What does India gain from joining the RCEP negotiation table?

The RCEP is touted as a significant step to bring the three largest economies of Asia - China, India and Japan - into a regional trading bloc, along with ASEAN member countries

The Regional Comprehensive Economic Partnership or RCEP is touted as a significant step to bring the three largest economies of Asia — China, India and Japan — into a regional trading bloc, along with ASEAN member countries. Subhayan Chakraborty writes what India could gain from joining the bloc.

What is the idea behind the RCEP?

The most ambitious trade pact India is currently negotiating, the Regional Comprehensive Economic Partnership (RCEP), is based on India’s existing free trade agreement with the 10 nation Association of the Southeast Asian Nations (Asean) bloc. The RCEP will include all the nations with which the Asean has trade deals — New Zealand, Australia, China, India, Japan and South Korea. Accounting for nearly 45 per cent of the global population with a combined gross domestic product of $21.3 trillion, it will be the biggest trading bloc on the planet, also bringing together the biggest economies of the region for the first time.

What does India gain from joining the RCEP negotiation table?

New Delhi has consistently focused on services trade norms, such as those allowing the free movement of trained professionals across national boundaries. This would effectively allow Indian professionals — such as chartered accountants, teachers and nurses — to practice in other RCEP nations without the need for bilateral mutual recognition agreements. Since India has an abundance of trained labour, that is interested in migrating while sending remittances back home, this is a prime focus area for the country. Commerce Minister Suresh Prabhu has said Indian firms have created more than 100,000 local jobs in RCEP countries, apart from cost savings and enhanced competitiveness, even with limited expatriate presence.

What are the issues on which the talks have got stuck?

Under planning since 2012, the talks have seen little movement since partner nations have been unwilling to concede on crucial issues. This includes the market access for foreign goods and reduction of import duties on them, discussion areas where India is gravely cautious since manufacturing powerhouse China is part of the arrangement. The country fears the RCEP pact will allow China to push its products at a lower prices and finally capture the market, something it hasn’t been able to do so far since India’s import barriers remain high. While the gargantuan $63 billion trade deficit with China remains a burning political issue for the government, security concerns have also arisen over Chinese conglomerates dictating market trends in sectors such as telecommunication. 

On the other hand, richer nations like Australia and New Zealand have remained adamant on issues such as seeking more leeway in selling specific products such as dairy and fruits in India. New Delhi has also moved slowly on investment norms, especially dispute settlement guidelines.

What is the stand of India Inc on these issues?

India Inc has been divided over the prospect of India joining yet another trade pact with nations that are competing with the country in the export space. Some want the deal as it might give them access to the huge Chinese consumer market, but most argue that existing trade agreements with Malaysia, Japan, Singapore and South Korea are grossly unfavorable to India and have only led to the widening of the trade deficit with these nations. 

Several ministries such as those of steel, agriculture, mines and information technology had opposed the talks earlier. Under such pressure, the Prime Ministers Office had decided to assess the pact and its fall-out despite the Prime Minister’s promise to seal the deal by 2017.

Where do the negotiations stand at the moment?

The mega trade bloc has been under planning since 2012 and so far, 24 rounds of talks have concluded, apart from seven minister-level meets. On Wednesday, Prime Minister Narendra Modi along with all other leaders of RCEP nations, met in Singapore to affirm their commitment to a speedy deal by 2019. Incidentally, all negotiating parties had promised to end talks twice before as well.

The proposed pact is to have 21 chapters across goods, services and investment. The short-term goal of concluding the talks on six-seven chapters by 2018-end seems to be on track. Till now, five have been concluded including crucial ones such as those on economic and technical cooperation, small and medium enterprises, customs procedures and trade facilitation and government procurement, among others.

Given the progress till now, what are the chances of a deal being signed in 2019?

At the latest summit, Prime Minister Narendar Modi stressed on India’s latest position: a request for more time to decide on tariff rates, especially with the national elections coming up in 2019. Apparently the move paid off since the Asean bloc, backed by China has put immense pressure on India to conclude the deal over the past year. Policymakers also pointed out that unlike the Trans Pacific Partnership, which went forward despite the United States boycotting it in the end, the RCEP nations can’t cut out India despite complaining over the nation’s slow progress. India presents the biggest trade potential and largest market growth for these nations and an RCEP without it doesn’t make sense.