Mumbai: The steel industry has heaved a sigh of relief after Prime Minister Modi decided against joining the Regional Comprehensive Economic Partnership, a Chinese-backed free trade agreement (FTA) among 15 nations that would have made the largest trade bloc in the world.
The RCEP, if one were to include India, would include countries accounting for a third of global economic output and half of the world’s population. RCEP negotiating partners include 10 South-East Asian economies and six others—China, Australia, Japan, South Korea, New Zealand and India.
The domestic steel industry, which has long opposed the one-sided nature of India’s existing free trade agreements, was opposed to the RCEP from the start.
Speaking to Mint, Bhaskar Chatterjee, Secretary General and Executive Head, Indian Steel Association, said: “The PM’s announcement has come as a great relief for steel industry in particular and many other industries in general. As far back as June, representatives of the steel industry met with the Ministries of Commerce and Steel and with the Indian Steel Association. These interactions between the government and industry were going on actively. We had asked the government that if signing the RCEP was inevitable, then steel items should be kept out of the agreement."
India has raised concerns about the unsustainable trade deficit that it has with countries such as China and wanted RCEP member countries to open up their labour market for Indian workers and reciprocate its opening up of the market so that Indian businesses could benefit in other areas. India had a trade deficit of $53 billion with China in FY19, Mint reported on 23 October.
The RCEP will still go through without India’s participation.
While the final details of the RCEP framework are not known, India has voiced its concerns about getting swamped by imports under the agreement. India runs a large trade deficit with RCEP countries and was looking for protection for its domestic industry and farmers, especially against an influx of Chinese imports. India has also been worried about possible circumvention of rules of origin of imports, restrictions on movement of labour between member-nations and no credible assurances on non-tariff barriers.
In his statement about his decision not to join RCEP, Modi said: "When I measure the RCEP agreement with respect to the interests of all Indians, I do not get a positive answer."
“At the end of day, if other countries are allowed to ship their material into India at nil duty, then many of them send in products that are priced cheaper than our own products," Chatterjee said. “The RCEP is an expanded version of FTAs and the threat of Chinese dominance is a vital factor in the RCEP. In 2016-17, we saw what Chinese steel dumping did to our industry and we live under the shadow of those events. The Indian steel industry is particularly vulnerable to this and we strongly support the PM’s decision. We are encouraged by this decision and it shows that the government is sensitive to what we have said."