India, China aim to resolve differences over RCEP deal

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LiveMint | 4 June 2018

India, China aim to resolve differences over RCEP deal

by Asit Ranjan Mishra

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Many countries want India to open up its market for 92% of traded goods, while India is only ready to offer market access up to a maximum of 85% items with deviations for countries like China, Australia and New Zealand with whom it does not have an FTA.

New Delhi: India and China will seek to resolve differences on Regional Comprehensive Economic Partnership (RCEP) trade deal in a two-day meeting at New Delhi starting Monday. India will seek non-reciprocal access to China’s market and urge China to support its efforts for a substantial agreement in services under the RCEP deal.

The 16-member RCEP free trade agreement (FTA) is mostly held up due to India’s reluctance to substantially open up its market to China as it has an unsustainably high trade deficit of $63 billion in 2017-18 with its northern neighbour. Many countries want India to open up its market for 92% of traded goods, while India is only ready to offer market access up to a maximum of 85% items with deviations for countries like China, Australia and New Zealand with whom it does not have an FTA.

“For India, RCEP is mostly about China. We can have FTAs with Australia and New Zealand separately. Once India and China settle their ambition level, then the rest of it could be sorted out,” a commerce ministry official said under condition of anonymity.

The official said discussions with China could happen at item level where each country will seek tariff cuts depending on its competitiveness. “We will ask for more than reciprocal liberalization from China. Goods are the most important part of the deal. If it’s done, then 50% of the deal is done. Then there are battles on investment, IPR (intellectual property right) which need to be settled,” he added.

The official said India will also seek China’s help to carve out a more ambitious deal in services under RCEP to which most member countries have shown strong resistance. India believes an ambitious services deal will help it provide job opportunities in RCEP member countries for its millions of skilled professionals at home.

Biswajit Dhar, professor of economics at the Jawaharlal Nehru University said a bilateral meeting between India and China on RCEP was only expected after the informal summit between Prime Minister Narendra Modi and Chinese President Xi Jinping in April on the latter’s invitation. “The Chinese are getting impatient about RCEP after the US president started warming up to the Trans-Pacific Partnership (TPP). China wants to conclude negotiations by the year-end. India must stick to its position and seek more time for liberalizing its industrial sector quoting its Make In India plan and sensitivity of the domestic sector,” he added.

Another trade expert speaking under condition of anonymity said it’s “blatantly foolish” for India to agree to a bilateral talks on RCEP with China. “We are not in a position to sign the RCEP deal without hurting our domestic industry. We should delay it beyond December after which electoral politics will take over in India. It is difficult to understand why we agreed to the bilateral talks just ahead of a crucial RCEP ministerial in July,” he added.

There is strong divergence in views among various arms of the government regarding its possible approach towards RCEP.

V.K. Saraswat, member of the government’s think tank NITI Aayog in a note published in April argued that the country needs to rethink joining the RCEP as it will be “disastrous” to provide more market access to China, which is a key player in the grouping.

In an interview with Mint in February, chief economic adviser in the finance ministry Arvind Subramanian said India needs to be extra cautious and take into account geostrategic issues while moving ahead with the RCEP deal as it will also mean opening up the market to its adversary China.

Former foreign secretary S. Jaishankar, at a presentation before the parliamentary standing committee on commerce, called for “observance of due restraint” and warned against concluding trade arrangements that are not in India’s medium-term interest.

Mint reported on 14 March that the prime minister’s office held a meeting of secretaries of various government departments on 6 March where most of those present opposed India’s signing of the RCEP deal. A final decision on whether India will quit RCEP negotiations has been left to prime minister Modi.

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source: LiveMint