Bali Meeting: India invited for fresh talks with RCEP members

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Published: January 22, 2020 2:15:40 AM

Apart from India, the RCEP consisted of the 10-member Asean bloc and five other countries – China, Japan, South Korea, Australia and New Zealand.

However, some of India’s demands, such as the one for tough rules of origin, could be too hard for countries like China to accede to.However, some of India’s demands, such as the one for tough rules of origin, could be too hard for countries like China to accede to.

India has got an invitation from members of the Regional Comprehensive Economic Partnership (RCEP) grouping to take part in a meeting on February 3 and 4 in Bali where its concerns will be addressed, in the first credible sign of efforts by RCEP nations to get New Delhi back into the Beijing-dominated free trade agreement.

India had pulled out of RCEP talks in Bangkok on November 4 last year on the grounds that its key issues, including extra safeguard mechanism to curb irrational spike in imports and tougher rules on the origin of imported products, were not addressed adequately.

A decision on whether India should attend the Bali meeting is yet to be made,” a senior government official said. The invitation has been sent by the Asean secretariat. But analysts say even if India participates in the meeting, it won’t be an easy task for either side to hammer out a consensus so easily, given the sensitivity of the Indian demands and the stubbornness of some RCEP nations, including China, in resisting those.

Apart from India, the RCEP consisted of the 10-member Asean bloc and five other countries – China, Japan, South Korea, Australia and New Zealand. The presence of China in the grouping had reinforced fears of domestic industry about potential dumping if India joined the pact.

Interestingly, at the Raisina Dialogue earlier in the month, external affairs minister S Jaishankar said India had not shut its doors on the RCEP and could undertake a cost-benefit analysis to assess the merit of such a deal. “Where RCEP is concerned, we have to look at cost and benefit. We will evaluate RCEP on its economic and trade merit. We have not closed our mind to it,” he had said.

After the pull-out, commerce and industry minister Piyush Goyal had said India would consider getting back at the negotiating table only if its demands were adequately addressed. Explaining the reasons for India’s withdrawal, he had said that New Delhi was unwilling to budge on its demand for an “auto-trigger” mechanism for safeguarding its industry from dumping, despite pressure from the potential partners. Also, it was steadfast in certain demands, including credible steps to address India’s $105-billion trade deficit with RCEP members, a more balanced deal on services, strict rules of origins of products to check the abuse of tariff concessions, and change in the base year to implement the tariff abolition from 2014 to 2019. Moreover, it almost wanted its agriculture and dairy sector out of the RCEP negotiations.

However, some of India’s demands, such as the one for tough rules of origin, could be too hard for countries like China to accede to. While New Delhi had pitched for “sufficient value addition” of at least 35% in the country of exports for a product to be eligible for its tariff concession under the RCEP, others wanted to settle for just minimal value addition. India strongly feels that in the absence of strict rules of origin, its different tariff concessions for different countries (the offers are least ambitious for China) and safeguard/anti-dumping tools against any irrational spike in imports will be rendered meaningless.

Upon India’s insistence on the 35% value addition clause in the RCEP agreement, other partners wanted to limit the list of tariff lines where such a level of value addition would be mandatory to just 100. India rejected such a short list,” a source had earlier told FE.

Although the 15 other nations went ahead with the pact in November 2019, they had showed willingness to accommodate India’s concerns.

Most members wanted to conclude the negotiations in 2019 so that a deal can be formally signed in 2020.

To protect its industry, India had decided to trim or remove tariffs on Chinese goods only in phases over a period of 20-25 years. Similarly, its tariff concession was to be the least ambitious for China – it offered to reduce or abolish import duties on a total of 80% of imports from China, against 86% from New Zealand and Australia, and 90% from Asean, Japan and South Korea.

Even without RCEP, India’s merchandise trade deficit with China stood at $53.6 billion in FY19, or nearly a third of its total deficit. Its deficit with potential RCEP members (including China) was as much as $105 billion in FY19.

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