A modern, comprehensive and mutually beneficial economic partnership agreement for an open trade and investment milieu in the Asia-Pacific region is the core objective of the Regional Comprehensive Economic Partnership (RCEP).
Countries, in diverse stages of development, from Australia, China, Japan and India to the 10 members of the Association of South East Nations (ASEAN) are part of the RCEP, besides South Korea and New Zealand.
Once wrapped up, RCEP would foster the largest regional trading bloc, making up 25 per cent of global GDP, 30 per cent of world trade and 26 per cent of cross-country foreign direct investment (FDI) flows the world over.
While 'substantial progress’ has been claimed by India in negotiations in 2018, a closer look is needed. So far, as many as seven chapters in RCEP encompassing economic and technical cooperation, amongst others, have been concluded. But the crucial one on market negotiations bristle with Indian reservations, as it is not prepared to let its domestic industry smothered by the deluge of cheap goods from the other members, particularly China.
Interestingly, the erstwhile tiger economies of ASEAN want India to eliminate tariffs or customs duties on about 90-92 per cent items that it trades with the countries with which India has a Free Trade Agreement (FTA). These include ASEAN and Japan.
With the non-FTA partners—Australia, New Zealand and China, discussions are on for removing duties on 80 per cent of traded products. New Delhi has asked for a 20-year deadline to end the duties, but with China, it seeks more time for removal of tariffs.
The need for seeking a protracted liberalisation phase with China is based on ground realities. A House Panel report on the impact of Chinese goods on Indian industry, tabled in the monsoon session of Parliament, vehemently argued that “the impact of Chinese imports has been such that India is threatened to become a country of importers and traders with domestic factories either cutting down their production or shutting down completely…”
From raw material to components to final product assembly, the competitive strength of the Middle Kingdom is proven beyond a pale of doubt and that too across several sectors in which the competitive strength of Indian products are ironically, at a disadvantage.
According to the report, the annual year-on-year growth in Chinese imports was about 9 per cent in 2013-14, which had soared to 20 per cent in 2017-18. The trade deficit with China at $63 billion constitutes more than 40 per cent of India’s aggregate trade deficit.
The Chinese goods itself constitute about one-sixth of all imports in terms of quantum in India. In the decade 2007-08 to 2017-18, there has been an increase in India’s exports to China by $2.5 billion only while its imports from China have zoomed by $50 billion during this period.
With sobering statistics such as these, Indian trade envoys are naturally demanding that China should give more and we, in turn, would give China lower concessions and take a longer staging period, given the gargantuan trade deficit with Beijing.
As the core of the marathon talks zero in on market access for goods, services and investment with the deadline deferred to 2019, India might have earned a reprieve from immediate danger to its cocooned domestic sectors.
But as 2019 is an election year in India, the outcome of which will determine whether the proposed RCEP would be wrapped up by the incumbent dispensation or a new one, the fact remains that India must perforce have to undertake structural reforms, including correction of the much-delayed inverted duty structure, liberalisation of the mining sector to spur domestic manufacturing and markedly cut down import of steel, coal, oil and a plethora of other minerals.
The urgent need to be in a mega trading bloc is nowhere crucial than at this juncture when the World Trade Organisation (WTO), is faced with an existential crisis.
The numerous multilateral trade deals under its charge have come to a halt over the past decade. A slew of few trading nations have naturally pitched for regional or preferential free trade agreements (FTAs) among compact number of participants to exchange concessions and move ahead with gains accruing from such liberalised trade.
For India, which has not been in any meaningful regional trading arrangement, but attempted to latch on to a few FTAs that had only brought resentment from local industries, the enduring benefits of trade remain elusive!
To compound the cup of mercantile misery, there is an ongoing trade war between majors, the United States and China, which began slapping retaliatory measures, fouling up the global trading atmosphere and generating a sort of psychosis among others as to how to wade in the choppy waters of overseas markets that have abruptly become protectionist and impermeable. In this dismal scenario, the time to fix the roof can no longer be deferred.