Introduction:

Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has existing free trade agreements (Australia, China, India, Japan, South Korea and New Zealand)

Do you know?

• Talks have been under way for over six years now, with over 25 rounds of negotiations between all FTA partner countries.
• The 16 member countries have now set a deadline of end-2019 to conclude the negotiations.
• India is among the countries that will have to take a call at this point considering the seriousness of the situation.
• The negotiations, until now, have been fraught with difficulties, with India accused of being ‘conservative’ in its approach towards tariff negotiations.

Concerns with respect to India and RCEP

• India is the one country that doesn’t have an FTA with China. The greater access Chinese goods will have to the Indian market, bigger the problem given India’s massive trade deficit.
• To circumvent this, the government has proposed a “differential market access” strategy for China, which others are inclined to accept.
• Both Indian negotiators and the domestic industry have been vocal about their discomfort with respect to opening up of the domestic market to Chinese exports. This is because of the massive Chinese overcapacity in key manufacturing industries, and major support programmes in the form of financial, non-financial and trade measures for the domestic industry, which give an edge to Chinese producers over other trade partners.
• There are also demands by other RCEP countries for lower customs duties on a number of products and greater access to the market than India has been willing to provide.
• The more developed RCEP countries such as Australia and Singapore have been unwilling to accommodate India’s demands to liberalise their services regime and allow freer mobility of Indian workers.

The way ahead:

• India suggests for appropriate safeguard clauses need to be put in place within RCEP in case injury to domestic industry is found, resulting due to impacts of massive support that China offers its industries, leading to overcapacity and price undercutting.
• India suggests introduction of clause on provisional safeguard measures.
• Also, given the current state of Indian industry, phased elimination of tariffs is necessary, especially with respect to some key manufacturing industries that have long gestation periods until they start running on full capacity.
• Therefore, at least a 15-25 years’ tariff elimination schedule should be negotiated for key sectors like chemicals, metals, automobiles, machinery, food products and textiles, which individually contribute more than 5% to India’s manufacturing GDP and employment, respectively. Phased elimination of few key manufacturing industries is absolutely essential with respect to China.
• Policymakers should be cognisant of the use of non- tariff barriers (NTBs) by China. Even though China has agreed to open almost 92% of their tariff lines, expecting India to reciprocate in the same manner, India’s concerns over China’s complex NTBs merit serious attention.

Conclusion:

• Indian negotiators bargain hard for an inclusive and balanced RCEP. However, domestically India must fiercely focus on problems plaguing manufacturing sector and exports.
• RCEP is an opportunity for India to play a greater role in Asia-Pacific, the fastest growing and developing region the globe.
• India must not take the easiest way out on the trade deal and walk out of talks, rather it should move forward and fill the vacuum being created by the protectionism of US.
• If negotiated well, the RCEP has the potential to be a game-changer for India.