India favours expeditious conclusion of negotiations for the 16-nation Regional Comprehensive Economic Partnership (RCEP) as long as its national interest is protected, but just one or two domestic industries can’t hijack the free-trade talks for their own interest, commerce and industry minister Piyush Goyal said on Wednesday.
However, to safeguard the interest of local industry, the government has sought a review of the country’s FTAs with not just Asean but also Japan and South Korea, which have contributed to its huge trade deficit, Goyal said.
Asean members on Tuesday agreed to the review, a first since the FTA came into effect in 2010. Similarly, to protect industry from irrational spike in imports, the government will resort to appropriate trade remedies that are in sync with the global best practices and compliant with the World Trade Organisation framework, the minister said.
Nevertheless, Goyal sought to play down domestic resistance to the RCEP, saying industry is vertically split in its opposition. While some in the pharmaceutical sector see vast opportunities for exports if they get credible market access in China through the RCEP, some others, notably the steel and dairy industries, are opposed to the deal for fears of cheaper dumping, especially from China and New Zealand, respectively.
The minister also said certain steps will soon be announced to improve exports and ensure that exporters don’t face any road blocks. The government has called the meeting of the board of trade on Thursday to explore ways to beat the slowdown in export growth. Apart from Goyal, finance minister Nirmala Sitharaman is expected to attend the first session of the almost day-long meeting.
India has invited representatives of RCEP members for discussing ideas in New Delhi on September 14-15.
Asked if India is in favour of concluding the RCEP negotiations by November, as is being sought by others, Goyal said the sooner it is done with adequate protection for our industry, the better it is. To a question whether New Delhi will continue to insist on “no early harvest” policy (that negotiations on all pillars of the proposed agreement such as goods and services must be concluded at the same time) at RCEP, the minister said in all negotiations, one has to be nimble and positions can’t always be constant.
The RCEP is a proposed trade pact between the 10 countries of the Association of Southeast Asian Nations and their six FTA partners, including Australia, China, India, Japan, Korea and New Zealand. It accounts for 25% of global gross domestic product, 30% of global trade, 26% of foreign direct investment flows, and 45% of the world’s population.
Despite making some progress, the RCEP negotiations have dragged on for years, having missed its deadline continuously.
As for India, sources had earlier told FE that the country could rethink its RCEP engagement and might even be forced to pull out of the mega trade deal if negotiations were sought to be concluded hurriedly without addressing its concerns on its massive trade imbalance with other members, especially China.
Also, while several RCEP members want India to commit more in liberalising its goods trade, they remain reluctant to accede to India’s interest and allow free movement of professionals.
Even without the deal, India’s merchandise trade deficit with China was as much as $53.6 billion in FY19. New Delhi wanted to link meaningful market access from Beijing in key sectors — including IT, pharma and agriculture — to its endorsement of an RCEP deal. India’s overall merchandise trade deficit widened to $176 billion last fiscal from $162 billion a year before.
In their meetings with Goyal late July, several industries had criticised India’s trade agreements with Asean, Japan and South Korea in the past decade on grounds that the country’s trade deficit with these nations just widened after these pacts had come into force and there was only limited gains for them. If, on top of this, a free trade agreement with China is effected through the RCEP (of which Beijing is a key member), cheap Chinese products will flood our market, they had feared. However, many consuming industries have supported the RCEP deal, saying it will help reduce their raw material costs.