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IASbaba’s TLP 2016 [9th March]: UPSC Mains GS Questions [HOT]: Synopsis

1. India needs to push forward for the finalization of ongoing FTA negotiations with different countries and regional groupings to preserve its trade interests keeping in mind the progress being made by the Pacific littorals to negotiate the Trans Pacific Partnership (TPP). Analyse.

Introduction

Trans-Pacific Partnership Agreement is a free trade agreement aims to lower cross-border barriers in trade of goods, services and investments, and enforce high standards of labour-environmental regulations, rules of origin criteria and intellectual property protection.

TPP impacts on India (Choose/Write any 3 points)

• TPP aims to eliminate tariffs and reduce non-tariff barriers and is expected to make around 11,000 tariff lines duty-free for its members. This extensive tariff elimination will definitely result in a loss of competitiveness of Indian exports in these markets.
• TPP contains strong and common rules of origin enforced to ensure that the benefits of TPP go to member-countries (i.e., only goods that originate in the TPP region will receive preferential treatment), hurts the exports of India.
• Aims to expedite release of goods; increased market access for services; Investments in the TPP markets will be liberalized; provisions to address competition in commercial markets with restrictions on the advantages conferred – India will get affected by diversion of trade
• TPP member countries will get unfettered and zero-duty access to the markets as against exporters from India who will face high percent import duties which will make them uncompetitive.
• If TPP members come together with stronger IPR regime, regulations on products produced by prison or child labour, it will be difficult for India to attract foreign investment with its history of retrospective taxation. New investments will flow into TPP member countries.

FTAs are arrangements between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non tariff barriers on substantial trade between them. Thus, to ensure that we don’t lose out in the global competition, India needs to actively engage with the other trading blocks and also encourage bilateral negotiations.

FTAs addresses the challenges posed by TPP and helps to preserve India’s trade interests (Choose/Write any 3 points)

• By eliminating tariffs and some non-tariff barriers FTA partners get easier market access into one another’s markets.
• Exporters prefer FTAs to multilateral trade liberalization because they get preferential treatment over non-FTA member country competitors.
• FTAs may also protect local exporters from losing out to foreign companies that might receive preferential treatment under other FTAs.
• Possibility of increased foreign investment from outside the FTA.
• Such occurrences are not limited to tariffs alone but it is also true in the case of non-tariff measures.

Conclusion (Cut short according to your word limit)

India has preferential access, economic cooperation and Free Trade Agreements (FTA) with about 54 individual countries. India is a late, and cautious, starter in concluding comprehensive preferential tariff agreements covering substantially all trade with some of its trading partners.

India needs to push forward for the finalization of ongoing FTA negotiations with different countries and regional groupings especially with the Europe which is in limbo since few years. Also India needs to speed up the process of the RCEP which will act to balance the TTP. Though India has signed FTA with ASEAN, it needs to be effective implemented and supported by policy initiatives. SAFTA has been a non-starter after several years; it needs to be brought on track. FTAs with African Union and South American nations must be finalized/taken on priority, if India needs to maintain it’s growth momentum and leverage ‘Make in India’.

Best Answer: Gaurav

Trans-pacific partnership(TPP) was recently finalized by Pacific littoral states and going by leading economist, it is going to be a new milestone event in geonomics by bringing widespread transformation in the manner global trade is carried out. The fact that member states hold 50% of world GDP not only attracts special attention of world, but also to India, which has large trading transactions with the countries.

Impact on India:

1. According to World Bank, India will face preference erosion and trade diversion which will cost some portion of GDP.
2. TPP contains discourse on new issues such as environment, labour, investment, govt policy, etc, which will bound to effect discussions at multi-lateral forums such WTO, and hence can hamper Indian priorities
3. Member countries of TPP might deviate from WTO commitments, e.g MFN status, and might restrict market access for non-TPP countries such as India
4. TPP also dwells on private standards, an area in which India has not experience and hence proliferation of such standards around the globe can be detrimental to India’s interest
5. India might also face trade isolation as fulcrum of trading shifts to Pacific
6. Investments and capital influx might also get diverted to Pacific region

In this regard India must strengthen regional trade agreements such as SAFTA and strive for quick finalization of multilateral ventures such as RCEP, Indo-EU BTIA as

1. this will impart momentum to trading and help cover up the losses which can happen due to diversion of trade
2. these agreements will also allow India to diversify the trade basket as well as the buyers
3. with help of trading India can also increase the stake of members in the nation, and can diplomatically influence the partners to take stands which are in nation’s interest at multilateral forums
4. also trading partners will be more aligned to ward-off negative effects of TPP
5. agreements like SAFTA has much unrealized potential and hence are low hanging fruits
   Besides, India can also try to join TPP as observer by using platforms such as APEC, as India will be better positioned to influence the decisions from inside than from outside.

Thus in time of uncertainities where TPP can alter the entire gamut of trading ecosystem of the world, bilateral and regional trading agreements can act as breakwaters in preserving the trading territory of the nation. Hence, highest priority should be accorded towards finalization of pending trade agreements.

Best Answer: Saurabh 

TPP is a trade Trade agreement between 12 nations of the Asia Pacific and is a major initiative by the US under her “Pivot to Asia” policy. It aims to integrate their economies contributing about 40% of the global GDP and thus generate economic growth and avenues of employment. However, the TPP has stringent standards on non-tarrif issues such as IPR, environment, labour policy, government procurement, e commerce, competition policy etc.

India as a major player in the Asian region has reasons to be concerned:

1) Since major world economies like US and Japan are a part of TPP, the higher than WTO standards on various aspects may become global norm

2) India stands to lose its product preference in many countries which are traditional markets. The impact on cotton yarn trade with Vietnam due to the “yarn forward” rule, is an example

3) With IPR becoming a major non tariff barrier, the market for Indian generics could shrink

4) The fulcrum of the trade in Asia Pacific could be shifted to US and EU, thus edging out India in this game

5) Capital investments might suffer due to this

There are certainly concerns and hence India should speed up the negotiations on trade pacts such as RCEP and SAFTA.. This would benefit India:

1) This would cover up for the losses caused due to the diversion of trade

2) Due to regional economic integration, India would speed up the creation of requisite physical infrastructure and the process of reforms. This would benefit in the long run

3) Materialization of these arguments would preserve Indian influence in Asia and would counter Chinese and US efforts

4) Integration of supply chains and production processes would impart efficiency into the Indian economy and would also generate much required employment

India could also mull her options towards joining the TPP as it could take up the case of the developing countries in the TPP and could influence the decisions over different non tariff issues.

With WTO not able to play a sufficient role, these trade partnerships are here to stay. The government has rightly taken cognizance of the effects of the TPP and a coherent strategy is the need of the hour.

2. Is india’s trade deficit vis a vis china a cause of concern? Why? Account for the reasons of this deficit. Also enumerate various steps that can be taken to bridge this deficit.

Introduction:

1. Total trade with China : USD 70 bn
2. Trade deficit with China : USD 48 bn
3. India’s trade deficit is in favour of China. It is definitely a cause of concern today.

Why cause of concern ?

1. Manufacturing industry of India suffers due to cheap chinese imports.
2. Huge forex reserve list every year.
3. China follows its aggressive economic policy, sees india as a competitor and intentionally dumps low cost products in India.
4. Risk of supply constraints during period of conflict.

Reasons:

1. Cheaper manufacturing, cheap and skilled labour and low cost of production in China.
2. China opened its economy much earlier than India and helped it to reap full benefits of globalization. It became a global leader in manufacturing.
3. In 1990s India signed Information Technology Agreement. Though it lead to booming of software industry, it also destroyed India’s electronic manufacturing industry making us to rely on imports.
4. India’s inefficient PSUs, lack of competitive domestic private sector till recent times also made us to rely on imports.
5. India’s exports to China are mainly raw materials like mineral ores, cotton etc. But India imports finished products of the same from China which is always an unfavourable trade.
6. China has put strong regulations on India’s exported products. It is apprehensive of importing India’s pharmaceuticals.
7. Devaluation of Yuan has made Chinese products mire attractive in recent times.
8. Dumping of chinese cheap products in India.

Steps:

1. India pharmaceuticals , agri products and IT sector should expand their presence in China.
2. Promoting Tourism between the two countries.
3. China largely supplies raw materials while it has no significant production brand in generic products and under these circumstances, it can become a high export market for India.
4. -To offset the impact of trade deficit, India had sought more investments from China especially in mega industrial parks (in States such as Gujarat and Maharashtra) so that products can be manufactured and shipped to China and other overseas markets.
5. -special purpose vehicle set up to promote investment in the Cambodia, Laos, Myanmar and Vietnam region would help Indian industry invest in the region and cater to the Chinese market.
6. Export processing zones and SEZ’s to attract potential manufacturers to improve exports.
7. Make in India programmes and GST and Bankruptcy bill in way.
8. Anti dumping duties and banning import of cheap quality products as Health hazards.
9. Signing MOU for rail and road development.
10. Involvement in RCEP.

Conclusion :

Give 1 or 2 line of conclusion with optimistic view.

Best Answer : vajrasattva

Trade deficit is an economic measure of a negative balance of trade in which a country’s imports exceeds its exports. Trade deficit between India and China has increased to USD 44.7 billion during April-January period of 2015-16.

India shouldn’t worry about its trade deficit with China because:

1. The structure of India’s trade with China is not so exceptional. India runs trade deficits with 16 of its top 25 trade partners.
2. India’s trade with China is actually more balanced than some of its other trading relationships. Ex. Trade deficits with Iraq, Switzerland were 90%, 83% of total bilateral trade, respectively.
3. To a certain extent, Chinese imports are beneficial both to Indian consumers and companies as cheaper Chinese consumer goods allow Indian living standards to rise & also provide more competition for local products and encourage their innovation.
4. One of China’s main exports are capital goods, which are used to accelerate the building of Indian infrastructure and thus positive for India’s economic growth.

Reasons for this Trade Deficit:

1. Major reason for India’s trade deficit is its weak manufacturing sector , which in turn stems from restrictive labor, land and tax laws, rickety infrastructure, and inadequate power supplies. India

simply doesn’t produce enough goods, or goods of high-enough quality, to meet the demand of its billion-plus consumers.

2. The tariff and non-tariff barriers such as phytosanitary standards that China imposes on Indian exports of agri commodities( of which India is a net exporter ),and other on pharmaceuticals, IT enabled services.
3. Iron ore ,one of India’s major export items to China have been falling steadily due to mining bans( Goa and Karnataka). Less demand in view of slowing down of Chinese economy resulted in decreased exports from India.
4. India has blocked the presence of Chinese investment in telecom, ports and shipping due to security concerns.

Steps can be taken:

1. Tariff concessions could be asked for the products under Asia-Pacific Trade Agreement (APTA)
2. China should open up more of its markets to IT and Pharmaceuticals which are India’s main strengths. Also China should allow Indian companies to bid for tenders in its state-owned enterprises .
3. India should insist up on for simplification and greater transparency in China’s procedures related to registration, inspection, and approvals of imports from India.
4. To offset the impact of trade deficit, India had sought more investments from China especially in mega industrial parks (in States such as Gujarat and Maharashtra).
5. Tourism is a sector with high potential and India can step up measures to promote India as a favoured tourist destination amongst Chinese, like development of Hiuen Tsang circuit suggested between India and China, tracing and developing the places where the Chinese scholar travelled and studied during his over 17-year long land journey to India.
6. India should convert her weak manufacturing sector into strong one by using Make in India &

skill India programme. India also should have integration in the East Asian supply chain , due to this there is presence of global supply chains and regional hubs of production in India.

It would be difficult for both India & China to maintain sustainable trade relations, unless both the nations take some firm actions to bridge this gap. 

3. Discuss the reasons behind the migrant crisis in Europe. It is being said that the notion of a continental European identity has been eroded by the crisis with old distinctions of western, central and eastern Europe resurfacing again. Do agree? Critically examine.

• Intro

Introduction can contain in brief about the origin of the crisis

• Body:
• Reasons for the migrant crisis:
• Push Factors:

1. Middle East (Syria, Yemen, Iraq)–>Western Powers in the pretext of supporting pro democratic forces have helped supporting radical grps and have given birth to ISIS. ISIS has subjected Syrians to murder ,torture ,sex slavery and many other atrocities
2. Africa (Eritrea, Nigeria, Somalia, Sudan, Gambia, Libya): Run by a repressive regime and have become a battle ground for ethnic clashes.
3. South Asia (Afghanistan, Pakistan, Bangladesh): Due to deteriorating socio-economic conditions, civil conflicts.

• Pull Factors:

1. Europe is the closest wealthy, safe and accessible region from the Mideast and Africa.
2. Europe is economically prosperous, socially secure, have better immigration laws and accessible region from the Mideast and Africa.
3. Prospects of better life in Europe, which are economically advanced and have huge demand for unskilled workers

• Whether older distinctions resurfacing again?
• Most of the refugees are entering western European countries and move further towards other Eastern countries, major landing points being Italy and Greece.
• Some countries like Germany, Greece, Italy and Sweden are more welcoming to migrants
• Other countries like Hungary, Austria, France and England are not in favour of accepting more refugees, they want an upper limit on the number of refugees per country, they fear that providing for health, education and social security for migrants will put unsustainable financial burden on them.
• By Brussels declaration, Turkey and European union ,Turkey has agreed to prevent migration to European Union through Aegean sea
• The Schengen Agreements and Dublin Regulations the movement of refugees cannot be controlled, adding to their worries .Some countries like Hungary, France have even closed their borders against these agreements
• Irresponsible financial management of some countries has already put huge financial stress on the European union, financial mismanagement by PIGS economies have put burden on Germany France and England.
• Russia’s growing influence in the eastern Europe has affected the stability of this region , the annexation on Crimea from Ukraine and increased militarization has created further divisions.

• Conclusion
• State your opinion about the issue and
• Comment on whether these developments are good or bad.

Best answer: Vajrasatva:

Europe is dealing with the migrant crisis due to huge exodus of people from the war torn Arab nations (Syria, Iraq,Jordan etc…), other nations like Afghanistan, Pakistan ,African nations & European nations like Kosovo,Ukraine.

Reasons for Migration:
1. There is growing threat to life due to terrorism like ISIS in Iraq and Syria, BokoHaram in Africa, Civil Wars (in Syria, Libya).
2. Due to continuous Political turmoil (Libya, Syria), there are shortage of Staples of life requirement.
3. Poverty (Kosovo & other nations) & famishment in those areas forced large scale migration.
4. Liberal migration policies, generous social benefits & nearness of Europe (Distance between Africa & Europe only 7.7 nautical miles) attracted migrants towards Europe.

Old distinctions of western, central and eastern Europe resurfacing again:

The repeated proposals by nations like Germany (Western), to distribute the migrants among themselves have been rejected by the eastern and central Europe countries. Central European Nations (The Czech Republic, Slovakia and Hungary ) were among the nations opposed to mandatory quotas.

There have been several outbursts from various corners in tackling inflow of migrants with several countries closing their border which was earlier known to be open free. Budapest passed a legislation imposing a sentence of three years of imprisonment if one enters the country illegally. Austria, Slovakia
and the Netherlands have also tightened controls on borders. The moves are a challenge to the EU’s Schengen agreement on free movement. If since any country of Europe will Ban the entry of Migrants its result would ultimately be seen in the neighboring country which result in conflict between
European countries (eg countries like Germany[central] welcoming migration and Greece[East], Spain[West] others objecting this decision)

A major point of dispute is the EU’s Dublin Regulation, states that the country where asylum seekers first arrive has a duty to process their claim. Greece and Italy – on the frontline of the crisis in the Mediterranean – have been heavily criticized for allowing people to cross their territory unregistered.

With Paris attack and New Year assault on women’s showing finger at migrants, there is rise of Islam phobia in Europe. Due to this the Baltic states of Lithuania, Latvia and Estonia have been debating a ban on burqas. Slovakia has promised to welcome Christian refugees alone.

A majority of Dutch voters is opposed to the Netherlands’ ratification of the European Union’s association agreement with Ukraine , which could open the doors to a continental crisis.

Apart from migrant crisis, there are other factors such as many powerful countries are now seriously thinking about the benefits they get by being in EU when compared to the costs attached to it. For example German people are dissatisfied as they feel that their tax are being spent on countries like Greece. Greeks feel that Germany is dictating their internal affairs. There are other worries as Britain
is planning to withdrawal from EU (BREXIT), same as GREXIT the possibility of Greece leaving the eurozone.If this happens, other members will also move away from EU & results in disintegration of EU.

All the EU members should understand their Moral responsibility & should come up with the uniform set of norms in order to deal with the Migrant crisis. Also other developed nations should come forward to reduce the burden of the EU nations