It is now clear that the US has initiated the era of disruptive trade policies by activating withdrawal from the original Trans Pacific Partnership (TPP) agreement and by its ongoing efforts to rework and modify the NAFTA agreement with Mexico and Canada.

These policies pursued by the USA, the world’s largest importer, have already triggered a trade and economic war with China (and perhaps soon with India), and will surely encourage the new but negative practice of regional trade protectionism globally. The ongoing US-Mexico Trade agreement will disrupt and displace the existing NAFTA agreement and certainly become a pointer to the way trade deals will evolve in the future. This landmark agreement, if signed, will impact on global trade in textiles and apparel, which is already plagued by lower-than-subsistence wages, as large multinational companies refuse to up their prices and as their customers look for even lower and bargain prices.

Below are outlined the various ongoing trade pacts, under negotiation and in the pipeline, all of which will impact global trade in the future, with likely disruptions to textile and apparel trade.

US-Canada

Canada, for which the US is the largest trade partner, remains in favour of the existing NAFTA pact with the US. despite latter’s declared intention to amend it. Canada has commenced hectic negotiations to complete the proposed rewrite.

It’s interesting to note that, on the presumption that it may lose some of the 75% of its exports that go to the US, Canada wants increased trade with the ASEAN block, and especially with Thailand and Singapore, which, along with Canada, will be the members of the reduced TPP 11 trade block. With the same considerations in view, Canada is also eyeing new free trade pacts with the South American countries of the Mercosur block, comprising of Argentina, Uruguay, Brazil and Paraguay. Canada is also getting enthusiastic about inking a free trade deal with China.

ASEAN-China

Under the ongoing Belt and Road Initiative (BRI) from China, three key target areas for trade deals have been already identified between ASEAN and China, where both blocs will be working to upgrade trade and investments using the ASEAN structures and the trade pact called the Regional Comprehensive Economic Partnership (RCEP).

China is also being considered favourably for a dedicated trade pact with the UK in the post-Brexit scenario; Britain has set a target to export 35% of its GDP by increasing its global trade ties in order to mitigate the impact of leaving the EU.

Australia-Indonesia

Among this shower of free trade pacts, Australia and Indonesia are almost on the brink of finalising a bilateral agreement. It is certain to be signed – and probably early in coming quarter, so as to mitigate concerns over the falling Indonesian Rupiah.

Iran-EAEU

A fully fledged free trade zone between Iran and Central Asian/Eurasian block called the Eurasian Economic Union (EAEU) has been agreed in principle, with a view to its conclusion by 2022. Iran is not a member of WTO and will benefit with this trade deal to export its metals, oil, etc, to the Eurasian bloc.

Indirectly, the biggest gainers in such a trade deal would be Iran and Russia, whose exports are being negatively impacted by the sanctions imposed on them by the US and EU. This trade deal will help these regional leaders to mitigate their export losses, especially to the US.

BIMSTEC and India

India, as a major regional trade player, initiated the BIMSTEC regional trade pact, covering India, Bangladesh, Bhutan, Nepal, Myanmar, Sri Lanka and Thailand. While BIMSTEC promises clear gains for India, even for landlocked Bhutan and Nepal this regional pact could be a game-changer by providing market access to nearly 1.5 billion people.

Considering that the ongoing trade wars will certainly affect and impact the economic scenario of every country in the future, it is important for all involved to ink such trade deals for regional groupings and find strength in numbers.

For India, which is also trying to ink a free trade pact with Britain, post-Brexit, and also separately with the EU, a regional pact like BIMSTEC will give it a trade leadership in the immediate region and help to mitigate trade losses, as India is neither a member of the TPP 11, nor a fully-fledged member of ASEAN.

INDIA’s Dilemma

With Vietnam on-board the TPP 11, India’s textile and apparel exports will face stiff competition, due to its ‘duty burdened access’ to other 10 member countries in bloc. Fortunately for India, with its GDP growth averaging 7% and much better than the world average, the domestic markets are really huge and growing at around 10-12% for the clothing and apparel segments.

There is already an effort being made to dent and penetrate India’s lucrative domestic markets by the South Asian Association for Regional Cooperation (SAARC) members, especially by Bangladesh and Sri Lanka, which enjoy duty-free access to India. It is also in India’s interest to safeguard and protect its textile industry from cheaper large-volume imports. India’s thinking behind its decision not to join the TPP 12, or its new version TPP 11, has been that, if India were to join such a ‘mega’ regional free trade pact, it would severely hit the country`s textile, agriculture and other manufacturing industries – and even services industries; especially the IT sector, where India is today the global leader.

*Thumbnail image credit: Adobestock