The Economic Times - 12 June 2019
13 RCEP nations oppose India’s strict country of origin norms
By Kirtika Suneja
India wants strict rules of origin to prevent Chinese goods from flooding the country through member countries that may have lower or no duty levels.
At least 13 countries including Australia, Japan and New Zealand have opposed India’s proposal for strict criteria to determine the source country of a product, based on which they get tariff concessions or duties, in the 16-nation Regional Comprehensive Economic Partnership (RCEP) trade pact.
The 10-member ASEAN bloc too has opposed India’s proposal, an official said.
India wants strict rules of origin to prevent Chinese goods from flooding the country through member countries countries that may have lower or no duty levels. Chinese garments are making their way into India through the duty-free route under the South Asia Free Trade Pact and the Duty-Free Quota-Free window from Bangladesh.
This was a key issue at the intersessional meeting of RCEP countries in Bangkok last month.
“We want clearly defined rules of origin to ensure integrity and sanctity of tariff differentiation. Led by Australia, most others want liberal rules of origin,” said the official familiar with the details.
India has said the highest value addition with the help of indigenous inputs must be done in the country from which a product is exported. Globally, the average threshold for domestic content to get originating status for a product is 40-60%.
“These countries don’t have the kind of resources and manufacturing like us except Japan, which is into large-scale value addition and exports. So, they want lenient rules,” the official said.
Strict origin norms are crucial for India, which had a trade deficit with 11 RCEP members including China, South Korea and Australia in 2018-19. The gap with China alone was $53.6 billion.
India’s aluminium and copper industries are worried about China’s presence in the grouping and anticipate widening of the trade deficit due to an “alarming” spike in imports and a potential threat to the Make in India initiative.
Niti Aayog said in a study that “if duty is further cut under RCEP, domestic aluminium industry will be severely hit.”
“However, China is conservative and not on either side,” the official added.
The issue will be taken up again at a meeting in Australia during June 28-July 3, followed by a meeting in China at the end of July. A ministerial meeting is slated in China in August as members try to conclude the mega-trade agreement this year.
“RCEP will not benefit us vis-a-vis China...We already have a deficit with most of the member-countries,” said a New Delhi-based expert on trade issues.
“The Chinese are already taking advantage of our liberal rules of origin with neighbouring least developed countries including Bangladesh,” said Biswajit Dhar, professor at the Centre for Economic Studies and Planning in the School of Social Sciences at Jawaharlal Nehru University.
RCEP is a proposed regional economic integration agreement among the 10 Asean countries and its six free-trade agreement partners—Australia, New Zealand, Japan, China, South Korea and India.