Syllabus: GS2/International Relation; Global Groupings
Context
- In an era marked by rising protectionism and fractured global trade alliances, India needs to reconsider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and deepen its integration with ASEAN and the European Union (EU) to safeguard its economic future.
Status of Global Trade
- Post-pandemic global trade has gained traction, with persistent inflation, tariff disputes, and conflicts such as Russia-Ukraine and Israel-Iran have disrupted trade flows.
- Multilateralism has given way to regionalism. Countries focusing on inward-looking policies, re-shoring industries, and recalibrating trade alliances in favor of economic security.
Why does CPTPP matter to India?
- CPTPP comprises 11 Pacific Rim countries including Japan, Vietnam, Canada and Australia, representing nearly 13% of global GDP.
- India’s entry into the CPTPP could offer:
- Market Diversification: Reducing overdependence on select geographies like the US and China.
- Strategic Presence in the Indo-Pacific: Enhancing India’s footprint in a region where China already holds sway (Reinforce its Act East Policy).
- Supply Chain Integration: Tapping into advanced manufacturing and digital trade networks.
- However, India needs to align with strict labor, environmental, and intellectual property standards—areas where domestic reforms may be politically sensitive.
India, ASEAN and EU
- ASEAN nations are deeply embedded in global value chains, particularly in electronics and manufacturing. Strengthening ties with ASEAN:
- Improve connectivity and reduce trade deficits.
- Support India’s role in regional supply chains and digital trade.
- India and ASEAN have developed a Comprehensive Strategic Partnership, with cooperation spanning trade, connectivity, digital transformation, and maritime security.
- Economically, India and ASEAN are linked through the ASEAN-India Free Trade Agreement (AIFTA), which came into effect in 2010.
- It has significantly boosted trade, with bilateral merchandise trade reaching over $130 billion in 2024.
- India-EU Free Trade Agreement (FTA): EU is India’s second-largest trading partner, and a formal FTA could open doors to advanced manufacturing, green tech, digital services collaboration, and innovation.
| About CPTPP – It was signed in 2018 in Santiago, Chile. – Members: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. – It builds on the original Trans-Pacific Partnership (TPP) but suspends certain provisions to reflect evolving priorities. 1. It covers a market of over $13.5 trillion in GDP. – Current Chair (2025): By Australia (Theme: Delivering Sustainable Trade and Resilient Growth). – Objectives: 1. Boost trade and investment among member countries by eliminating tariffs and reducing non-tariff barriers. 2. Promote sustainable and inclusive trade, with commitments on labor rights, environmental protection, and support for small and medium-sized enterprises (SMEs). 3. Facilitate regional economic integration, especially in the Indo-Pacific, by creating a platform open to future members who meet its high standards About ASEAN – Members: Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar, and Cambodia. – Primary Objective: To promote political and economic cooperation and regional stability. |
Other Significances of Multilateralism
- Boosting Export Competitiveness: India’s exports have struggled with high logistics costs and limited value chain integration. Joining high-standard trade frameworks like CPTPP and finalizing the India-EU FTA could:
- Enhance access to high-income markets.
- Encourage domestic reforms in standards, labor, and IP rights.
- MSME Imperative: India’s Micro, Small, and Medium Enterprises (MSMEs), which account for 40% of exports, stand to benefit the most from broader market access.
Concerns Ahead of India
- Looking At India’s Immediate Challenge: India now faces the prospect of a more fragmented trading system. It needs:
- Secure bilateral gains with the US, where possible.
- Accelerate engagements with trade-friendly partners to hedge against US-induced volatility.
- Recent FTAs: India’s traditional trade scepticism has gradually shifted toward a more open stance, reflected in recent FTAs and partnerships with Australia, United Arab Emirates, and United Kingdom.
- Strategic Actions for India: Submit a formal application to the CPTPP, aligning itself with markets like Japan and Korea, to attract foreign investment, reform domestic regulations to meet global standards, and make Indian exports more competitive.
- Regulatory and Standards Alignment: CPTPP and EU trade frameworks demand high compliance with labor rights, environmental safeguards, and intellectual property norms.
- Protection of Domestic Industries: India’s MSMEs, agriculture, and manufacturing sectors fear being outcompeted by cheaper imports if tariffs are slashed.
- It was a major reason for India’s withdrawal from RCEP and continues to shape its cautious approach to CPTPP.
- Tariff and Non-Tariff Barriers: India’s relatively high tariffs and complex customs procedures could become sticking points in negotiations.
- The EU, in particular, has pushed for greater market access in sectors like automobiles, wines, and dairy—areas where India remains sensitive.
- Geopolitical Sensitivities: India’s strategic calculus—especially regarding China’s influence in regional trade blocs—adds comple
Way Forward
- Calibrated Re-entry Strategy: Reassess CPTPP with a phased-in negotiation framework focusing on services, IP, and digital trade safeguards.
- Upgrade Domestic Standards: Invest in logistics, testing, and quality infrastructure to meet EU and CPTPP norms.
- MSME clusters need capacity-building schemes for international compliance.
- Revive FTA Talks with EU & ASEAN: Push for balanced FTA clauses with EU (e.g., digital sovereignty, green taxonomy flexibility).
- Improve implementation of India-ASEAN FTA to resolve non-tariff barriers.
- Leverage Strategic Partnerships: Use forums like QUAD, IPEF, and BIMSTEC to align security, supply chains, and standards.
- Coordinate trade strategy with geopolitical goals.
| Daily Mains Practice Question [Q] In light of global trade shifts, do you think India should reconsider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and deepen integration with ASEAN? Highlight the potential challenges. |
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