The Asean secretariat had last month invited New Delhi to the Bali meeting, scheduled for February 3 and 4.
Dashing hopes for an early return to the negotiating table for the China-dominated Regional Comprehensive Economic Partnership (RCEP), India has skipped a meeting in Bali where its concerns on the mega regional trade deal were to be discussed, according to sources.
The Asean secretariat had last month invited New Delhi to the Bali meeting, scheduled for February 3 and 4. India’s decision comes in the wake of China showing no sign of flexibility in its negotiating positions, not even through bilateral communications.
A senior Indian official told FE: “There is no point going to talks and investing resources when you know nothing substantial will come out of it. India’s main concerns were about potential dumping by China, and its proposals on critical issues, including safeguard measures and tough rules of origin, were not accepted. The ball is in China’s court now. Unless Beijing shows flexibility, the talks can’t move further meaningfully.”
Apart from India, the RCEP talks have involved 10-member Asean and five other countries — China, Japan, South Korea, Australia and New Zealand. Much of the RCEP communications take place through the Asean secretariat.
India pulled out of the RCEP talks in Bangkok on November 4 last year and made its return incumbent on adequate redressal of its concerns. Commerce and industry minister Piyush Goyal had then said New Delhi was unwilling to budge on its demands for an “auto-trigger” mechanism for safeguarding its industry from dumping and strict rules of origins of imported products to check the abuse of tariff concessions, despite pressure from potential partners. Also, it was steadfast in certain demands, including credible steps and market access to address India’s $105-billion trade deficit with RCEP members, change in the base year to implement the tariff abolition from 2014 to 2019 and a more balanced deal on services.
Although the 15 other nations went ahead with the RCEP pact in November 2019, some of them were keen to address India’s concerns. However, China’s willingness to consider its demands has fallen far short of New Delhi’s expectations. Most members wanted to conclude the negotiations in 2019 so that a formal RCEP deal could be formally signed in 2020.
Interestingly, at the Raisina Dialogue last month, external affairs minister S Jaishankar said India hadn’t shut its doors on RCEP: “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.”
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. Upon India’s insistence on the 35% value addition clause in the RCEP agreement, other partners, mainly China, wanted to limit the list of tariff lines with such a level of value addition to just 100. “India rejected such a short list,” a source had earlier said.
New Delhi feels without strict rules of origin, its different tariff concessions for different countries (the offers are least ambitious for Beijing) and safeguard/anti-dumping tools against any irrational spike in imports will be rendered meaningless. Even the Budget for 2020-21 last week reiterated India’s intention to tighten such rules.
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 concessions were 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, even without factoring in the deficit with Beijing-proxy Hong Kong. Its deficit with potential RCEP members (including China) was as much as $105 billion in FY19.