Although India is not a signatory of the Trans Pacific Partnership agreement of 2015 (TPP), it should look at the document as a blueprint for the future of US-India relations. It includes all of the components that will drive the relationship – greater imports and exports, innovation, technology and more common regulations and policies.
TPP was a remarkably ambitious agreement. It estimates that, upon full implementation of TPP by all participating nations, 40% of the world’s economy will function more smoothly. And nearly 18,000 taxes and tariffs will be eliminated on products from technology to life sciences and manufacturing.
I believe that the United States and India can achieve a bilateral economic relationship that reaches $1 trillion by 2030. To do this, India will need to build the capabilities of its institutions in the private, civil and government sectors to achieve greater scale, create jobs and integrate better with the world economy. In addition, it will need innovation across sectors and business models to solve societal challenges and build Indian companies.
The TPP’s biggest impact is in these areas of innovation, intellectual property and new industries – exactly where the United States and India are headed for greatest collaboration – and competition. As a result, the two nations should look at TPP as the blueprint from which to negotiate bilateral agreements in the future.
The sector where TPP may most benefit innovators and entrepreneurs is clean energy and the environment. The agreement eliminates tariffs on environmentally-beneficial products and technologies, such as solar panels, wind turbines, wastewater treatment products, air pollution control mechanisms, as well as air and water quality monitors. Many of the TPP member’s countries had tariffs and other barriers in places in these sectors in the hopes of developing a domestic industry. With this agreement, the emphasis changes towards innovation and rapid adoption of clean technologies.
Intellectual property is the area where TPP has received the most scrutiny. It requires every member nation to crack down on counterfeit products – a boon to IP-dependent companies in technology, life sciences, manufacturing and energy. In addition, patents will, theoretically, proceed in multiple jurisdictions simultaneously – thus reducing the cost, time and uncertainty around patenting and IP recognition. These steps will greatly benefit startups based in the United States who are worried about IP protection and the costs of the patent process.
In the area of medicine, pharmaceuticals and public health, the agreement continues to be controversial. According to the White House, TPP “eliminates tariffs on medicines and medical devices, helping lower costs for hospitals, clinics, aid organizations, and consumers.” Medicines like amoxicillin, penicillin, and anti-malarial medicine, which are critical in the developing world, will remain available at lower cost, but perhaps only by the company holding its patent. TPP recognizes the Doha Declaration on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and Public Health, which affirms the rights of countries to take measures to protect public health.
In other words, pharmaceutical companies and biotech startups will benefit from the recognition of common intellectual property norms. But if a nation, such as Vietnam, determines that a major local health concern requires the rapid distribution of low-cost, generic versions of medications, it maintains the right to do so. What remains unclear is whether or not it can source those medications from generic products, or must negotiate deals with the patent-holding pharmaceutical manufacturer. For startups developing orphan drugs or diagnostics for the developing world, this point will be critical to their success or failure. India will probably require similar safeguards in any IP policy.
One just needs to go back to 2014 to see that these two issues were, at the time, defining the US-India relationship. India’s policy to support local solar energy providers, and its intellectual property regime had put much of the US business community at odds with the Singh government.
The willingness of Vietnam, Peru, Brunei and Malaysia to join TPP also highlights a strategic change in how countries position themselves economically. By joining TPP, each country forfeits some of the benefits of being a low-wage, manufacturing economy. The agreement places strict limits on currency manipulation, protects collective bargaining for labor unions, requires acceptable labor laws around wages and working conditions, and protections for the environment. A particular emphasis was placed on the reduction of illegal logging, fishing or wildlife trafficking.
These countries are willing to lose their labor cost arbitrage advantage because of the much bigger advantages of being viewed as being a stable place to do business by the private sector. According to experts, the Vietnamese and others believe that the legal and operational familiarity bred by participation in the TPP will encourage more long-term investment than would have come through labor cost arbitrage. The desire of other emerging markets to join the TPP, including Thailand, Philippines and Indonesia, in the near future speaks to change in mindset.
And this is what I would expect to see from India. Over the next 10-15 years, as Indian industry matures, the two nations will have to negotiate bilateral agreements to address the exact same issues as TPP has done for economies that were already fairly integrated with each other. To expect India to jump in today is unfair. But to expect both nations to use the TPP as a blue print to get to a broader bilateral trade and investment treaty, is common sense.
Image credit: “Go Fisherman go – Gokarna India 2011” by Andreas Lehner, CC BY 2.0 via Flickr.
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