Ministries differ on renewed invitation by RCEP countries

External affairs ministry opposes India joining it, but commerce dept open to studying new proposal

A move by the Regional Comprehensive Economic Partnership (RCEP) nations to reach out to India with a more acceptable proposal has led to differences between the ministries of external affairs and commerce, the two key stakeholders in the RCEP negotiations.

The nations in the grouping have recently approached India through diplomatic sources, asking Delhi to join the bloc.

Last month, a letter issued by the RCEP’S trade negotiating committee had also softened its stand on market access demands for foreign products in India.

As of now, the external affairs ministry remains solidly against India entering the proposed RCEP. It argues that

China plans to use the bloc as a platform to counter the government’s efforts in building domestic manufacturing capabilities.

It has also pointed to the aggressive geopolitical stance adopted by Beijing over the past few months. The neighbouring country has increasingly been cornered by nations for hiding the extent of the Covid19 pandemic in its early days.

However, officials in the commerce department say they are evaluating all possible outcomes and will study proposals sent by the RCEP.

A senior commerce department official said the government is open to hearing out new proposals by the RCEP bloc. A decision to join it will be based on the realities of global trade and the need to find suitable export destinations for India’s goods.

But he added that major concerns still remain unaddressed. “Of the 70-odd issues that had held up the deal, around 50 were India’s concerns. Prime among them was a push by us to institute a proposed import cap on China and a mechanism to raise tariffs on Chinese imports if it crossed a certain threshold. This has continued to be furiously refused by Beijing,” he said.

The proposed RCEP is a free-trade agreement (FTA) between the 10 Association of Southeast Asian Nations (Asean) economies and six others (New Zealand, Australia, China, India, Japan, and South Korea) with which the grouping currently has FTAS. It has been touted as the biggest trading bloc on earth.

After Prime Minister Narendra Modi opted out of the RCEP at the Leader ’s Summit in Bangkok in November 2019, the Centre clarified it was open to being part of the grouping in the future if it got favourable offers. The other RCEP nations had also left the door open for India — the largest untapped consumer and industrial market — in the bloc.

India’s hope of greater trade in services, which would have allowed cross-border movement of Indian information technology, medical workers and teachers, was also impeded by opposition from the Asean bloc and developed economies such as Australia.

According to the MEA, China plans to use the bloc as a platform to counter the government’s efforts in building domestic manufacturing capabilities. It has also pointed to the aggressive geopolitical stance adopted by Beijing recently

Past experience

Since then, the government has upped the ante against the previous United Progressive Alliance regime, bashing it for compromising India’s trade interests. The government had also remained cautious on not to repeat a deal similar to India’s FTA with the Asean bloc.

India’s revenue foregone due to Delhi’s first major multilateral deal has more than doubled to nearly ~26,000 crore in 2018-19.

Being the basic framework of the RCEP deal, the FTA with the 10-nation grouping came into effect in 2010. Exports to the 10 economies stood at $37.4 billion in 2018-19, up by 9 per cent from the previous year. On the other hand, imports were higher at $59.31 billion, up by 25 per cent from the previous year’s $47.13 billion.

According to a study by the NITI Aayog , the utilisation rate of regional trade agreements ( RTAS) by Indian exporters remains critically l ow at between 5 per cent and 25 per cent.