India grapples with ways to deal with China in RCEP
Live Mint - 06 October 2019
India grapples with ways to deal with China in RCEP
By Asit Ranjan Mishra
India is grappling with ways to deal with China in the Regional Comprehensive Economic Partnership (RCEP) forum, even as trade ministers of the countries in the grouping are working towards sealing negotiations for a trade deal later this week in Bangkok.
India has agreed to remove duties on 74% of its traded goods with China over a period of 20 years. This figure may even be increased to 80% on China’s request. However, China is unwilling to offer tariff elimination in 90% of traded goods.
The 28th and latest round negotiations for RCEP were held in Danang, Vietnam, from 19 September to 27 September. Trade ministers are scheduled to meet on 10-12 October in Bangkok to give final shape to the deal before a meeting of RCEP heads of states in November when a formal announcement regarding the negotiations is likely to be made.
“India’s market access negotiations, especially with China, remain incomplete. Though another round of negotiation is not proposed, negotiators may meet in small groups to sort out remaining issues," said an Indian government official with knowledge of the negotiations.
Home minister Amit Shah had chaired a crucial meeting on RCEP on Friday with finance minister Nirmala Sitharaman, external affairs minister S. Jaishankar, and trade minister Piyush Goyal. This comes in the wake of Jaishankar saying last month during a panel discussion in Singapore that India remained concerned over the “protectionist policies" of Beijing that have created a significant trade deficit between the two nations.
India, whose trade deficit with China and RCEP in 2018-19 was $53.6 billion and $105 billion, respectively, is apprehensive that further liberalization in tariffs to the neighbouring country could lead to surge in imports harming the domestic industry.
India is unlikely to gain even if China substantially reduces its tariff levels as it has not negotiated non-tariff barriers with RCEP members, especially China, according to another official.
Indian pharmaceutical companies always complain of cumbersome registration processes and long delays in getting licenses in the lucrative Chinese market.
The proposal of an auto-trigger mechanism to protect Indian manufacturers from a sudden surge in imports from RCEP member countries is unlikely to be effective, said analysts. “While the proposal has received positive feedback from other RCEP member countries, such a mechanism on 100-200 products will prove inadequate and ineffective," said the second government official cited above.
It is unwise on the part of the commerce ministry to push for an auto-trigger mechanism as a remedy against import surge to protect the domestic industry, said Ashwani Mahajan, convener of the Swadeshi Jagran Manch. “An auto trigger seeks to address import surges alone, but does nothing to price dips. Further, the period of application will be short. The import surge will raise the trigger in the subsequent year, making its application more difficult after the auto trigger is used once," he said.
“A price trigger is easy to monitor through international prices. However, as volume triggers are used in auto-trigger mechanism, our ports need to be linked perfectly so that the government knows when thresholds are being exceeded," said Biswajit Dhar, professor at Jawaharlal Nehru University.
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Concern of some of the countries, including India, is critical as a complete tariff elimination on RCEP could widen their trade deficit and severely harm some vulnerable sectors, please take a look at this link.
India is planning to employ an “auto-trigger” safeguard mechanism for imports from not just China but also Australia and New Zealand to better protect domestic players from irrational inflows of heavily-subsidised products, see on this link.
Prime Minister Narendra Modi took stock of the proposed Regional Comprehensive Economic Partnership (RCEP) trade agreement whose negotiations are in the final stages, for the details see this link.
Thailand will host a ministerial meeting on the Regional Comprehensive Economic Partnership (RCEP) on Saturday in Bangkok, please read the full story on this link.
