India is losing ground in trade negotiation talks with the Regional Comprehensive Economic Partnership.
What is the problem?
India’s earlier proposed to a three-tier tariff structure –
80% tariff-free lines with ASEAN, essentially maintaining the FTA status quo;
65% free lines for Japan and Korea; and
42% free lines for China, Australia and New Zealand.
Now at best-case scenario, it can get 74% free tariff lines with China to be arrived at over the next 15-20 years.
Meanwhile, India’s insistence on lower services investment and visa barriers for its professionals is not making headway.
The problem here is tariffs within its other members are already remarkably low.
e.g Japan and China deeply integrated into the ASEAN economy and with each other in terms of trade, investment and global supply chains.
India remains an outsider in this club, with the exception of China, with which it runs a huge trade deficit.
India accounts for just over 3% of ASEAN exports and below 2% of the latter’s imports, whereas China accounts for over 11% of ASEAN exports and nearly 20% of its imports.
China has displaced Japan and the US as ASEAN’S principal trading partner.
The challenge is for India to break into this bloc at a time of growing protectionism in the West, without compromising its interests in agriculture, industry and intellectual property rights.
What should be done?
India must be clear about dovetailing tariff openness with its ‘Make in India’ programme.
India can be flexible about opening up sectors such as legal services, entertainment and accountancy.
In the long run, it should increase its skill and technology levels to match RCEP countries by investing in R&D and quality education.
The key lies in driving growth through productivity and innovation, rather than low-cost labour alone.
