The Tribune - 5 December 2018
India must keep agriculture out of RCEP
By Devinder Sharma
Food & agriculture specialist
India’s foray into the proposed RCEP treaty, a mega trade agreement among 16 Asia-Pacific countries, is being seen as a risky adventure. Given the huge trade deficit that India has with China, Korea, Indonesia and Australia, and given the huge domestic market that India will provide by eliminating import duties on a majority of tradable goods, the treaty will invite a flood of cheaper imports.
At a time when the call for deglobalisation is gaining momentum and increasing protectionism has led to pulling down of global growth in merchandise trade for the second quarter this year, India’s foray into the Regional Comprehensive Economic Partnership (RCEP) treaty, a mega trade agreement among 16 Asia-Pacific countries, is being seen as a risky adventure. More so at a time when agriculture is passing through a terrible agrarian crisis and manufacturing sector continues to limp.
The latest round of negotiations held in Singapore in November abandoned the proposal of reaching a basic agreement by the year-end, and set a new goal for reaching a final conclusion by the end of 2019. This is primarily because India, Thailand and Indonesia are scheduled to go for general elections next year, and none of these countries is willing to bite the bullet before the formation of the new government. The news agency Nikkei quoted an Indian diplomat as saying: "If a basic deal on lowering tariffs is announced, the government in New Delhi will collapse."
What is RCEP
Seeking greater commitment to liberalising trade, the RCEP is a trade agreement among 10 Asian countries and their six FTA partners — Japan, South Korea, China, Australia, New Zealand and India. This block, when the treaty is signed, will cover 45 per cent of the global population and account for 25 per cent of the global GDP and 40 per cent of global trade. It has been under negotiations for six years, and is focused on three pillars — goods, services and investment. The RCEP will then turn into world’s biggest trade block.
Since India’s trade deficit with the RCEP countries exceeds $100 billion, which is roughly 64 per cent of the total deficit, India is looking forward to bridging the trade gap. But given the huge trade deficit that India has with China, Korea, Indonesia and Australia, and given the huge domestic market that India will provide by eliminating import duties and bringing these to zero on a majority of tradable goods, it will invite a flood of cheaper imports.
Already, several ministries have raised the red flag, and domestic industries, including steel and metal, pharmaceuticals, food processing and dairy, have expressed concern.
The RCEP framework entails providing zero duty on 92 per cent of the tradable goods, with another five per cent added over the years. This is what the ASEAN nations and Japan, countries with which India has free trade agreements, are insisting on; the three other major non-FTA partners are seeking elimination of import duties on 80 per cent products with an inbuilt margin of six per cent. As per reports, India is willing to provide tariff concessions on 72 to 74 per cent of the goods to China, Australia and New Zealand. It has sought 20 years to remove the tariffs. But with China, it wants more time, for which negotiation are under way.
Over the past few decades, especially after the World Trade Organisation (WTO) came into existence, rich countries have been seeking a steep reduction in farm subsidies and demanding more market access. What was attempted initially under the WTO was subsequently pushed aggressively under the free-trade agreements (FTAs) and numerous bilateral agreements. While a number of studies have shown how reduction in import duties has turned a majority of developing countries into net food importers, destroying in the process millions of farm livelihoods, the implications of the proposed RCEP treaty on India’s food security have been least studied. What makes the implications more worrisome is that the RCEP negotiations are being held in secrecy, with not even the industry and NGOs being allowed to participate.
Isn’t it strange that six years after the RCEP negotiations began, India is now initiating studies to understand the potential losses from it? It has belatedly entrusted the task to the Centre for Regional Studies, New Delhi, and IIM, Bangalore. Meanwhile, experts and industry representatives, including steel and pharma, have expressed uneasiness. Jayan Mehta, senior official of Amul dairy cooperative, 15 crore livelihoods engaged in dairy farming will be hit from the RCEP negotiations.
What is at stake
Dairy farming: With production exceeding 176 million tonnes this year, India is the biggest producer of milk in the world. Presently, the imports of milk and milk products are allowed with an import duty ranging between 40 and 60 per cent. This provides enough protection for the local industry to build its level of competitiveness. At a time when the US/EU dairy industry is in a crisis, opening the floodgates will inundate India with cheaper milk flowing in from Australia/New Zealand. While Australia, which has only 6,300 dairy farmers, and New Zealand, with 12,000 dairy farmers, are pushing in to protect the interests of their dairy community, India is willing to put the sector on the chopping block.
Food sovereignty: At a time when a reduction in import tariffs has already flooded the country with edible oils, turning it into the world’s second biggest importer, and the zero duty import of pulses in the past three years has caused a steep fall in farm gate prices for farmers, opening up for import of wheat from Australia, which has been wanting India to lower import duties, will be the final nail. Coupled with WTO pressure to restrict MSP payments for public stockholding, it will destroy India’s ability to retain food sovereignty and erode farm livelihoods.
Farming interests: Worse, such floods of imports coming in food crops, plantation crops, fruits and vegetables as well as in processed foods will strike a severe blow to Indian farming, which is already reeling under distress.
Member-countries, on the other hand, are already seeing tremendous trade opportunities. Australia’s Trade Minister Simon Birmingham, who was in New Delhi last week, said the export of almonds from Australia has grown five-fold in the past decade and items such as these showcased the opportunity to diversify the trade basket.
Therefore, agriculture should be kept out of the RCEP. If US President Donald Trump could pull out of the 12-nation Trans-Pacific Partnership treaty to save American jobs, India, too, should protect its food security, built so assiduously over the years. Importing food is akin to importing unemployment, and a vibrant agriculture has the potential to revitalise the economy, more so at a time when the country is faced with jobless growth.