India and other member countries of Regional Comprehensive Economic Partnership (RCEP) may have resolved differences related to investor to state dispute settlement (ISDS) mechanism and data localization, but 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 may make or break a deal.
“ISDS issue has been sorted out. After five years, whether to include it or not in the deal will be decided based on consensus rather than by majority proposed earlier. In effect, ISDS is out of RCEP," a commerce ministry official said speaking under condition of anonymity.
On data localization also both sides have agreed on a mutually agreeable language which recognizes the primacy of national and domestic legislation. “RCEP has agreed that there should not be any dispute settlement mechanism in e-commerce chapter which means there is no scope of challenging our domestic legislation. This is to our advantage," the official said.
However, India’s demand to shift the base year for tariff cuts is considered unreasonable by other member countries as India has already negotiated the whole deal on the basis of 2014 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," he added.
Under the liberal rules of origin conditions 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 added.
Issues of market access such as duty cuts that India will offer to China — 74% or 80% of total traded products — are also expected to drag on till the last moment, the official said.
RCEP is a proposed free trade agreement (FTA) between the 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. India remains undecided on whether to join the deal, even as Prime Minister Narendra Modi will join other RCEP heads of states in Bangkok on 4 November where conclusion of negotiations for the deal is likely to be announced.
The deal has been facing increasing resistance from domestic industry, farmer groups, civil society organizations and opposition political parties who apprehend China will dump cheaper goods into India using the RCEP deal.
Congress on Friday formally opposed the government’s move to sign the RCEP deal next month though, it started the negotiations in 2012. Former union minister Jairam Ramesh said if Modi goes ahead with signing RCEP deal, it will be the third assault on the Indian economy after demonetisation and implementation of Goods and Services (GST).
“We are not doing a U-turn here. When UPA (United Progressive Alliance) government negotiated FTAs, the economy was booming. We did not have the economic crisis that we are having today. There was an investment boom, exports were growing. So the economic context was totally different," Ramesh said at a press conference.
Anuja contributed to this story