The next ministerial of the 16-nation Regional Comprehensive Economic Partnership (RCEP) in the Philippines on November 4 could adopt the “no early harvest” policy, following India’s insistence, sources said on Tuesday. This means agreements on all the three pillars of negotiations — goods, services and investment — have to be implemented only as a package, and not one at a time.
So even if a consensus is reached early on goods trade (which is what most nations want), it cannot be enforced in isolation and accords on all the three pillars of negotiations can be put to effect only simultaneously. FE had reported on July 15 that India was insisting on the ‘no early harvest’ clause in RCEP talks.
Differential offer for China in goods trade
The sources said although India has been considering sweetening its offers for RCEP countries for liberalisation in goods trade, its offer for China will likely be different from that for others — both in terms of removing tariff lines on imports from the giant neighbor as well as the time frame for doing so.
While India is learnt to have shown its readiness to consider scrapping as much as 80% of tariff lines in merchandise trade for all other RCEP partners, it seems comfortable with removing around 65% of tariff lines for China initially. This is still a marked improvement from the initial offer of 42.5% for China, although these tariffs could be abolished only over a period of time to protect interests of domestic industry. The period for phasing out tariff lines for imports from China could be 20-30 years, as it is essential to ensure Indian industry has enough time to improve its competitiveness, sources had earlier told FE.
India already had a massive goods trade deficit of almost $53 billion with China in 2015-16. India will, however, be bold to sweeten its offer in goods trade provided it is assured of commensurate pledges from others in services trade and investment. The scrapping of tariff lines means import duties on specified items would be cut to zero over a mutually agreed-upon time frame.
Initially, India had offered to abolish 80% of tariff lines for 10 Asean members, 65% of tariff lines for Japan and South Korea and 42.5% for China, Australia and New Zealand. In return, while South Korea and Japan were willing to offer 80% tariff elimination for Indian goods, China was ready to remove only 42.5% tariff lines. Australia and New Zealand offered to abolish 80% and 65%, respectively, of tariff lines for merchandise imports from India.
India to insist on more details of offers in services
India will impress upon other countries to spell out details of their offers in services trade before they insist on India making its offer in goods more explicit. Several countries are already unwilling to commit much in liberalising their services trade or investment space, and are interested in seeking more concessions from India in goods trade.
For instance, Asean — especially Singapore — is learnt to be resisting move for any worthwhile liberalisation in services trade. India is already seeking liberalisation in at least 120 areas in Mode 1 (cross-border trade) and Mode 2 (consumption abroad) services, while some nations are willing to go up to only 100. Similarly, negotiations for further liberalising trade in Mode 3 (commercial presence, mainly FDI) are yet to pick up pace. Importantly, serious offers on liberalising Mode 4 — which is of immense importance to India, as it covers the movement of skilled professionals — have barely started.