BackNirmala Sitharaman defends India’s new position at RCEP
India has agreed to provide similar tariff cuts to all RCEP members with limited deviation
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New Delhi: Trade minister Nirmala Sitharaman on Wednesday defended India’s changed position at the 16-member Regional Comprehensive Economic Partnership agreement (RCEP) trade bloc, where it has agreed to provide similar tariff cuts to all member-countries with limited deviation, holding that India has the option of phasing out tariffs at a different pace for different countries.
Mint first reported on 9 August that in the just-concluded RCEP ministerial at Laos on 5 August, Sitharaman agreed to the proposal to move to a single-tier system with similar tariff reduction plans for all countries from the earlier three-tier tariff reduction plan which was based on whether India has a free trade agreement with the member-country or not.
Under the earlier plan, India proposed 80% tariff cuts to the 10 Association of Southeast Asian Nations (Asean) countries, 65% to South Korea and Japan and finally 42.5% tariff liberalization to China, Australia and New Zealand with which it does not have free trade agreements.
“The three-tier approach was all right at the beginning. Now, it was felt that it will lead to several agreements within an agreement with different terms and conditions rather than a single, holistic agreement. So, it was decided to move towards common concessions where you are going to have roughly one offer for everybody, although they recognized the discomfort that India will have with China because our (bilateral) trade imbalance is so huge," she said.
India had a trade deficit of $52.7 billion with China in 2015-16.
However, she disagreed that India’s changed position is a giveaway to other member-countries. “If they are agreeing to a staggered approach, which is comparable with what Vietnam, Mexico and Japan got under the Trans-Pacific Partnership (gradual phasing out of tariffs for a number of items), that will meet our requirements, is it prudent for us to move forward and get what we want or fixated with our earlier position?" she asked.
Sitharaman said India has weighed its options on how to move forward. “We can’t afford to open up in several sectors even today or five years down the line. Negotiations are where your national interest could be best pushed ahead without losing ground; or if you are losing ground, it should hurt less and must bring bigger gains," she added.
Sitharaman said bigger gains for India are not limited to services. “It could mean gains for some manufacturing sectors. I am keeping all my options open at this stage," she added.
Asked how India is going to handle China, with which it has a huge trade deficit, Sitharaman said common concessions do not mean India will end up eliminating tariffs for every country on 70% or 82% items. “We will have the flexibility. What we initially offered (42.5%) to China can probably go up to 60% in some commodities. In some commodities, we can stagger it for five years, 10 years or 15 years," she added.
On concluding RCEP negotiations, Sitharaman said though many countries wanted it to be finalized by December this year, it can only be concluded sometime in 2017. “The next round of RCEP ministerial is in November. The venue has not been finalized yet," she added.
Biswajit Dhar, professor of economics at Jawaharlal Nehru University, said India should first focus on domestic regulations in other RCEP countries. “There are a whole spate of domestic regulations which are acting as non-tariff barriers, which should be negotiated transparently before we negotiate market access. We should also oppose easier rules of origin and insist on flexibilities related to Trade-Related Aspects of Intellectual Property Rights," he added.
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