360 Degree 04 Nov 2019 RCEP: Make it or bre ...

RCEP: Make it or break it

DECCAN CHRONICLE. | MADHUSUDAN SAHOO
Published Nov 4, 2019, 5:16 am IST
Updated Nov 4, 2019, 5:16 am IST
RCEP is a proposed free trade agreement between the 10-member states of the Asean and its six FTA partners.
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 from several quarters over fears of Chinese goods flooding the country.
 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 from several quarters over fears of Chinese goods flooding the country.

At stake are millions of livelihoods in the agriculture and allied sectors, especially dairy. If adequate safeguards are not put in place, the Indian industry, too, faces a big threat from cheap Chinese goods.

Amid the throes of economic slowdown engulfing all sectors in the country, the government is learnt to have faced severe criticism on India’s economic growth front over joining a pact in the proposed Regional Comprehensive Economic Partnership or, the RCEP. The negotiations for this deal are likely to be revealed on November 4.

 

Though the government is trying to allay fears and is repeatedly assuring all protection to the interests of each participant in this deal, many domestic stakeholders such as India Inc, farmer groups, civil society organisations and Opposition parties are keeping their fingers crossed. However, they apprehend the fact that China may dump cheaper goods into India using the deal as a major tool.

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 from several quarters over fears of Chinese goods flooding the country.

RCEP is a proposed free trade agreement or FTA between the 10 member states of the Asean — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam — and its six FTA partners such as China, Japan, India, South Korea, Australia and New Zealand.

RCEP member states account for 3.4 billion people with a total GDP of $49.5 trillion, approximately 39 per cent of the world’s GDP, with the combined GDPs of China and India making up more than half of that amount. Keeping the India’s state of economy in view, India remains undecided on several domestic fronts as to whether to sign the deal, even as Mr Modi is all set to join other RCEP heads of states in Bangkok for discussions on Monday.

Indian negotiators are trying to include adequate protection against cheap Chinese imports in order to make the deal more acceptable to the Indian industry and agriculture. If India joins RCEP, the country will have to take on commitments for tariff elimination for about 90 per cent of items from the Asean, Japan and South Korea, and over 74 per cent from China, Australia and New Zealand.

“India will cut duties for more than 90 per cent of items for most member states in RCEP, excluding China, with some duties being phased out over 10-year, 15-year and 20-year time frames,” a government functionary told this newspaper on condition of anonymity.

“India’s government plans to seal the deal as a political win because tariffs won’t kick in for a decade, but the administration still worries that the local manufacturing sector will struggle when tariffs eventually drop and the country’s poor, small-scale and low-tech farmers would struggle to compete,” he said.

India has many issues involved in the deal, including the country’s demands to shift the base year for tariff cuts to 2019 and an auto-trigger mechanism to check an import surge from China that may make or break a deal. Besides, there are also differences related to the investor-to-state dispute settlement (ISDS) mechanism and data localisation.

Allaying the fear of entering into free trade agreements with other nations, commerce and industry minister Piyush Goyal recently said, “While negotiations for a potential FTA with the US and a larger trade deal with member nations of the RCEP bloc are on, India does not intend to compromise national interest and wrap up such deals without ensuring safeguards for its own industries, according to him.”

“We can’t have inefficient industry lobbying against import and free trade agreements on the pretext that it will affect them. Indian consumers can’t be made to keep paying disproportionately high value for inefficiencies in a particular sector,” Mr Goyal added.

On the other hand, observers are of the view that India keeps making last-minute requests after it agreed to terms for the world’s largest regional trade agreement, potentially preventing Asian leaders from announcing a breakthrough in Bangkok on the 16-nation pact.

As far as differences are concerned, “areas like e-commerce, the auto-trigger mechanism and trade remedies are being smoothed over by officials ahead of the summit. Even the ISDS issue has been sorted out. Even after five years, the question of whether to include it or not in the deal will be decided based on consensus rather than by the majority proposed earlier”.

“But voices have been rising in protest across the country. Farmers, traders and the Opposition parties  have joined the clamour — even though it was the Congress which had joined the RCEP negotiations when it had been in power at the Centre,” an observer said.

As far as the deal is concerned, farmers and non-governmental organisations working in agriculture and allied fields are the main groups who will be affected by the signing of the pact. They have appealed to the government not to sign the deal. They want agricultural produce and dairy to be kept out of the purview of the RCEP.

The Gujarat-based National Dairy Development Board (NDDB) has also expressed concerns and opposed the government’s move on tariff reduction as part of the RCEP deal. The NDDB chairman, Dilip Rath, had requested the ministry of commerce on September 15 to keep the dairy sector out of RCEP.

“Millions of farmers represent the dairy sector. A decision to reduce the tariff barrier would encourage import of cheap milk powder in the country, particularly from Oceania. This would put the livelihoods of our dairy farmers in peril and at the same time severely compromise our food and nutritional security,” Mr Rath said.

“Our country will be again pushed into a state of import dependance, as is the case in many South Asian and Southeast and Far East Asian countries,” he added.

It is learnt that the All India Kisan Sabha has announced a nationwide protest on November 4, the day the deal has to be struck. Farmers’ unions and NGOs have formed an Indian Coordination Committee of Farmers’ Movements to coordinate the protests against the proposed mega-deal. Even the RSS-affiliated Swadeshi Jagran Manch held protests earlier in October against RCEP.

Principles of pact
What is RCEP?

RCEP stands for Regional Comprehensive Economic Partnership. It is a proposed free trade agreement between the 10-member states of the Asean and its six FTA partners.

Who are the main stakeholders in the RCEP deal?
Many domestic stakeholders are India Inc, farmers’ groups and the dairy sector.

For India, what are main issues involved in the RCEP deal?
India has many issues involved in the deal, including shifting the base year for tariff cuts to 2019, an auto-trigger mechanism to check import surge from China and differences related to the ISDS mechanism and data localisation.

What is India’s demand?
India’s demand to shift the base year for tariff cuts is considered unreasonable by other member countries. Indian negotiators are trying to include adequate protection against cheap Chinese imports in order to make the deal more acceptable to the industry and agriculture sectors.

Why do stakeholders fear if India joins RCEP?
All the stakeholders apprehend the fact that China may dump cheaper goods into India using the deal.

What is the govt’s stand on the deal?
India does not intend to compromise its national interest and wrap up such deals without ensuring safeguards for its own industries. India can’t have an inefficient industry lobbying against import and free trade agreements on the pretext that it will affect them.

Who mostly oppose the RCEP deal and want to keep out of it?
Farmers and NGOs working in agriculture and allied fields have expressed concerns appealed to the government not to sign the deal. They want agricultural produce and the dairy sector to be kept out.

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