Will India’s move to pursue a deal in RCEP pay off?1 min read . Updated: 30 Aug 2018, 03:13 PM IST
Ahead of the crucial Singapore Ministerial on 30-31 August, a lowdown on the current state of negotiations on the RCEP trade deal
India has been negotiating the Regional Comprehensive Economic Partnership (RCEP) trade deal since May 2013. Ahead of the crucial Singapore Ministerial on 30-31 August, Mint gives the lowdown on the current state of negotiations.
What is the dilemma for India?
The presence of China, with which India had a $63 billion trade deficit in 2017-18, is the biggest worry. Granting greater market access to China under RCEP would mean more trouble for India’s labour-intensive domestic industry. The steel sector is particularly concerned, as China has been dumping iron and steel products in India at a much lower price than that of the domestic industry. India has often resorted to anti-dumping measures to protect local companies from the onslaught of cheap Chinese imports.
Is India likely to gain in services trade from the RCEP negotiations?
Since the start of the RCEP negotiations, India has sought greater liberalization in the services sector, especially for easy movement of its professionals to RCEP-member countries. Most members have resisted a services deal, sensing a threat from China and India. India’s plan to make the services pact signed in 2009 under the Asean-Australia-New Zealand Free Trade Area as the template for RCEP has not found favour. It has since lowered its ambition, with no substantial gain in sight.
Why is RCEP important?
The talks envisage regional economic integration, leading to the creation of the largest regional trading bloc, making up 25% of global GDP, 30% of global trade, 26% of FDI flows.
Wasn’t India aware of the Chinese threat?
India joined the RCEP talks to not lose out on regional integration. Initially, India proposed a three-tier tariff reduction plan, under which 42.5% tariff liberalization was offered to China. It buckled under pressure from other members and agreed to offer similar tariff cuts to all RCEP-member states. Now, India’s offer for tariff liberalization on 74% of goods for China, Australia, New Zealand, and up to 86% for other RCEP members is not acceptable.
Is there unanimity in the government on the RCEP deal?
No. Several government departments are against yielding greater market access to RCEP members. NITI Aayog member V.K. Saraswat, ex-chief economic adviser Arvind Subramanian and ex-foreign secretary S. Jaishankar had cautioned against signing the deal. An informal group of ministers led by Suresh Prabhu decided to remain in RCEP, but not cede more than 86% market access.