Trading bloc to India: Cut tariffs or exit FTA talks

Member countries of RCEP issueultimatum

April 20, 2016 12:40 am | Updated September 12, 2016 09:45 am IST - NEW DELHI:

India has been told to either agree to eliminate tariffs on most products quickly or leave the talks on the proposed Free Trade Agreement (FTA), being negotiated by the Regional Comprehensive Economic Partnership, the trading bloc comprising 16 Asia-Pacific countries.

Sources in two ministries told The Hindu that the other RCEP members have issued this ultimatum being irked by what they perceive as New Delhi’s “obstructionist, defensive and half-hearted approach” that is “delaying” the conclusion of the talks. They said the apprehensions were voiced at the last round of negotiations in February in Brunei, adding that the 12th round of RCEP talks slated for April 23-29 at Perth in Australia could be a “turning point” in the negotiations with India.

In particular, trade negotiators from the other RCEP members, comprising the 10-member ASEAN bloc, and China, Japan, Australia, South Korea and New Zealand were upset over India’s protectionist stance, “focusing only on the export of manpower” and not on liberalising trade in goods and other services, as well as investment.

Matters could come to a head as officials in the ministries of External Affairs and Commerce are expected to seek a clear direction from PM Narendra Modi on whether or not India should be part of the RCEP.

The PM, they said, has been concerned over the lack of progress in India’s negotiations on all the major FTAs including the RCEP, and with the European Union, Australia and Canada. “The PM will have to take a strategic call,” on whether the government wants to go ahead with all these FTAs, said a senior official.

The official also said that RCEP members must acknowledge India’s interest in the RCEP as a key component of its ‘Look East’ policy. “We have maintained that we have made very substantial offers and we are seriously negotiating. We cannot be brushed aside as if we were non-serious about it,” the official said.

The RCEP is among the proposed three mega FTAs in the world so far – the other two being the TPP (Trans Pacific Partnership, led by the US) and the TTIP (Trans -atlantic Trade and Investment Partnership between the US and the EU).

The sources said that the root of India’s ambivalence on RCEP and other negotiations is internal differences on how to go forward on free trade issues. One group wants India to aggressively push for easier movement of professionals between the RCEP members in return for some concessions that India can offer including reduction (and not elimination) of duties in goods on a lower threshold (that includes a combination of percentage of tariff lines and that of total RCEP imports) over a period lasting beyond 15-20 years.

This so-called “defensive” group is also opposed to the RCEP being used as an indirect FTA with China and have cited the industry’s sensitivities in doing so. They have questioned the logic behind India entering into the RCEP negotiations especially when India has inked FTAs with Asean, Japan and Korea, and currently is negotiating FTAs with Australia and New Zealand.

The other so-called “constructive” group wants India to take a long-term approach and agree to eliminate duties in goods (barring in a few sensitive sectors in agriculture & industrial goods) on a higher threshold within a decade to help India Inc leverage the opportunities arising out of the Global Value Chain. This group wants India Inc not to be afraid of taking on China. They have opined that it will be better for India to focus on a comprehensive liberalisation of services trade as part of RCEP instead of only on easier movement of natural persons.

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