Negotiations for concluding the ambitious Regional Comprehensive Economic Partnership (RECP) pact this year are in full swing, but the Indian manufacturing sector continues to be apprehensive of competition from China and is demanding higher protection.

Representatives of the Indian industry, including steel, automobile and the engineering goods sectors, have asked the government to restrict market opening offers for China under the mega trade pact between 16 nations to about 42 per cent instead of over 90 per cent being demanded by the Beijing.

“In a recent meeting with the Commerce Ministry, industry representatives said that tariff elimination on 74 per cent items for China being considered by India was too high and would make the Indian industry vulnerable. Instead, India should stick to its initial offer of 42 per cent,” an official told BusinessLine .

Not much benefit

The industry argues that since it has not benefitted much from the existing free trade pacts with the ASEAN, Japan and South Korea, there was little hope that a pact involving China, which already has a huge trade surplus with India, would be useful if most import tariffs are eliminated. In fact, the concern is that many sectors, with small-scale players, may be wiped out.

China, on the other hand, is not willing to budge from its demand that India should eliminate tariffs on over 90 per cent of goods which it is considering for most other members of the RCEP, including the 10-member ASEAN, South Korea and Japan.

India, recognising the need for continued protection of its industry, had initially offered to eliminate duties on 42 per cent of traded items for China, Australia and New Zealand — the three countries in the group with which it does not have any free trade agreement. But with all RCEP members pushing for minimal tariff barriers in the region, it has been forced to improve its offer and go up to 74 per cent.

“The Indian government realises that with the industry being so apprehensive about competition from China and demanding protection, there is little scope for raising its tariff elimination offers beyond 74 per cent of items. Although India is also negotiating for a longer time frame for implementing the tariff cuts, there is a need to protect a number of lines in both agricultural and manufacturing sectors. The negotiations are indeed poised at a difficult point for India,” the official said.

Largest trade bloc

New Delhi is also hesitant of opting out of the RCEP pact because, if concluded it would be the largest free trade bloc in the world accounting for 25 per cent of global GDP and 30 per cent of world trade. Officials from the 16- member countries met in Australia last week with the focussed objective of fast-tracking the negotiations so that the pact could be concluded this year.

So serious are the ASEAN nations in their pursuit of convincing India of respecting the year-end deadline that trade Ministers from Thailand and Indonesia and the ASEAN Secretary General may travel to India to meet Commerce & Industry Minister Piyush Goyal to discuss the matter.