Huge pressure on trade sops may derail Suresh Prabhu's first RCEP talks

Richer nations at Manila summit want India's concessions in domestic space to be extended to them

Excessive pressure by negotiating nations on securing future trade concessions provided by India in the domestic space may derail new Commerce Minister Suresh Prabhu's first trade engagement at the Regional Comprehensive Economic Partnership (RCEP) ministerial in Philipines.

Currently in Manila, Prabhu will have to negotiate hard as senior sources in the know said the issue is likely to be brought up again, similar to the past few rounds of negotiations. While India had communicated its intention to allow certain sectoral concessions in the services and investments segments, richer nations have continued pushing for similar concessions in goods trade as well, they said.

Known as 'ratchet' in trade terminology, the concept implies that any policy changes initiated by India domestically in the future will be automatically committed under the RCEP agreement after a fixed time period of the policy decision.

Also, sources suggested that India has also agreed to the MFN (most favoured nation)-forward clause, agreeing to provide any future investment or services related concession given to a trading partner under a bilateral treaty automatically to RCEP members as well without any time gap.

Both concepts have been contentious among trade experts who have pointed out that it limiits India's negotiating space while curtailing the scope for domestic policy. Interestingly, disagreements over these two provisions proved to be contentious hurdles to India ever joining the proposed Trade in Services agreement currently being discussed by the United States and the European Union among other nations.

The RCEP is a proposed free trade agreement (FTA) between the 10 countries of the Association of Southeast Asian Nations (Asean) and six others with which this bloc has FTAs with namely, Australia, China, India, Japan, South Korea, and New Zealand.

Negotiations, which formally began at the end of 2012, have been pushed hard by the Asean nations, which want to achieve meaningful progress on RCEP before the end of the year since 2017 is the 50th anniversary of the bloc’s founding. 

On a related note, it announced the conclusion of negotiations on a Free Trade Agreement (FTA) and a Investment Agreement with China's Hong Kong Special Administrative Region on Saturday.

The preceding round of RCEP was held in Hyderabad. Back then, civil society groups had voiced their concerns over various aspects of the proposed agreement. "Cutting down agricultural tariffs will basically mean giving away market access to nations like Australia, Japan and New Zealand who are major producers of dairy, meat and seafood, " Ranjana Sengupta from NGO Third World Network said.

Also, their high levels of product standards will effectively nullify the chances of Indian exports making it to there, she added.

Also, patient care groups have also raised concerns with the proposed intellectual property norms that may stop production of affordable Indian generics that make life-saving medicine available to millions across the globe.

The target for 2017 is to see members finalising the broad contours of the agreement, a senior government official said under conditions of anonymity. However, with most chapters on goods trade yet to see full discussions, members may make their second round of offers on tariff reduction, he added.

On the most contentious issues of tariff liberalization, India was earlier willing to offer reduction on 80 per cent of all tariff lines, with a six per cent deviation.However, in the current scenario, India may offer reduction in tariffs on 86-74 per cent of goods for nations, taking into account the gamut of trade with them.

Recently, China has stepped up its demand for significant liberalization in tariffs.It has called for abolishing tariffs in 92 per cent of traded products. However, India wants a longer phase-out period for Chinese imports for about 20 years, against 15 for other RCEP nations.