At RCEP meet, India seeks 10% advantage over China in tariff removal
This advantage for India will mean that its exporters can access 10% more Chinese product lines without facing tariff barriers.Updated: Oct 19, 2019 03:10 IST
India has bargained a nearly 10% advantage over China in tariff elimination during the ongoing Regional Comprehensive Economic Partnership (RCEP) discussions in a move aimed to placate the domestic industry and pave the way for New Delhi to conclude negotiations ahead of PM Narendra Modi’s visit to Bangkok next month, three people familiar with the matter said on Friday.
This advantage for India will mean that its exporters can access 10% more Chinese product lines without facing tariff barriers
Indian negotiators and experts are stationed in Bangkok to fine tune commercial and legal issues pertaining to the RCEP, said an official with direct knowledge of the matter. They are expected to iron out key issues before commerce and industry minister Piyush Goyal arrives in Bangkok early next month ahead of Modi’s scheduled visit on November 4, the official said.
The Indian leadership is determined to protect the interests of the domestic industry, agriculture and farm sectors before concluding any FTA (free trade agreement), according to the people cited above.
“India will not repeat the mistakes of the past. The Asean FTA has been tilted in favour of countries like Vietnam and Thailand. India’s trade deficit with Asean has soared since the FTA has become operative in 2010,” one of the officials said.
According to official data, while India’s exports to ASEAN grew 9.56% to $37.47 billion in 2018-19, imports surged to $59.32 billion in the same period, a whopping 25.87% growth.
India is determined to bargain hard on the principle of equity, which was perceived to have been sacrificed while signing the Asean FTA, the official said.
“India’s concessions to countries such as Vietnam and Indonesia are disproportionate under the Asean FTA, which is against the principle of equity. While India agreed to eliminate more than 74% of tariff lines, Indonesia agreed to about 50% and Vietnam 70%. Such tilts are the main cause of concern for the Indian industry,” the official added.
An agreement between India and China is the key for successfully concluding the RCEP because New Delhi already has FTAs with most of the other members.
The RCEP is a proposed FTA covering 16 countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — the 10 members of the Association of Southeast Asian Nations (Asean) and its six FTA partners — China, Japan, India, South Korea, Australia and New Zealand. India has FTAs with Asean, Japan and South Korea. FTAs are arrangements between two or more countries that primarily agree to reduce or eliminate tariff and non-tariff barriers on substantial trade between them.
The RCEP will not be fully successful without India’s participation, which is one of the main reasons why other members agreed to allow time for further negotiation even as the last ministerial (October 11-12) was expected to conclude the deal before the 3rd Leaders Summit scheduled on November 4 this year in Bangkok, an official said.
According to the domestic industry, the FTA with Asean did not bring the desired gains for the Indian industry in terms of enhanced exports.
“India’s trade deficit with Asean, which was approximately US$12 billion in 2010-11 jumped to over US$22 billion in 2018-19,” said Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).
A NITI Aayog report that reviewed various FTAs, including the one with Asean countries said India has been a net loser in almost all, except with Sri Lanka. The report, ‘A Note on Free Trade Agreements and Their Costs’, said the Asean FTA saw the greatest reduction in Indian import tariffs.
“FTA covers 75% of the two-way trade. India offered around 9,000 products for tariff elimination out of about 12,000 tariff lines, 1,800 lines in sensitive track and almost 1,300 lines in exclusion. Thus India kept around 10% of their tariff lines in exclusion, Thailand, Philippines, Myanmar, Brunei and Vietnam kept more number of tariff lines under exclusion compared to India,” it said.
India’s stand on “free” but “fair” trade has been reinforced recently at a high-level internal meeting on the RCEP in New Delhi. The meeting took place ahead of Goyal’s vist to Bangkok to attend the ministerial (October 10-12).
“The government is also conscious of the fact that the RCEP agreement would be fully operative some time around 2021-22 and its impact will be felt in 2023-24, which will be the time when the government would be seeking a fresh mandate. Hence, it cannot afford to sign a hasty deal as was done in the past,” the second of the people cited above said.
“The industry is opposing the RCEP because of historical blunders in FTA negotiations. For example, India gave more than proportional access to some of the member countries such as Vietnam and Indonesia,” said Ram Singh, professor, Delhi School of Economics. “Now India should negotiate trade deals in favour of its industry and extract more concessions from countries like China before signing the RCEP. This will win the confidence of Indian industry and improve balance of trade for the country.”
Sharad Kumar Saraf, president, Federation of Indian Export Organisations (FIEO), said, “When you go to negotiate any FTA, there is always some give and take. Important is to strike a balance. A 10% edge is reasonable. It will help India’s exports.”
“Some local industry could feel the heat. But, the government can help them by providing assistance, such as duty-free imports of components that can make them competitive,” he said.