Let's not miss the CPTPP bus

In Trump 2.0's uncertain trade landscape, India must act now to secure its place in the open, rules-based, and potentially largest trade bloc in the world

- AMITA BATRA

The recent statements by President-elect Donald Trump about imposing higher tariffs on imports from Mexico and Canada cast a shadow over two important aspects of global trade - friend-shoring and the United States-Mexico-Canada Agreement (USMCA). The former has clear implications for all US allies that may have assumed they would get an easier pass through the transactional bilateralism characteristic of Mr Trump's tariff hikes. The latter reveals a review and perhaps even an unravelling of institutions and legislation under Trump 2.0, even if they have been crafted to serve US interests in the past.

Higher tariffs on US and Mexico would violate the USMCA, which is a preferential trade agreement among the three North American economies that substituted the North American Free Trade Agreement in 2020. The Inflation Reduction Act of 2022, which offered preferential rules of origin to Mexico and Canada to promote regional supply chains, particularly in the electric vehicles (EVs) sector, too would stand challenged with this tariff hike.

Clearly, therefore, under Trump 2.0, uncertainty will loom large over the global trade environment. From an Indian trade policy perspective, this necessitates a risk-diversification trade strategy through participation in stable, alternative institutional arrangements and/or agreements.

In the present context, India's options are from among the three mega-regional trade arrangements - that is, the Indo-Pacific Economic Framework for Prosperity (IPEF), the Regional Comprehensive Economic Partnership (RCEP), and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Participation in all three would, of course, be the most optimal path for risk diversification and ensuring access to greater possibilities of trade and global value chain (GVC) integration.