China would want India to be one of the countries to sign the Regional Comprehensive Economic Partnership (RCEP), a free-trade pact among 16 nations, instead of staying out, said Song Hong, deputy director general and senior fellow at the Beijing-based Chinese Academy of Social Sciences. For this, China could create a bilateral mechanism with India to generate support for the treaty, he said.
Negotiations on the RCEP between the ten Asean members and the six partner countries of India, China, Australia, New Zealand, Japan and South Korea are in advanced stages and are expected to conclude by November. It will create the world’s largest trading bloc. The major differences at this stage are between India and China. India runs an annual trade deficit against China, estimated at close to $58 billion in 2018, having risen by about 12 per cent in just one year.
Song, an economist, is in New Delhi as part of the RCEP Track 1.5 Meeting organised by the Indian Ministry of Commerce and Industry to drum up goodwill for the RCEP. “A joint commission between the two nations negotiated independently of the others might be a useful measure.” His comments are significant given his standing in the Chinese Communist Party which gives him an influential voice in the trade negotiations of the country.
He made the comments at a session on “China, India and RCEP”, hosted by Research and Information System for Developing Countries (RIS), a New Delhi–based autonomous policy research institute, on Saturday.
The academician said the commission could explore areas of non-tariff barriers that India has often pointed out as having hurt imports to China. New Delhi has repeatedly raised concerns with Beijing about the lack of market access.
The Director General of RIS, Sachin Chaturvedi, said the formation of a joint commission to address these issues would be welcome. “It will give Indian negotiators a win-win platform in signing the trade deal. There are genuine concerns since China did offer special and differential access to the USA on several products at certain periods, a treatment it can certainly reciprocate for India.”
On Saturday, Business Standard had reported India is finalising a list of products on which it would want to retain import tariffs despite RCEP’s commitment to largely eliminate duties on trade between the signatory countries. All of the goods on the proposed list are imports from China on which India wants space for differential tariff reduction. Harsha Vardhana Singh, former deputy director general at the World Trade Organization, said India has been keen to also get a simultaneous list of items from China, goods on which it will allow easier imports. “But it has made no progress so far”, he said.
In the session, Song Hong drew parallels for India with the way China moved into the global trade chain in the nineties of the last century. He said India cannot develop expertise in end-to-end production but must enter the global value chain.
“Exports of components is the best,” he advised and said this can only happen if India integrates itself into the Factory Asia, a term which S&P has recently used to describe the continent.
He said of late as the cost of production has risen in China, companies moved out from the coasts to the Western regions and are also moving out of the country. For India to host those “massive enterprises” he suggested reforms in land, labour and capital markets to create a competitive environment for the domestic industry at par with what the other Asian countries have begun to offer.