RCEP deal may go down to the wire as key issues are yet to be resolved

Negotiations to conclude the ambitious free trade agreement (FTA), the Regional Comprehensive Economic Partnership (RCEP), could go down to the wire with India on Thursday saying that there were still some critical issues pending resolution.

RCEP is a proposed FTA among 10 member-states of the Association of Southeast Asian Nations (Asean), and its six FTA partners, including China, India, South Korea, Japan, New Zealand and Australia. Negotiations were expected to be completed by the time the leaders of the member-nations met in Bangkok on 4 November. However, there could still be some hurdles on the road to establish the world’s largest free-trade zone, comprising 16 countries accounting for one-third of global gross domestic product and nearly half the world’s population.

RCEP is widely seen as a China-supported alternative to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which covers 11 countries across the Pacific.

“The RCEP negotiations have been going on for many years now and India has participated constructively in these negotiations,” said Vijay Thakur Singh, secretary east, in the Indian foreign ministry. “We believe RCEP represents a significant economic and trade opportunity for all partners. There are some critical issues still outstanding and efforts are being made to resolve them to provide a fair and transparent trading environment,” she told reporters, ahead of the Prime Minister’s departure for talks with Asean leaders on Saturday.

“These issues are extremely important for our economy and livelihood of our people. It is therefore imperative that these issues are resolved satisfactorily,” she added. “India remains engaged to find a resolution of these issues.”

Greater clarity was expected after the ministerial talks on 2-3 November, which will be attended by Indian trade minister Piyush Goyal, Singh said.

When asked whether RCEP could be announced without India, Singh said she would not like to speculate, given that the talks were still on.

The RCEP negotiations started in 2012 among the 16 member-nations, continuing for several rounds. According to an Indian commerce ministry official, India and RCEP partner countries have resolved differences on the state dispute settlement mechanism and data localization. However, issues such as India’s demands to shift the base year for tariff cuts to 2019 and an auto-trigger mechanism to check import surge from China, were still unresolved.

India has already negotiated the whole deal on 2014 as the base year. “RCEP members have asked us to give a list of limited number of tariff lines on which 2019 tariff rates need to be applied,” the commerce ministry official said, requesting anonymity.

India’s concerns stem from the fact that it already has a bilateral trade deficit of over $50 billion with China.

Under the liberal rules of origin under RCEP, India apprehends that items on which duty cuts have not been given to Beijing, may end up from China via other RCEP member countries. India wants a tariff differential mechanism to prevent this. “While RCEP again is fine with a limited number of such items, our demand is to apply the tariff differential to all items not offered to China,” he said.

Issues of market access, such as duty cuts that India will offer to China—74% or 80% of total traded products—were also expected to drag on till the last moment, the official said. The deal has been facing increasing resistance from the Indian industry, farmer groups, civil society organizations and opposition political parties, who apprehend China will dump cheaper goods in India using the RCEP deal.