India has for now opted out of the trade pillar of the US-led Indo-Pacific Economic Framework (IPEF), which had its first in-person ministerial in Los Angeles. IPEF is a grouping of 14 countries which account for 40% of global GDP, and marks the US’s pivot to the Indo-Pacific region to counter China’s dominance. Trade is one of the four pillars of this bloc that aims to enhance supply chain resilience, sustainability, inclusiveness, economic growth, fairness and competitiveness. India’s decision is a step in the right direction as it is unsure of making binding commitments and hasty pledges on sensitive issues like the digital economy, data flows, labour and environment standards and public procurement which the trade pillar entails, according to a report in the FE. India’s concern is that it will undermine its still-evolving policies on the digital economy and data privacy. The ruling NDA regime recently withdrew its personal data protection Bill to introduce a more “comprehensive legal framework”. However, India has joined the other three pillars on supply chains, tax and anti-corruption, and clean energy, and has endorsed IPEF’s underlying objective to foster “high standard, inclusive, free and fair trade”, according to the joint statement issued after the conclusion of the ministerial.
While India has rightly upheld its interests in not joining IPEF’s trade pillar, there is a need for greater clarity on its objectives to ink deep free trade agreements with the UK, EU and Canada. Recently, there were reports that India Inc is ready to embrace new generation FTAs that entail regulatory policy reform, intellectual property rights protection, labour rights etc. But if—as Amitendu Palit , senior research fellow, Institute of South Asian Studies in Singapore, is suggesting—India does not have enough experience in dealing with such issues, how will these FTAs materialise? After exiting the EU, the UK is eager to stitch up a deal with India as part of its wider outreach to the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership by end-2022. CPTPP is a higher order agreement and will serve as a template for the UK’s deal with India, unless it is only an interim FTA covering selected goods and services. The EU is a leader in new generation FTAs and recently concluded one with New Zealand, which had provisions that respect the Paris Climate Agreement and core labour rights, enforceable through trade sanctions as a last resort. Will India gain experience negotiating such deals to later signal its readiness to rejoin IPEF’s trade pillar?
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India’s stakes in re-engaging with IPEF’s trade pillar are high. Last fiscal, the US emerged as our leading trading partner. There are also relatively greater comfort levels in trading with the US with which India enjoys a trade surplus of $32.8 billion. India has also indicated that it would be “happy and willing” to negotiate with the US should the Biden administration look for a new free trade partner. Even without a deal, both partners are engaged on investments, technology and boosting trade. Whatever issues that bedevil such a deal can be resolved through bilateral dialogue and at the forthcoming trade policy forum meeting by this year-end. Although the IPEF is only a putative bloc, the relatively greater attractions for India are that its two-way trade with the 14 members is similar to that of RCEP but with a smaller deficit of $18.8 billion.
