Hoping to break the impasse in negotiations and mount pressure on India so that it moves faster towards signing the RCEP (Regional Comprehensive Economic Partnership) free trade agreement, a three-member high-powered ASEAN delegation led by its secretary-general Dato Lim Jock Hoi will meet Union minister of commerce and industry Piyush Goyal in New Delhi next week.
Other members of this delegation include the economic ministers of Thailand and Indonesia. SNI has learnt that Goyal will have discussions with the delegation members and host them for lunch on July 9. While the delegation members are expected to exert pressure on India to move ahead on RCEP, Goyal will be voicing Indian concerns about the proposed pact.
While the ASEAN secretary-general is from Brunei, the economic minister of Thailand is part of the delegation as his country is the current chair of ASEAN while the Indonesian minister is part of the delegation as Indonesia is the country coordinator for RCEP negotiations.
The delegation is visiting just days after Malaysian Prime Minister Mahathir Mohammed suggested that his country was willing to go ahead on RCEP without India as well as Australia and New Zealand “for the time being”. There have also been media reports that China too has proposed a truncated RCEP that would not include India, Australia and New Zealand. India, on its part, believes that ruling it out of RCEP when negotiations are still on might be a bit premature.
The mega trade pact, when concluded, will encompass the world’s largest trade area and is being negotiated between the 10-member ASEAN grouping (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) and six other countries (existing FTA partners of ASEAN) — India, China, Japan, South Korea, New Zealand and Australia.
The renewed push to get India on board for RCEP has come with ASEAN member states deciding last month to engage yet again with the Modi government after it began its second term in late May. With India still having significant misgivings about RCEP, particularly the impact it would have on its manufacturing industry, New Delhi wants its concerns addressed before signing on the dotted line.
Having begun in 2012, RCEP negotiations are now in their seventh year with ASEAN leaders hoping to conclude them by the year-end. It is, however, the prospect of India not coming on board that has the 10-member ASEAN worried.
Indeed, the Bangkok Declaration upon the conclusion of the 34th ASEAN Summit in Thailand on June 23 said, “we reiterated our strong commitment to concluding the Regional Comprehensive Economic Partnership (RCEP) negotiations within 2019 to reinvigorate international trade and to maintain ASEAN credibility and centrality…We also called for relevant ASEAN partners to prioritise the RCEP negotiations and to work with ASEAN to conclude the RCEP negotiations within this year.”
As New Delhi conducts its RCEP negotiations, it has found itself caught between a rock and a hard place. For, it needs to balance geo-strategic interests while also ensuring that the interests of its domestic industry are protected. What has proved to be the biggest stumbling block for India in progressing on RCEP has been China’s presence in the proposed trade bloc as it’s worried that an unfettered import-duty free entry of Chinese goods will have an adverse impact on the domestic industry.
Going by past experience with regard to the India-ASEAN FTA on goods, there is a perception that India did not gain as much as it should have with growth in imports having exceeded that on exports. At the same time, India has not been able to gain much in the services sector despite the FTAs it has signed.
Indeed, the Indian government has been facing stiff resistance from the domestic industry even as it tries to balance the industry concerns with the country’s strategic interests. Indian industry fears that once India joins RCEP, cheap Chinese goods will flood the domestic market. With the huge subsidies offered to exporters by the Chinese government, the large economies of scale industry enjoys there and greater productivity, Indian industry feels it will be adversely impacted once these cheap Chinese imports enjoy duty-free access to the Indian market under RCEP.
Under intense pressure to join RCEP and at the same time hoping to protect the interests of Indian industry, India’s demand for differential tariffs for trade with China has been agreed to under the RCEP negotiations. However, India continues to push for the ‘Country of Origin’ rules to be enforced stringently under the mega trade pact.