Home >industry >manufacturing >India wary as Beijing seeks Asia-wide trade pact in Trump era

New Delhi/Hong Kong: As China renews its push for an Asia-wide trade pact in the wake of Donald Trump’s election victory, Beijing faces at least one prickly negotiating partner: India.

With the likely demise of the Trans-Pacific Partnership, which President-elect Trump has said would be “catastrophic" for the US economy, Chinese president Xi Jinping is expected to use this week’s Asia-Pacific Economic Cooperation summit in Lima to promote a competing regional trade bloc.

But India, Asia’s third-largest economy, shares none of the urgency that geopolitical rival China is showing to deepen ties with major regional economies and the Association of Southeast Asian Nations. One major sticking point is India’s push to liberalize the services sector by negotiating access for its globe-trotting professionals, who want greater labour mobility in the region.

“It’s a geostrategic hesitation that is behind India’s stand, but there are also sticking points in terms of movement of skilled personnel," said Lalit Mansingh, a former Indian foreign secretary. “We are looking at it with apprehension, but I’m not so sure if we can stop it."

Commerce minister Nirmala Sitharaman said India was not being obstructionist in the Regional Comprehensive Economic Partnership negotiations but would not yield on its demands for liberalized services, according to an Economic Times report in May.

“We are fully committed to the RCEP negotiations, an early signing of that agreement and its operationalization," said Indian foreign ministry spokesman Vikas Swarup at a briefing on 17 November.

China’s deal

The partnership includes the 10 Asean countries as well as those that have free-trade agreements with the regional bloc, including China, Japan, South Korea, Australia, New Zealand and India. Countries within the RCEP contain roughly 3.5 billion people and account for a total gross domestic product of around $22.6 trillion, according to Australia’s foreign ministry.

The 16th round of talks is scheduled to take place in Indonesia next month. A few weeks ago, ministers from RCEP countries noted “the soft outlook for world trade growth and increasing protectionist sentiment" that “underscored the urgency" of concluding the trade deal.

China plans to seize the opportunity presented by Trump’s antipathy toward free trade and stress the RCEP at the Asia-Pacific Economic Cooperation summit in Lima this weekend, said He Weiwen, deputy director of Beijing’s Center for China and Globalization think-tank.

“RCEP will not only further enhance China’s regional economic sway, but also bring about a bigger say over trade rules making," said He, who is also a former business attache in Chinese consulates in New York and San Francisco.

Indian resistance

China is India’s largest trading partner, with a two-way relationship worth nearly $75 billion. But after the UK’s Brexit vote and Trump’s anti-immigration victory in the US, global appetite is waning for the looser immigration rules India wants for its consulting sector.

“I cannot imagine that countries like Australia and New Zealand, which are part of the RCEP negotiations, will be willing to significantly liberalize immigration conditions for skilled workers," said Rajiv Biswas, Asia-Pacific chief economist for IHS Global Insight.

Blake Berger, a research associate at the Lee Kuan Yew School of Public Policy, said even Singapore — Asia’s most trade dependent economy — is increasingly wary of skilled immigration.

Priyanka Kishore, lead Asia economist at Oxford Economics, said services liberalization remains one of India’s key expectations from RCEP. She said members agreed to negotiate on the mobility of skilled professionals and that “things should be clearer" after the December round of talks.

“This may well become a bone of contention between India and other RCEP members going ahead," Kishore said.

That stiff resistance might mean China seeks to finish the deal with India as an observer, said Cao Heping, director of the Department of Developmental Economy at Peking University.

“We don’t have to wait for India," Cao said. “India can choose to join after the benefits are borne out in a couple of years." Bloomberg

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