India faces a stern test of its commitment to RCEP

Amiti Sen New Delhi | Updated on August 08, 2018 Published on August 08, 2018

Govt has to decide on the tariff ‘red lines’ that cannot be crossed

India may need to take a view on whether it wants to remain a part of the Regional Comprehensive Economic Partnership (RCEP) that is being negotiated among 16 countries, including China, before Prime Minister Narendra Modi attends the RCEP Summit in Singapore in November.

“While the RCEP may not be ready to be signed in November, most members want significant commitments to be taken by leaders at the summit. India needs to make its negotiation position clear before the meeting of Trade Ministers of RCEP countries this month-end,” a government official said.

Meeting tomorrow

A group of four Ministers — Suresh Prabhu, Piyush Goel, Nirmala Sitharaman and Hardeep Puri — has been tasked with steering the discussions with Secretaries of key Ministries and Departments. The committee, which also includes the Cabinet Secretary, will meet on August 10.

“The Commerce Ministry has started discussions with other Ministries and Departments, including agriculture, steel, heavy industries, economic affairs, revenue and textiles. The August 10 meeting with Ministers and Secretaries will provide guidance on the stance at the RCEP,” the official said.

The RCEP includes the ten-member ASEAN, India, China, South Korea, Japan, New Zealand and Australia. While it would be an important strategic move for India to be part of the world’s largest free trade area, the high ambitions of its members, including China, and the impact it could have on the Indian industry holds negotiators back.

“In our consultations with other Ministries and Departments, we have to determine whether we should have red lines in certain areas, and if we should exit the negotiations if other members do not agree with them,” the official said.

For instance, agreeing to dismantle tariff barriers for Chinese goods could be disastrous for the industry beyond a limit. “Our negotiators have to be clear on how much liberalisation would be too much as far as China is concerned,” the official said.

Also ASEAN’s aggressive push to dismantle tariffs on about 90-92 per cent items and reduce tariffs to below 5 per cent on an additional 7 per cent of items is equally worrying for India; it would expose sensitive items, including farm and dairy goods, automobiles and steel products, to tariff cuts.

In the investment chapter, too, there are contentious areas such as liberalising based on a negative list (wherein all items are to be included except those specifically mentioned in a list) and the inclusion of an Investor State Dispute Settlement mechanism. This could lead to India getting involved in costly legal suits filed against it by corporates.

New Delhi needs to decide if it should agree to a liberalising pact on goods if nothing worthwhile is offered in the area of services by others, the official added.

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Published on August 08, 2018
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