China proposes ASEAN+3 mega free trade agreement sans India, Australia and NZ

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The Hindu Business Line - 26 May 2019

China proposes ASEAN+3 mega free trade agreement sans India, Australia and NZ

Commerce Ministry officials feel move may be aimed at extracting concessions in RCEP talks
India could be out of the mega trade deal being negotiated between 16 countries, including the ASEAN and China, if a proposal made by Beijing for a free trade pact excluding New Delhi is taken seriously by other members.

“China has started pushing for a free trade pact between ASEAN + 3 (which includes the ten-member ASEAN, China, Japan and South Korea) at the East Asia Summit. This would effectively mean that among the 16 countries negotiating the Regional Comprehensive Economic Partnership (RCEP), all except India, Australia and New Zealand would get included in the proposed pact,” an official told BusinessLine.

The Ministry of External Affairs, which attends the preparatory meetings for the East Asia Summit, has sought comments from the Commerce Ministry on China’s proposal for an ASEAN+3 FTA. The next East Asia Summit, which is a forum of 18 countries of the Asia-Pacific region formed to fulfil the objectives of regional peace, security and prosperity, is in Turkey next month.

Pressure tactic

Some officials in the Commerce Ministry feel that the proposal, which had once been floated earlier but rejected by Japan, has been given a fresh life by China to put pressure on India to give it concessions similar to those by other countries at the RCEP negotiations.

Since RCEP members, including the ASEAN, are aggressive in their demands, proposing that over 90 per cent traded items should have zero tariffs, New Delhi is hesitant about falling in line. India is especially apprehensive about Chinese goods swamping its market, forcing domestic producers to cut production or shut down. If finalised, the RCEP will result in the largest free trade bloc in the world accounting for 25 per cent of global GDP and 30 per cent of world trade.

“China is trying to give a message that it is ready to ignore New Delhi if it plays hardball and switch over to an alternative ASEAN+3 arrangement. The move may also result in Australia and New Zealand putting more pressure on India to be more flexible in the RCEP negotiations, as they wouldn’t want to be excluded,” the official said. China may be trying to push for an ASEAN + 3 arrangement to speedily create a new order in the region with itself at the helm to counter the challenge posed by the US with which it is engaged in a trade war.

“Earlier, it was Japan which was insistent on India’s participation in the negotiations for a regional bloc as it believed that the country could act as a balancing factor and block China’s efforts to increase its influence over the region.

“However, if China has reached some kind of understanding with Japan on the matter, it could be a rough road ahead for India,” the official said.

At present, officials from RCEP countries are holding an inter-sessional meeting in Bangkok, which is to be followed by another round at the end of next month.

Most RCEP countries want to conclude the negotiations for the free trade bloc by the year-end, but India so far has refused to be hurried into giving its commitments.

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