RCEP countries woo India back to drawing board with ‘flexible package’

To urge India back to the negotiations for the Regional Comprehensive Economic Partnership (RCEP), its 15 member countries have offered New Delhi the option of deferring commitments related to opening up its market. This means, India would not have to make any commitment on this crucial issue at the time of signing the agreement, according to a diplomat from a member country.

“The deferral means that India does not need to worry about RCEP’s impact on the broadening of its trade deficit with China and other member countries when it signs the RCEP agreement,” the diplomat told BusinessLine .

India quit talks with the RCEP — which includes the 10-member ASEAN, China, Japan, Australia, South Korea and New Zealand — in November 2019, as it could not agree on crucial issues including the level of market opening being demanded by the members, especially China.

The exit was also prompted by strong protests from various segments of the Indian industry, farmers’ groups as well as the dairy sector that complained that eliminating duties for RCEP members on most traded products could destroy their livelihoods.

“The flexibility offered to India on deferring commitments on market access was part of the flexibility package proposed by RCEP countries last month. But since the letter had a number of other issues as well, the real message may not have been communicated well to India. That is why delegations are now in touch with the Commerce Ministry to spell out clearly what the package has on offer,” the diplomat said.

RCEP members are also ready to wait for India’s response to the proposal, despite the May 15 time-line proposed initially, as it was just a “polite request”.

Attempts are also being made by RCEP countries to ensure that the Indian industry is aware of the flexibilities that have been offered so that their apprehensions are abated.

“If India agrees to the package then it can enjoy the benefits of all other aspects of the RCEP pact such as investments, services and intellectual property rights, without having to worry about the fate of industry and farmers,” the diplomat further said.

Largest trading bloc

The RCEP, once completed, could be the largest trading bloc in the world, accounting for 45 per cent of the world’s population and 40 per cent of world trade. Japan and Australia had been the force behind designing a flexible package for India to try and coax it back to the negotiating table. Japanese companies in India, too, are placing their hopes on India joining the RCEP talks again, as most believe that it would improve prospects for bilateral trade and investments, an official from the Japanese delegation said.

The Japan External Trade Organisation (JETRO) recently interviewed more than 200 Japanese companies in India who have some investment plans. Most said that that they would maintain or increase their local production in India if it joined the RCEP.

“Some companies, however, pointed out that if India is not part of RCEP, they would rather consider reducing their production in India, as China and Vietnam would then be more attractive,” the official added.

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