Interest groups behind RCEP: Is it really gainful for India?

March 20, 2019 3:29 PM

India will have to overcome various market access barriers if it is to increase doubling its exports in agriculture, manufacturing and services sectors.

RCEP, Commerce, TradeThe market access challenges that India faces are different under the goods (agricultural & manufacturing) and services trade.

By Murali Kallummal

In a bid to wrap-up the RCEP negotiations, the 16 countries have pledged to endorse a “package of outcomes” before December 2019.  Presumably, this will bring to end the negotiations which started nearly six years ago. At this juncture, it becomes important to trace the trade barriers present in RCEP market.  For any country, a regional grouping aiming for greater integration should usher in good times for at least some sectors. India will have to overcome various market access barriers if it is to increase doubling its exports in agriculture, manufacturing and services sectors.  

The market access challenges that India faces are different under the goods (agricultural & manufacturing) and services trade.  The real challenges for goods are the use of non-transparent tariffs (specific duties) by some RCEP countries, particularly prevalent in the agricultural sectors of Japan, Korea, Thailand, Malaysia and New Zealand, etc.  These are mainly Non-Ad-Valorem tariffs for which Ad Valorem Equivalent tariffs have not been calculated; these therefore supress the actual MFN applied tariff of the base year in all these cases. On the other side, India is faced with by its own low application of non-tariff measures (NTMs) in the WTO within the group.  Meanwhile among the Rest-of-RCEP, Australia, Japan, New Zealand, China, Thailand and the Philippines maintain a large number of sanitary and phytosanitary (SPS) measures, while China, Japan, Korea and Malaysia maintain several technical barriers to trade (TBT). An important example is the case of SPS standards being used by Australia, New Zealand and Japan, which have been found to based on non-harmonised (such as CODEX) maximum residual limits (MRLs) for many of the traded agricultural products.  On these the two issues the rest-of-RCEP members have been found on the other side of WTO agreements.

Based on the existing trends in trade relations between countries we can make some assessment as to how important these are for the RCEP as a group.  For any regional grouping, it is important to analyse the trading activities and one key task is to analyse the total trade at the country level. By dividing into two groups — extra-RCEP trade and intra-RCEP, the trends would reveal themselves.  The share of intra-RCEP trade increased for rest-of-RCEP members by 19 percentage points from 43% in 1996 to 62% in 2016, while India’s trade increased only by 8 percentage points. The share of rest-of-RCEP has increased at a faster pace with 11 percentage points in comparison to India’s increase seen during the same period.  Some countries within the RCEP grouping have been benefiting more while others are not gaining as much. This inter-country differences would accentuate further with the deal.

The trends in intra-RCEP exports and imports clearly reveal India’s vulnerabilities further.  In comparison to world exports and imports, the intra-RCEP share of India’s trade does not provide confidence at all.  The export shares have fallen in the case of India for the whole period (1996 to 2016) by 1.8 percentage points and further since the negotiations began in 2012 by nominal 0.2 percentage points.  Among the 16 RCEP members, the gainers in terms of increased shares from 2012 were Cambodia, Korea, Republic of Korea, China, Myanmar and Singapore. In terms of imports expect for Brunei, Myanmar and New Zealand all the other RCEP members were losers as imports surged intra-RCEP.  

All future agreements have to built-in among other things a more transparent mechanisms for information sharing on issues like Intellectual property, domestic regulations in services, investments, e-commerce etc.  This would call for innovative mechanisms to capture bilateral trade data flows (both physical and financial) and legally binding transparent means of communication between trading partners. To make gains in the RCEP trade we may have to resort to dispute resolution provisions, especially in cases mandatory SPS barriers.  It is important for India to make sure such mechanisms are an integral part of future trade agreements too.

Dr Murali Kallummal is a professor at CWS, Centre for Research on International Trade (CRIT).
The views expressed are personal.

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