Prime Minister Narendra Modi’s Singapore visit will be remembered for his keynote address at Fintech festival and participation at ASEAN, East Asia Summit. And his sharing a table with heads of state of the 16-member Regional Comprehensive Economic Partnership (RCEP) was of high significance. But the big question is - is RCEP membership important for India and why pressure is mounting on it to conclude early the trade agreement that aims to cover goods, services, investments, economic, technical cooperation, competition and intellectual property rights?
Launched in 2012, the RCEP envisages free trade agreement between India and 10 ASEAN nations along with Japan, China, South Korea, Australia and New Zealand. Once implemented, it will create the world’s largest trading bloc, accounting for 40 per cent of global GDP. This is the reason India wants to be a part of the RCEP.
But since India, as per 2017-18 financial year, is facing a huge trade deficit of over $63 billion with China, $11.96 billion with South Korea, $12.47 billion with Indonesia and $10.16 billion with Australia, experts have asked for adoption of due caution while concluding the deal with the RCEP.
Several rounds of talks at the official and ministerial level among RCEP members have taken place. The last ministerial level RCEP meet occurred in Singapore just one day prior to the group’s summit level meet in the lion city on November 14. But it failed to reach any consensus on several issues, including e-commerce, competition and investment. That means it can’t be concluded by the end of 2018 and that India will relook at trade and tariff issues of the RCEP with new energy and plan after the 2019 parliamentary election.
Yet, it needs to be born in mind that e-commerce space in India is in the developing stage. There is a fear that once e-commerce market is opened under a trade deal with RCEP countries, China’s Alibaba which is knocking at India’s door for entry into the e-digital market, will kill smaller companies like Snapdeal, Myantra, Jasper and others. Even micro, small, medium enterprise (MSME) sector, which is still growing, will suffer a major jolt if India concludes deal with the RCEP nations without significant concessions from them. India is also being asked to remove export restrictions on minerals and raw materials’ mining by countries like Japan, China and South Korea.
No longer will, experts feel, India be able to protect its pharmaceutical, food processing, dairy, agriculture and intellectual property if it goes ahead with the trade deal without realising its pros and cons for the country’s interests. The Swadeshi Jagran Manch, one of the affiliates of the RSS, has also called for quitting the proposed trade agreement as it is not in the interest of the people of India. “The RCEP presents a major threat and not a major opportunity for India,” the SJM said in a letter to Prime Minister Narendra Modi. Earlier in April, NITI Aayog, a think tank of the government, had cautioned the country from joining the RCEP as it will be disastrous to provide more market access to China, the key player of the group.
ASEAN and its FTA partners like Japan, China, South Korea, Australia and New Zealand want India to open its market for 92 per cent of goods, but they are not ready to open their markets for the services sector, especially on the movement of skilled manpower, an area in which India is very strong. This presents quite asymmetrical situation for India, yet it has not been addressed so far.
Japan, China and South Korea, recognised for strong manufacturing base will not spare any effort from swamping the Indian market with their products if the country reduces import duties on goods under the RCEP deal. India’s steel industry, already reeling under huge bad debt, will meet its certain death if the countries like China, benefiting from reduced tariff under the RCEP deal, start dumping cheap steel items in the Indian market.
But ironically these countries that preach day in and day out that India should lower its tariff on tradable goods to zero level, have no gumption to accommodate New Delhi’s demand on free movement of skilled professionals in RCEP countries. Without give and take, no trade deal works. Still India’s patience has not worn out, but it will like to see that the multi-nation trade deal should be modern, comprehensive, balanced and mutually beneficial to the people of all countries.