RCEP stutters on Indian fears
Hopes of summit breakthrough fade
NEW DELHI: India’s last-minute requests on terms of the world’s largest regional trade agreement could prevent Asian leaders from announcing a breakthrough on the 16-nation pact during the Asean Summit in Bangkok next week, people familiar with the situation said.
In recent days, India has angered other negotiators by requesting changes to the China-backed pact covering half the world’s population, said the sources, who asked not to be identified because the talks are private. Leaders had planned to announce a preliminary deal on Nov 4 when leaders gather for meetings hosted by Asean, they said.
Chief negotiators are still confident they can reach a broad agreement on the deal to reduce tariffs, known as the Regional Comprehensive Economic
Partnership (RCEP), at the Bangkok gathering, the sources said. Any announcement would pave the way for nations to finalise the details on the legal framework in the coming months.
A breakthrough after seven years of talks would mark a win for trade liberalisation in an era of rising tariffs and resurgent nationalism. The deal would also further integrate Asia’s economies with China at a time when US President Donald Trump is seeking to convince the region to shun Chinese infrastructure loans and 5G technology.
India, which has raised some tariffs under Prime Minister Narendra Modi, has long been the main holdout on an RCEP deal due to strong domestic opposition over fears the country would be flooded with cheap Chinese goods.
Mr Modi, who is fresh from a landslide re-election win in May, agreed to move ahead with the deal after receiving personal assurances from Chinese President Xi Jinping in an informal meeting earlier this month, an Indian official said. China has long pushed to conclude the pact, which also includes Japan, South Korea, Australia, New Zealand and 10 Southeast Asian nations.
Still, India came up with new demands after a broad RCEP agreement was concluded, seeking changes in base duties and product-specific rules, according to an Indian official. Indian officials said Mr Modi’s government would push for further concessions but is likely to agree to sign due to fears that India could be left out of the announcement, forcing it to negotiate with countries on a bilateral basis.
The Office of the Prime Minister in India didn’t immediately respond to a request for comment.
“I have been quite sceptical of a robust RCEP coming to conclusion, due entirely to India’s intransigence,” said Richard Rossow, the Wadhwani Chair in US India Policy Studies at the Centre for Strategic and International Studies in Washington.
“However, since Modi’s re-election, there seems to be new energy behind completing the deal despite serious concerns about how it could impact India’s trade balance with China.”
India will cut duties for more than 90% of items for most nations in RCEP, excluding China, with some duties being phased out over 10-year, 15-year and 20-year time frames, one of the Indian officials said.
India’s government plans to sell the deal as a political win because tariffs won’t kick in for a decade, another Indian official said. But the administration still worries that local manufacturing will struggle when tariffs eventually drop and the country’s poor, small-scale and low-tech farmers would struggle to compete.
“It’s not good political or geopolitical strategy for the Indian government to join the RCEP,” said Ashwani Mahajan of the Swadeshi Jagran Manch, a Hindu group aligned with Mr Modi’s party that commands influence among his base. “The RCEP is little more than a freetrade agreement with China, which will be disastrous for Indian businesses. We have spoken with the trade minister and made it clear that India should stay out of this deal.”
It’s “highly likely” the RCEP deal will be agreed to in Bangkok even if the agreement is not finalised, said Juan Sebastian Cortes-Sanchez, a senior analyst at the Asian Trade Centre research group in Singapore.
“I don’t think we can expect a complete, crisp agreement, with all the tariff schedules and information, and all the chapters completed,” he said. “But we would expect them to sign something so that they can move forward with it.”
In Tokyo, Japanese Trade Minister Hiroshi Kajiyama will skip tomorrow’s ministerial meeting on RCEP in Bangkok to attend parliamentary deliberations, a Diet committee official said yesterday.
Mr Kajiyama has apparently decided to focus on domestic matters after his predecessor abruptly resigned last week over a money and gift scandal. Hideki Makihara, a senior vice minister of economy, trade and industry, will attend the gathering tomorrow to be joined by ministers from 16 countries negotiating the RCEP.
In Bangkok, Auramon Supthaweethum, director-general of Thailand’s Trade Negotiations Department, yesterday expressed confidence that the RCEP agreement would come to fruition within this year.
The leaders of 16 participating nations vowed to conclude the talks by the end of this year when they attended the Bangkok RCEP Ministerial Meeting in September. Ms Auramon said the RCEP ministers would meet tomorrow to finalise the negotiations and the results will be proposed to the RCEP Summit on Monday.