With just about 40% of the agenda items having been resolved, there is still a long way to go before the Regional Comprehensive Economic Partnership (RCEP) talks are concluded, according to officials in the Commerce Ministry. They added that it was agreed during the recently-concluded Singapore Ministerial meeting that the deadline for an agreement is shifted to 2019.
India had scored big diplomatic points at the Singapore meeting by getting the countries gathered to omit the phrase ‘significant conclusions’ from the leaders’ statements. Some major economies such as China and Japan felt that the phrasing should be that “substantial conclusions” had been achieved. India strongly opposed this.
India discovered that in some countries’ trade parlance, ‘substantial conclusions’ is legal terminology. Adopting the term would have implied that discussions on market access were over and that those countries would have to disclose the discussions to their Parliaments, and to their public. This has serious implications because only five out of 16 chapters had been concluded, and after the meeting in Singapore, only seven had been concluded. None of the 7 chapters settled had to do with market access, discussions on which would have been seriously jeopardized.
After India pointed this out, several other countries such as Philippines, Indonesia, Malaysia, Vietnam, and Australia also took up the issue and supported India’s position on the matter.
What do you need to know about RCEP?
RCEP is proposed between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has existing FTAs (Australia, China, India, Japan, South Korea, and New Zealand).
RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia.
RCEP aims to boost goods trade by eliminating most tariff and non-tariff barriers — a move that is expected to provide the region’s consumers greater choice of quality products at affordable rates. It also seeks to liberalize investment norms and do away with services trade restrictions.
Why has it assumed so much significance in recent times?
When inked, it would become the world’s biggest free trade pact. This is because the 16 nations account for a total GDP of about $50 trillion and house close to 3.5 billion people. India (GDP-PPP worth $9.5 trillion and a population of 1.3 billion) and China (GDP-PPP of $23.2 trillion and a population of 1.4 billion) together comprise the RCEP’s biggest component in terms of market size.
Greater access to Chinese goods may have an impact on the Indian manufacturing sector. India has got a massive trade deficit with China. Under these circumstances, India proposed a differential market access strategy for China.
There are demands by other RCEP countries for lowering customs duties on a number of products and greater access to the market than India has been willing to provide.
If India is out of the RCEP, it would make its exports price uncompetitive with other RCEP members’ exports in each RCEP market, and the ensuing export-losses contributing to foreign exchange shortages and the subsequent extent of depreciation of the rupee can only be left to the imagination. Some of the sectors that have been identified as potential sources of India’s export growth impulses under RCEP to the tune of approximately $200 billion.
There are more compelling trade and economic reasons for RCEP to become India-led in future, than otherwise. India would get greater market access in other countries not only in terms of goods but in services and investments also.