Seven years after India joined negotiations for the 16-nation ASEAN (Association for South East Asian Nations)-led RCEP (Regional Comprehensive Economic Partnership) or Free Trade Agreement, Prime Minister Narendra Modi announced on Monday that India was dropping out of the agreement, citing its negative effects on “farmers, MSMEs and dairy sector”.
“The present form of the RCEP Agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP. It also does not address satisfactorily India’s outstanding issues and concerns. In such a situation, it is not possible for India to join RCEP Agreement ,” Prime Minister Modi told leaders of the other 15 nations at the RCEP summit in Bangkok.
The summit included China, Japan, Australia, New Zealand, South Korea, and the 10-nation ASEAN grouping.
“When I measure the RCEP Agreement with respect to the interests of all Indians, I do not get a positive answer. Therefore, neither the talisman of Gandhiji nor my own conscience permit me to join RCEP,” Mr. Modi added, referring to the stakes of Indian farmers, traders, professionals and industrialists, all of whom have protested against the government’s decision to go ahead with the negotiations in the last few months.
Later in the evening, a joint leaders’ statement indicated that despite India’s “unresolved” outstanding issues, other countries were prepared to go ahead with the RCEP agreement .
“We noted 15 (of 16) RCEP Participating Countries have concluded text-based negotiations for all 20 chapters and essentially all their market access issues; and tasked legal scrubbing by them to commence for signing in 2020,” the statement issued at the end of the summit said.
“India’s final decision will depend on satisfactory resolution of these issues,” the joint statement said.
When asked whether India might consider joining RCEP at a later date, an MEA official said, “Not as the agreement stands today.”
Sources said Indian officials, who had hoped for consensus on pushing the timelines on an agreement to next year, reacted angrily to the joint statement, and stormy scenes were reportedly witnessed over the wording of the statement.
Officials present at the meetings said India had tried to negotiate “in good faith” but felt that their views “were not being accommodated”. They also accused the other nations of attempting to “gang up” in an attempt to force India to toe the line on issues like safeguards against flooding of Chinese goods, allowing Indian labour mobility to other countries for services, and agricultural and dairy tariffs. Since 2012, there have been 28 rounds of negotiations that went right down to the wire over the weekend at the RCEP ministerial meeting, which ended inconclusively for India.
According to a government note, the outstanding issues included major trade deficits with all the countries in RCEP, lack of assurances on market access, and RCEP negotiators’ insistence on keeping 2014 as the base year for tariff reductions. The note, which was circulated to the media shortly before Mr. Modi went up on the dais to make his announcement, also said India was in the process of reviewing its Free trade Agreements with Japan, Korea and the ASEAN grouping, and discussing trade agreements with Europe and the U.S., while criticising the previous UPA government for “poor negotiations” in the past.
The note called agreements like RCEP “in reality FTAs by stealth” with countries with whom India has a “huge trade imbalance” — a veiled attack against China with which India has a $53 billion deficit.
The government denied reports that it had made any “last minute demands” at the ASEAN and East Asian Summits on RCEP.
“Overall we are clear that a mutually beneficial RCEP, in which all sides gain reasonably, is in the interests of India and of all partners in the negotiation,” government sources said later in the afternoon. A few hours later, however, the mood had considerably changed, and India decided to walk out of the RCEP agreement altogether.
RCEP negotiations were meant to create the world’s biggest free trade region that represented half the world’s population and one-third of the global GDP.
The decision to join RCEP met with stiff resistance in India, however, from most industry and farmers’ bodies. The All India Kisan Sangharsh Coordination Committee (AIKSCC), which represents about 10 lakh farmers, had called for an all-India protest on Monday against joining. Separately, the Confederation of All India Traders, which represents about seven crore traders, made several representations to the Commerce Ministry to keep steel and allied services, and dairy out of the purview of the RCEP agreement.
However, while certain industries such as steel, agriculture, and dairy have been vocally against India joining RCEP, the Confederation of Indian Industry in a report on Monday said the naysayers had only taken the limited view of curbing imports from China and have not looked at the opportunities for export growth that India could exploit by joining RCEP.