RCEP is a proposed mega trade pact between the 10 Asean members, India, Australia, China, Japan, South Korea and New Zealand.
As leaders of the 16 nations congregate in Thailand in the hope of announcing a Regional Comprehensive Economic Partnership (RCEP) deal on Monday, India will likely support the mega trade pact if it gets an assurance from partners that it will be at liberty to settle its differences bilaterally with any of them and negotiate accordingly even after the current summit.
Differences between India and some others like China still persisted on certain crucial aspects — especially in safeguard mechanism, tariffs, rules of origin and services trade — even after hard negotiations over the weekend, a source aware of the talks told FE. Each side has presented the outcome of the talks to their respective leaders, who will now make a political call on the agreement before an announcement on Monday, a source said.
Prime Minister Narendra Modi, who is in Thailand to attend the summit, has already stated that India has put forward “reasonable proposals” and is “clear” that a mutually-beneficial RCEP is in the best interests of every member. India faces a critical situation of having to pacify growing domestic opposition to the deal by bargaining hard with RCEP partners, especially China, to grant it meaningful concessions.
New Delhi also has to ensure that it doesn’t get isolated in world trade by opting out of an opportunity to better integrate with global value chain.
The persisting differences mean the final signing of the deal could be delayed beyond the current goal of June 2020, even though other RCEP members are pushing New Delhi hard to stick to the deadline.
Commerce and industry minister Piyush Goyal has been in Thailand since Friday to participate in the negotiations with other trade ministers and prepare the stage for the Monday’s summit.
In an interview to Bangkok Post newspaper, Modi has said: “India remains committed to a comprehensive and balanced outcome from the ongoing RCEP negotiations… Hence, India seeks balance across goods, services and investments, and also within each pillar.”
“We believe that for this, addressing our concerns over unsustainable trade deficits is important. It needs to be recognised that opening the vast Indian market must be matched by openings in some areas where our businesses can also benefit,” Modi added.
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. Industry fears this will only widen if the RCEP deal is signed, as China will divert massive supplies from the US to tide over the trade war.
RCEP has already stoked a political slugfest, apart from drawing the usual resistence from domestic industries and certain government departments like steel and dairy. Congress chief Sonia Gandhi recently said RCEP would deal a “body blow” to the Indian economy.
Gandhi’s statement drew sharp rebuttal from Goyal late Saturday when he pointed at the many free trade agreements (such as the ones with Asean, Japan and South Korea) signed by the Congress-led UPA government, which have only worsened the country’s trade deficit. In fact, the RCEP negotiations had started under the UPA-II in 2012. Industries are worried about dumping of products if any FTA with China and others is effected through the RCEP.
Recently, Goyal stated that unlike in the UPA era, the NDA government would not sign any trade pact in haste but, at the same time, “fear psychosis” around any such agreement must go if India were to avoid global isolation in trade.
CII president Vikram Kirloskar said a large section of industry has expressed serious concerns about joining RCEP on the basis of a very genuine reasons, especially pertaining to China. “However, any decision of joining an agreement of this size and magnitude must not be based on our concerns with regards to just one country. FTAs must be considered from their long-term impact, both on our domestic market and the access it provides. Some of our industry may be domestically focused today, but in ten years would want the access to this most vibrant region of 15 other countries that RCEP provides.”
Modi travelled to Bangkok to participate in the 16th ASEAN-India Summit on Sunday. He will also attend the 14th East Asia Summit and the third RCEP leaders’ summit on Monday.
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.