Vice President Joe Biden returned from India last week after a whirlwind trip designed to reinvigorate U.S.-India ties and cajole Delhi toward economic reform.
Meanwhile, 2,000 miles away, the latest round of negotiations for the Trans-Pacific Partnership (TPP) trade agreement was kicking off in Malaysia.
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These events are unrelated, but they needn’t be. Following a decade of rapid growth, India’s economy is the world’s ninth-largest. Even with a recent slowdown, it is already larger than all but two emerging markets — and with the country set to become the world’s most populous by 2025, India’s continued potential for growth is vast.
The TPP, meanwhile, could be the most important initiative in global trade in a decade. With Japan recently joining, the pact already comprises 40 percent of the world’s GDP, more than 775 million consumers, and 40 percent of total U.S. trade in goods. In addition to Japan, the pact links together major economies in North America (the United States, Canada, and Mexico), South America (Chile and Peru), the Pacific (Australia and New Zealand), and Southeast Asia (Malaysia, Singapore, and Vietnam, among others) in a deal that promises broader and deeper liberalization than any previous trade deal.
India’s addition would only enhance the TPP’s transformative potential. And a TPP including India would do more to buttress Washington’s ties to New Delhi than any number of high-level junkets. What’s not to like?
President Barack Obama has characterized a strong relationship with India as “indispensable.” But the truth is that U.S.-India relations have stagnated since the signing of the civil nuclear deal at the end of the George W. Bush administration. The United States has been preoccupied with domestic economic issues, a volatile Middle East, and a rising China. The tumultuous U.S. alliance with Pakistan has angered Delhi, even as Washington has recently attempted to distance itself from Islamabad. More generally, South Asia sits uneasily and neglected in the Obama administration’s map of crisis, sandwiched between the U.S. “pivot” to Asia and the ongoing conflicts rocking the Arab world.
India’s trade with the United States, meanwhile, remains far below its potential. Last year, the United States did just $62.9 billion in total trade with India – less than with the Netherlands. The United States does 10 times as much trade each year with China. India’s entry into the TPP would facilitate what some estimate could be a $500 billion bilateral trade relationship by slashing tariffs and non-tariff barriers, reshaping supply chains, and establishing common standards on a host of goods and services.
To be sure, negotiating Indian entry would not be easy. India’s economic reform has stalled over the past few years, and much of the TPP’s promise lies in all members’ commitments to meet the pact’s high standards. India’s fractious domestic politics would significantly slow the talks, which are currently proceeding steadily toward completion.
Why, then, would the United States promote India’s entry, particularly when it would be complicated to broker? For one, Indian admission to the TPP would be an economic coup. Adding the world’s largest democracy, and a BRIC, would represent a symbolic victory for a pact that promises to set global trading standards for decades to come.
Joining the TPP would be a smart move for India, too. The TPP offers Delhi the opportunity to gain preferential access to thriving and fast-growing markets in Southeast Asia, in addition to Canada, Japan, Mexico, and the United States. The agreement will also establish rules on a host of issues deeply relevant to India’s economy, including intellectual property, generic pharmaceuticals, local content requirements, and the liberalization of services. And for the perpetually energy-insecure country, the United States could dangle the prospect of access to future U.S. and Australian exports of liquid natural gas.
It’s also a no-brainer from a geopolitical standpoint – a chance to rack up a rare diplomatic victory against Beijing. The TPP, contrary to popular (and Chinese) perceptions, is not an anti-China club. Rather, it’s designed to enshrine high trade standards for any country — even China — that meets them.
Yet an Asia dominated by China and its state-capitalist economic model would hurt India’s efforts to reinvigorate growth and the United States’ ongoing recovery. Under its “Look East” policy, India is already seeking both economic and strategic inroads into Southeast Asia. The TPP would be a perfect vehicle to ensure that India retains its historical role as a major influence in the region, and that Southeast Asia continues its present progress toward more open economies.
For now, TPP members are refusing to entertain new applicants for fear of disrupting meaningful progress toward establishing the trade area. But the pact has huge potential to attract new members in coming years, with South Korea, Thailand, and Costa Rica, among others, often discussed as TPP aspirants. Even China has hinted that it might want to explore the opportunity.
Why not India?
Jesse Kaplan, a former Babar Ali fellow at Lahore University of Management Sciences, is a student at Yale Law School. Sean West is head of Eurasia Group’s U.S. practice and can be followed on Twitter @seanpwest.
Bring India into the TPP
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