India’s trade deficit with China weighing over RCEP talks

India’s trade deficit with China has widened to a whopping $62.8 billion in 2017-18 from $51 billion a year before, deepening concerns that the indiscriminate tariff elimination under the proposed Regional Comprehensive Economic Partnership pact could worsen the imbalance, a government official said.

Officials from the 16 RCEP countries, which comprise the 10-member ASEAN, India, China, Australia, New Zealand, Japan and South Korea, are in Singapore trying to concretise offers for market openings with a view to conclude the negotiations by the year-end.

“There is a lot of pressure on India from the ASEAN and China to minimise the deviations in the market access offers for goods. But with the trade deficit between India and China continuously on the rise, there is no way Beijing can be offered the same concessions that could be offered to the ASEAN. New Delhi has to make this point clearly at the meeting,” the official said.

ASEAN demand

In a meeting of the 10 Economic Ministers from the ASEAN countries on Saturday, the Indonesian Minister of Trade Enggartiasto Lukita, who is the country coordinator of the RCEP negotiations, urged all ASEAN member countries to submit their offer packages in goods, services and investments

“ASEAN should demonstrate its solidity and leadership in leading the negotiations towards a substantial resolution by the end of this year. This is demonstrated by striving to reach an agreement to deliver an initial commitment so that the negotiations on request and offer packages can be initiated and intensified to reach mutual agreement for all parties,” Lukita said in a written statement in Jakarta.

The ASEAN wants India to agree to eliminate tariffs on more than 92 per cent of the items and maintain uniformity in its offer by extending similar concessions to all members. It is also putting pressure on India to agree soon to the ambitious tariff cuts being sought so that it is not responsible for delaying the negotiations beyond end-2018. Interestingly, the Indonesian Trade Minister, during his India visit in February, had said that he hoped that India would stand by the ASEAN to conclude RCEP this year and would not disappoint.

“India will try to lessen the pressure building on it at the RCEP talks in the area of goods by insisting that the services offers made by the other members be improved first. Since most of the RCEP members have given very conservative offers in services which would not lead to any incremental market openings, the case would be strong,” the official said.

New Delhi wants not only to shield a larger number of goods imported from China from tariff cuts, it also wants a much longer implementation period for the commitments it undertakes.

The Indian industry is not in favour of offering deep tariff cuts to China as it fears that it could lead to substantial loss of domestic business.

While India’s imports from China increased to $76.27 billion in 2017-18 from $61.28 billion in the previous fiscal, its exports to the country was at $13.33 billion, against $10.17 billion the year before.

Once concluded, the RCEP could be the largest free trading bloc in the world accounting for 45 per cent of the world population and over $21 trillion of gross domestic product (about 30 per cent of world GDP).

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