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RCEP: India hardens stand ahead of summit with ASEAN

The Hindu | 23 December 2017

RCEP: India hardens stand ahead of summit with ASEAN

by Suhasini Haidar & Arun S.

In a sign that India’s Free Trade Agreement (FTA) negotiations could slow further, the Ministry of External Affairs (MEA) has taken a strong stand that the country should restrain itself from concluding any such pact from which it would not gain in the medium term.

This was evident in Foreign Secretary S. Jaishankar’s comments before the Department Related Parliamentary Standing Committee on Commerce in June. The panel’s report on ‘trade with Association of South East Asian Nations (ASEAN)’ showed that Mr. Jaishankar had “called for observance of due restraint and not conclude trade arrangements which are not to our medium term advantage.”

According to the panel’s report, the senior official “submitted that a lot of our [India’s free trade] agreements have not served as well as they could have.”

The report, released on December 18, is significant coming ahead of the ASEAN-India commemorative summit to be held on January 25, where the issue of the long-delayed Regional Comprehensive Economic Partnership (RCEP) will likely take centre stage.

Joint chief guests

In a first, all 10 heads of ASEAN states led by the grouping’s current chairperson, Singapore Prime Minister Lee Hsien Loong, will attend the ASEAN-India summit and be the joint chief guests at the Republic Day Parade on January 26.

In an interview during a visit in 2016, Mr. Lee had urged India to take a more “liberal approach” on freeing up trade and promoting regional integration.

Referring to the RCEP before the standing committee, Mr. Jaishankar had said that “though larger FTAs are important for getting preferential access to the markets, it is important to be cautious about the manner in which such arrangements work out in respect of our imports as well as on our efforts to increase the share of manufacturing sector in our economy.”

The RCEP is a proposed mega-regional FTA involving the 10 member countries of ASEAN and its six FTA partners including India, China, Japan, South Korea, Australia and New Zealand.

Access for services

Mr. Jaishankar stressed that India’s external trade arrangements must be supportive of the Make in India initiative. As per the committee’s report, he pointed out that “emphasis in these trade arrangements is mostly on trade in goods and the same enthusiasm is not shared for trade in services. The reluctance in giving market access for trade in services is a big challenge.”

When contacted, a senior MEA official said, “the thinking is now we do deals only if our interests are taken into account.” The official added that such a strong stand would also be adopted in other negotiations including those on the proposed India-European Union Broad Based Trade and Investment Agreement.

Commerce ministry sources said while there is immense pressure on India in the RCEP negotiations to commit to opening up (90%) of its traded goods, what is troubling the government is the fact that other RCEP countries have so far been lukewarm to India’s demands for greater market access in services, particularly on easing norms on the movement of professionals and skilled workers across borders for short-term work. India, which is defensive regarding opening up its goods sector, is currently virtually isolated in the RCEP talks, the sources said. The next round of talks is in February in Indonesia. So far, 20 rounds of negotiations have been held, in addition to five ministerial meetings, three inter-session ministerials and one summit level talks between heads of state.

Significantly, while the India-ASEAN Trade in Goods Agreement was inked and enforced from January 1, 2010, India’s goods trade deficit with ASEAN widened from $4.98 billion in 2010-11 to $14.75 billion in 2015-16, and then narrowed to $9.56 billion in 2016-17.

The huge goods trade deficit has led to questions on whether the pact is only helping ASEAN nations and not benefiting India.

 source: The Hindu