RCEP Summit: As leaders take stage, India not ready on crucial issues

PM Narendra Modi will attend the RCEP leaders summit on Tuesday aimed at fixing a deadline for mega-trade deal by 2018

India is yet to sort out crucial chunks of the agreement as Prime minister Narendra Modi is set to attend a summit with heads of government from the nations negotiating the proposed Regional Comprehensive Economic Partnership (RCEP).

On Tuesday, Modi will be attending the first ever RCEP leaders summit in Manila. After repeated failures on the deadline front, the leaders will commit to getting the deal on the ground by 2018 as well as finalising the core tenets of the final deal, senior Commerce ministry official said.

However, he added that it will remain a tall task to do so since even with the basic draft of the agreement ready, India is still pitted against the ASEAN bloc as well as China on tariff reduction in goods trade and market access in services.

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 trade agreements, namely, Australia, China, India, Japan, South Korea, and New Zealand.

During the latest -20th round of negotiations - held last month in South Korea, member nations had failed to come to an agreement on a joint statement.

The pain of tariff reduction

A large part of that was due to disagreements over eliminating tariffs on goods trade, a subject on which India has come under increasing opposition from other nations. Now led by the ASEAN, they have demanded that tariffs on almost 92 per cent of all traded goods be reduced or eliminated. The bloc wants meaningful progress on RCEP before the end of the year owing to this year being the 50th anniversary of its founding.

However, that is a difficult call for India where tariffs have historically remained high and a sudden change in the structure may prove devastating for domestic industry making it incompetitive against those from developed nations such as Australia and Japan which already operate at low or non existent tariff levels, Sachin Chaturvedi, Director-General at forign policiy think tank RIS, said. 

During the 19th round of negotiations, held in Hyderabad, members had provided their second round of offers on tariff reduction. But, even after the Korea round of talks, some chapters on goods trade have not been comprehensively discussed while India's stand contradicts that of other major players such as Australia on others, a senior government official said.

After sticking to its long held position of a three tiered approach to tariff reduction, India had earlier this year offered reduced rates on 80 per cent of all tariff lines, with a six per cent deviation, another official said. Under this 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.

However, it has named different terms for China which is a major manufacturing and is expected to flood nations with its manufactured goods given a chance.

Services issues remain stagnant

Another area of contention for India is services trade, where India is pushing for liberalisation of norms and greater market access.

This has been due to India enjoying a natural advantage position due to its large pool of trained services professionals like nurses, chartered accountants, Information Technology professionals and trained workers in several fields.

India had pushed hard for the opening of services trade, especially on Mode 4, which deals with a cross-border migration of services professionals. While other nations have historically not been open to the idea, they have now started to make discussions on e-commerce as part of those on services, the official mentioned above said.

India should be wary of e-commerce norms being imposed on it owing to the digital platform still in its nascent stage in the country. Within e-commerce, issues like consumer protection, domestic regulatory frameworks, customs duties and data protection, among others, Biswajit Dhar, Trade expert said.

Civil society groups have voiced their concerns over a possible drastic reduction of agricultural tariffs, which may make Indian products unproductive, as well as looser investment norms, exposing the country to litigation from foreign commercial interests.

The RCEP Summit will be held on the sidelines of the 3-day ASEAN Summit in Manila which began on Monday. A meeting of Trade ministers from the RCEP countries alongside that of the Trade Negotiations Committee is also slated.

For India, the RCEP presents a decisive platform to influence its strategic and economic status in the Asia-Pacific region. Expected to be the largest regional trading bloc in the world, accounting for nearly 45 per cent of the global population with a combined gross domestic product of $21.3 trillion, it will bring together the biggest economies of the region into a regional trading arrangement for the first time.

Key takeaways
 

• RCEP leaders meeting for the first time will commit to sign RCEP by 2018 as well as finalise core tenets of the deal
• India is still pitted in a fight against the Asean bloc and China on tariff reduction on goods trade whereby its under pressure to reduce tariffs on 92% of all traded goods
• On services trade, it is yet to make a headway in talks as other nations block its push for unrestricted movement of trained professionals
• To be the largest regional trading bloc in the world, RCEP will account for nearly 45% of global population with a combined gross domestic product of $21.3 trillion