In a departure from the norm followed during the United Progressive Alliance’s term, the current government’s stance on trade negotiations in recent months has sought to reopen issues, such as agriculture and trade facilitation, which had been more or less settled within the World Trade Organization (or WTO) framework. The rethink has evidently sought to preserve India’s interests by linking trade facilitation to the finalisation of public stock holding norms for food security purposes. Thus, the chances of an early agreement on liberalising trade in agriculture and adoption of a new trade facilitation regime look more remote than ever. In part, this rethink has been prompted by the developed countries’ insistence on concluding the trade facilitation agreement without settling the public stock holding norms, in which India is vitally interested. It has also been influenced by a shift to trade protectionism across the globe. But what is of long-term concern is that while most of the major trading countries have responded to the deadlock in WTO negotiations by preparing the ground for plugging themselves into some bilateral or plurilateral trading arrangements, India has been markedly slow in this regard. As such, there is now a danger of India being isolated in the global trading arena.
Such dangers look real as India has taken what appears to be an unsustainable position in its negotiations for the Regional Comprehensive Economic Partnership (RCEP) agreement. In a world where WTO talks on a fresh trading round is deadlocked, the RCEP negotiations are of even greater importance for India if it wants a toehold in the trading bloc of 10 member countries of the Association of Southeast Asian Nations (Asean) and six other countries with each of whom it has a free trade agreement. India is one of the other six countries along with China, Japan, South Korea, Australia and New Zealand. India’s negotiating stance at the RCEP negotiations in Laos last August was widely appreciated and hailed as a bold move as it sought a single-rate tariff structure instead of a three-tiered one. But in a sudden and inexplicable move, India has reportedly introduced a new element to its offer by suggesting a differentiated tariff structure for China within the RCEP framework. Far from expediting the conclusion of the RCEP negotiations, India’s new proposal has given rise to many problematic challenges.
Most importantly, such a negotiating stance to isolate a country such as China, which is an important member of the trading bloc, can be counterproductive. Nor does it reflect a coherent policy approach since the proposed differentiated tariffs for one of the RCEP members is not legally defensible. Worse, it will not even be beneficial for India’s long-term trading interests. There is a real danger that with such a proposal India may not be taken seriously by other trading partners. To argue that the differentiated tariffs offer for China is to put pressure on that country reflects as much a lack of mature thinking as an overstated assessment of its own negotiating powers vis-a-vis China. India must explore all options to be a member of the RCEP and secure for itself the best terms. But seeking differentiated tariffs for China, fearing that it would swamp the Indian market with its cheap products, is not a realistic way of ensuring that.
