New Delhi: Allaying fears that India may exit trade talks under the Regional Comprehensive Economic Partnership (RCEP) to avoid giving more market access to China, an informal group of ministers (GoM) headed by trade minister Suresh Prabhu has decided that India will remain engaged in the 16-member trade grouping.
India will however inform at the upcoming Singapore Ministerial of the RCEP that it can’t offer tariff liberalization above 86% of traded goods to all member countries, a top government official said on condition of anonymity.
RCEP is a proposed trade pact between 10 Asean countries and their six FTA partners, namely Australia, China, India, Japan, Korea and New Zealand. It comprises 25% of global GDP, 30% of global trade, 26% of foreign direct investment flows and 45% of the total population.
The GoM was set up earlier this month to finalize India’s strategy for RCEP in view of growing opposition to the trade deal from within and outside the government. It includes power minister Piyush Goyal, defence minister Nirmala Sitharaman and housing and urban affairs minister Hardeep Puri.
“We will affirm that any tariff liberalization beyond 86% needs to be discussed and finalized bilaterally between two RCEP member countries," said the government official, aware of the RCEP negotiations.
The Singapore Ministerial of RCEP is scheduled for 30 and 31 August.
India does not expect the negotiations to conclude by December as proposed by many RCEP members due to many unresolved issues, the official said. “Even the modalities of negotiations are yet to be finalized," he added.
India has held bilateral talks with China, Australia and New Zealand on RCEP tariff liberalization and is expected to hold more rounds of talks with these nations.
So far, India has agreed to offer tariff liberalization on up to 86% of goods to Asean, Japan and South Korea with whom it already has free trade agreements (FTAs). However, for countries such as China, Australia and New Zealand with whom India does not have FTAs, it is ready to offer tariff liberalization on 74% of traded goods.
Several RCEP members want India to allow 92% of traded goods, but are averse to allow Indian skilled professionals greater access to their markets.
Earlier in August, Observer Research Foundation argued that a more holistic cost-benefit analysis is needed to know the potential impact of RCEP. “Till India properly comprehends the potential benefits, costs, and the associated threats including the geostrategic concerns, it should refrain from signing the RCEP," it added.
There has been a growing clamour in the Indian industry as well as the government to exit RCEP.
V.K. Saraswat, a member of government think tank NITI Aayog, said in April that India needs to rethink joining the RCEP as it will be “disastrous" to provide more market access to China, which is a key player in the grouping.
In an interview to Mint in February this year, then chief economic adviser in the finance ministry, Arvind Subramanian, too, had said that India needs to be extra cautious and take into account geostrategic issues while moving ahead with the RCEP deal, as it would mean opening up the market to China.
Former foreign secretary S. Jaishankar, at a presentation before the parliamentary standing committee on commerce, had called for “observance of due restraint" and warned against concluding trade arrangements that are not in India’s medium-term interest.