As leaders take stage, India not ready on crucial issues
Even as Prime Minister Narendra Modi is set to attend a summit with heads of government of countries negotiating the proposed Regional Comprehensive Economic Partnership (RCEP), India is yet to sort out crucial chunks of the agreement. On Tuesday, Modi will attend the first-ever RCEP leaders’ summit, which will take place in Manila.
After repeated failures on deadlines, the leaders would commit themselves to get the deal up and running by 2018 as well as finalise its core tenets, a senior commerce ministry official said.
However, he added it would be a tall task. This is because even with the basic draft of the agreement ready, India is pitted against Asean (Association of Southeast Asian Nations) as well as China on tariff reductions in the goods trade and market access in services.
The RCEP is a proposed free trade agreement among the 10 countries of Asean and six others with which this bloc has trade pacts. The six are Australia, New Zealand, China, Japan, South Korea, and India.
The pain of tariff reduction
During the latest — the 20th round— negotiations, held last month in South Korea, member nations had failed to agree on a jointstatement for the leaders to deliver. A large part of that was due to disagreements over eliminating tariffs on the goods trade, a subject on which India has come under increasing opposition from other nations. Now led by Asean, they have demanded that tariffs on almost 92 per cent of all traded goods be reduced or eliminated. The bloc wants meaningful progress on the RCEP before the end of the year, owing to this year being the 50th anniversary of its founding. However, that is a difficult call for India, where tariffs have historically remained high and a sudden change in the structure may prove devastating for domestic industry, making it uncompetitive against those of developed nations such as Australia and Japan, which have low tariffs or none, Sachin Chaturvedi, director-general at foreign policy think tank RIS, said.
During the 19th round of negotiations, held in Hyderabad, members had provided their second offer on tariff reduction. But, even after the South Korea round of talks, some chapters on the goods trade had not been comprehensively discussed, while India’s stand contradicted that of other major players such as Australia on others.
After sticking to its long-held position of a three-tiered approach to tariff reduction, India had earlier this year offered reduced rates on 80 per cent of tariff lines, with a six per cent deviation. India may offer a reduction in tariffs on 86-74 per cent of goods for nations.
Services issues remain stagnant
Another area of contention for India is the services trade, in which India is pushing for liberalising norms and greater market access. India had pushed hard for opening up the services trade, especially on Mode 4, which deals with crossborder migrations of services professionals. While other nations had historically not been open to the idea, they had started discussing e-commerce as part of those on services.