Amid persisting differences on certain key aspects of the RCEP deal, the group’s members had decided that all issues must be settled by negotiators by October 22.
With barely a week left for countries to make their positions clear on the Regional Comprehensive Economic Partnership (RCEP), the ball lies in Prime Minister Narendra Modi’s court, as he will take the final call on whether India would be part of the mega regional trade deal or not, sources told FE. A leaders’ summit, to be attended by the heads of the 16 RCEP nations, is scheduled to be held in Bangkok next week, where the deal was supposed to be announced.
The deal faces fierce domestic resistance from not just industries, including steel and dairy, but also the government departments overseeing these sectors, thanks to persisting fears of dumping by countries like China.
Fisheries, animal husbandry and dairying minister Giriraj Singh is the latest to ask the commerce ministry to keep the dairy sector out of the RCEP. The steel ministry has already expressed fears about dumping from China.
Recently, the Congress party also stepped up its opposition to the trade deal. All these have multiplied challenges for the commerce as well as external affairs ministries, as they wrestle with domestic opposition, said one of the sources. “The Prime Minister has held multilple meetings with key ministers in recent months and he will take the final call,” said the source. Several experts, including noted economist Arvind Panagariya, have highlighted the importance of India joining the RCEP to better integrate with the global value chain and improve its trade competitiveness.
Most RCEP members want to conclude the negotiations in 2019 so that a deal can be formally signed in 2020 (after the announcement by the leaders). Some of them are upset with what they say India’s “recalcitrance” in sealing a deal early. Singapore, for instance, is learnt to have asked India, at the last ministerial in Bangkok, to make up its mind about the deal. For its part, India has been trying to safeguard the interest of its industry that fears higher trade imbalance (Its past free trade agreements with Asean, Japan and Korea have already widened its trade deficit).
Despite two days of intense negotiations through October 12, certain issues relating to trade remedies, e-commerce, trade competition, trade in services, rules of origin and investment remained unresolved. Consequently, no joint statement came out of the meeting of trade ministers at Bangkok. Safeguards for domestic industry, particularly, remain a crucial part of India’s negotiations.
Amid persisting differences on certain key aspects of the RCEP deal, the group’s members had decided that all issues must be settled by negotiators by October 22. The issues that were not settled by October 22 will be frozen for a decision only by the leaders (heads of states), before they are expected to meet on November 4 to announce the RCEP deal, a source had earlier told FE. Trade ministers and negotiators of the 16 nations have to present to their respective leaders which issue can or can’t be settled now so that appropriate announcement can be made at the leaders’ summit, according to the source.
However, New Delhi will have the scope to settle its differences on issues, including tariffs and safeguards, with countries like China bilaterally. However, even that window may not last long.
A source had earlier said that India was planning to employ an “auto-trigger” safeguard mechanism for imports from not just China but also Australia and New Zealand to better protect domestic players from irrational spike in imports. This mechanism will typically come into play once imports of a particular sensitive product breach a stipulated limit. Similarly, New Delhi wants the flexibility of a snapback — or transitional safeguard — mechanism for all RCEP members.
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.
The RCEP is a proposed mega trade pact between the 10 Asean members, India, Australia, China, Japan, South Korea and New Zealand. According to initial estimates, it accounts for 25% of global gross domestic product, 30% of trade, 26% of foreign direct investment flows and 45% of population.