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India against ‘early harvest’ of RCEP pact; here’s why

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Financial Express | 16 July 2016

India against ‘early harvest’ of RCEP pact; here’s why

By Banikinkar Pattanayak

Even as the 16-nation RCEP (Regional Comprehensive Economic Partnership) ministerial in Laos on August 5 will mainly focus on liberalisation in goods trade, India has made it clear that it doesn’t favour an “early harvest”, a person aware of the developments told FE. This means agreements on all the three pillars of negotiations — goods, services and investment — can be implemented only as a package, not one at a time.

So even if a consensus is reached early on goods (which is what most nations want), it cannot be enforced in isolation; New Delhi will still press for a successful conclusion of talks in services and investments as well, so that accords on all the three pillars can be put to effect simultaneously.

India has already shown its willingness to further sweeten its concessions on goods from the initial offers, provided it gets commensurately attractive offers from others in services and investments.

A meeting of the trade negotiating committee will be held on July 18-19 in Jakarta, which will serve to address differences among members and also set the stage for any changes to initial offers on goods at the Laos ministerial. It is also expected that some Asean nations, which are yet to submit their initial offers on goods trade, will do so at Laos.

“India’s goods offer may not necessarily be very ambitious (offer on tariff reduction may not be very drastic) because in services and investments, other countries are not committing much beyond their autonomous policy position,” said the source. However, some more concessions on goods from the initial position can’t be ruled out if negotiations move in a positive direction, the source added.

Initially, India had offered to abolish 80% of tariff lines for 10 Asean members for goods imports, 65% of tariff lines for Japan and South Korea, and 42.5% for China. RCEP consists of 10 Asean members and their six free trade agreement partners, such as India, China, Japan, Korea, Australia and New Zealand. The scrapping of tariff lines means import duties on specified items would be cut to zero over a mutually agreed-upon time frame.

India is keen on services, as they account for over a half of its gross domestic product.

Recently, chief economic adviser Arvind Subramanian argued that India cannot get a sustained 8% expansion without significant export growth. Not just China and other Asian tiger economies, even India’s own high-growth years saw 24%-plus export growth. So trade pacts could be a significant part of India’s exports strategy.

The commerce ministry has already held talks with the external affairs ministry and apprised the latter of its position, said one of the sources.

Ram Upendra Das, professor at the Research and Information System for Developing Countries, said: “Insisting on ‘no early harvest’ is a correct move. Due to the inherent dynamic economic implications on inter-linkages among trade in goods, trade in services and investments, RCEP should be concluded as a ‘single undertaking’. Otherwise, the fullest gains from economic complementarities emanating from the RCEP deal would not be tapped.” However, he asked: “Why goods first, why not services?”

Das said that care has to be taken to ensure that mutual recognition agreement in services is signed before sealing the final deal. Only then services trade can flourish unhindered.

 source: Financial Express