Reconsidering CPTPP, Integrating with ASEAN & EU

Brief 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.

Source Content

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.

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.

Source: BS