Soon after his elevation as the President of the United States, Donald Trump began his first day with a bang by delivering upon his promise to scrap the Trans Pacific Partnership (TPP).
TPP was the brainchild of then President Obama who brought together 12 countries including United States; Canada; Mexico, Peru, and Chile in the Americas; and Japan, Australia, Vietnam, Malaysia, Singapore, Brunei, and New Zealand in the Asia-Pacific.
Together, they comprised almost 40 percent of the world's GDP and had enough financial and political muscle to balance their one-sided trade relationship with China.
US’exit from the TPP delivers a death blow for the policy of outgoing President Barack Obama who sought to use the TPP to shift the focus of US foreign policy from the Middle East to Asia.
US’ TPP withdrawal, however, will not have too much of an impact on the real economy of the USA as it was only a plan with several roadblocks on the path to implementation.
Besides, US’ withdrawal from TPP also marks its end as the other nations lack the negotiating power without USA.
Moreover, US manufacturing workers have been demanding the exit from TPP as they felt that it would lead to a higher exodus of manufacturing jobs from the USA.
That, however, was not true.
Most of the manufacturing jobs were lost due to automation, which has union movement at its core. Companies were forced to look for automation to avoid dealing with difficult union members and entry level manufacturing jobs were not going to return any which way.
So, the popular reason cited behind the withdrawal is just a sham and will not result in any actual benefit to US workers.
However, this protectionist attitude will help the USA as it brings back into focus the domestic issues the country is faced with.
Under the presidency of Clinton and Obama, the government of USA was criticised for having lost focus on employment and fiscal issues in its blind pursuit of foreign policy, arguably for the benefit of the arms and oil lobby.
Now, the withdrawal from TPP heralds an era of protectionism for USA, which will be good both for the world as well as the USA.
US’ exit from TPP will also be beneficial for India as TPP was much more than just a trade agreement.
It would have placed countries which were part of the treaty in a position better than India and China.
It had stringent requirements for Human Rights, labour & environment conditions, which are used by developed nations to put artificial trade barriers against countries like India and China.
On the other hand, the withdrawal of US from the TPP will only provide a short respite to India as our resistance to WTO will lead the developed countries led by USA to pursue alternative policies designed to force our hand.
The Indian government, therefore, needs to plan for the eventuality by going for sustained development through reduction of bureaucratic barriers to business rather than lowering FDI limits.
(The author is a Finance & Legal professional with membership of the Institute of Company Secretaries of India. He has been setting up and streamlining legal & tax departments as Founder Director of Staava Consultancy Private Limited and has been instrumental in the entry of large MNC groups including Rocket Internet (Germany), OCS Group (UK) into India)
