The negotiations on “Regional Comprehensive Economic Partnership” (RCEP), is witnessing a stalemate mainly due to India’s concerns.
In a positive development, the Chinese commerce minister had visited his Indian counterpart recently to further the deal.
What is the RCEP?
RCEP is a giant trade and economic agreement encompassing all the 10 ASEAN countries and 6 other countries in the Asia-Pacific neighbourhood.
The countries are China, Japan, South Korea, Australia, New Zealand, India and the ASEAN Block (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam).
Taken together, these countries account for over a quarter of world trade and holds immense potential for enhancing trade ties in the region.
While every country wants trade liberalisation for goods (tariff reduction), India has agreed to it on the condition that services trade is also liberalised.
Additionally, India had also proposed a differential tariffs reduction timelines for different members of the agreement, which wasn’t accepted.
Considering the prolonged stalemate, some countries party to the deal are even contemplating a possible agreement without Indian participation.
But China has now reached out to work a compromise with India regarding the deal and demonstrated its intent to rectify recent troughs in bilateral ties.
What is the basis for Indian demands?
At a time when India is promoting local manufacturing through ‘Make in India’ program, massive reduction in tariff lines as demanded is not desirable.
Animal husbandry sector could also take a hit as opening tariff lines would flood Indian markets with “Australia and New Zealand’s” dairy products.
Also, Indian economy is service oriented and there is much to gain on services liberalisation, while manufacturing liberalisation will benefit China the most.
Notably, US had also made similar demands for trade in services during the Uruguay round talks, stressing that all previous rounds focused on goods.
The US had managed to pull off with TRIPs in the Uruguay round and subsequently pushed for the creation of WTO to further its agenda.
While India couldn’t emulate the same success, it wasn’t wrong on its part to try and hence it can’t be perceived as an obstructionist approach.
What is the way ahead?
While India has vouched a genuine case for itself, the lack of consensus demands India to move on to other positive aspects to save the deal.
Even without the core demands, the deal is worthwhile as enhancing trades in goods will nevertheless have a positive impact on consumers and the economy.
Competition will better quality and make things cheaper, and the inbuilt anti-dumping duties will anyway deter predatory trade practices.
Additionally, for increasing exports and ensuring the fructification of ‘Make in Indi’ initiative, India can’t afford to ignore global supply chains.
Within RECP - Australia is resource rich and Singapore is a financial hub, and Japan is a technological power and most other are low cost manufacturers.
Hence a comprehensive trade deal within a group this diverse (that also has a huge consumer base) could benefit all due to economics of scale.
Various Indian ministries are concerned about RCEP, the better approach would be to enhance sectoral competitiveness rather than sabotage the deal.
