “Indo-Pacific” concept. Of course, India is still interested in joining the TPP in the medium and long term, there is possibility for it to join.

From the preceding analysis, we can see that the biggest concern for India in the Asia-Pacific regional integration is China. India seems to doubt that China was not willing to see it to join and play roles in the RCEP; furthermore, India has not yet completed the FTA with China because of the current large amount of trade deficit, thus making it more difficult to promote economic cooperation with China. India wants to get on a great power status equal with China in the Asia Pacific region, especially more influences in the Southeast Asian region. In order to balance the Chinese influence, India may wish to rely on the United States to achieve the goal. Based on such situation, China should increase efforts to promote the RCEP negotiations and India’s participation so as to reduce its strategic concerns. China has shown positive attitude to strengthen cooperation, for example, in May of 2013, Prime Minister Li Keqiang has proposed to establish a China-India-Myanmar (BCIM) economic belt corridor in order to promote the interconnection among East Asia and South Asia. If such a plan can be implemented smoothly, India is likely to reduce the interest in TPP.