Live Mint | 4 February 2016
India to defer finalizing trade pact with Australia
by Asit Ranjan Mishra
India has decided to defer finalizing a trade deal with Australia until the ongoing multi-country Regional Comprehensive Economic Partnership (RCEP) trade negotiations come to a conclusion.
Australia is part of the RCEP and India thinks it may lose its leveraging power by finalizing a trade deal with it ahead of the RCEP deal.
“A bilateral trade deal with Australia has to be an improvement over the RCEP. There is no point signing an agreement with Australia ahead of the RCEP deal,” a commerce ministry official said on condition of anonymity.
Australia has been very keen to sign the agreement but both sides missed the December target.
Australia trade minister Andrew Robb visited India four times in 2015 to convince India to fast-track the trade deal.
The ninth round of Australia-India Comprehensive Economic Cooperation Agreement (CECA) negotiations took place in New Delhi on 21-23 September last year with both sides agreeing on the importance of making progress towards a balanced and mutually beneficial agreement.
“The ninth round covered key issues, including market access for goods, services and investment and chapters on goods, services, investment, rules of origin, customs procedures and trade facilitation, sanitary and phytosanitary measures, technical barriers to trade, legal and institutional matters and dispute settlement,” Australia’s commerce ministry said in September.
While both the sides expressed keenness to hold the 10th round of negotiations in November, it did not materialize.
Replying to questions, a spokesperson for the Australian high commission in New Delhi said both the sides are working towards an early conclusion of the bilateral CECA and that government leaders have instructed ministers to intensify efforts to conclude the RCEP negotiations this year.
“Pursuing bilateral and regional FTAs (free trade agreements) provide the opportunity to maximize the outcomes for both Australia and India. Regional FTAs provide access to a large market and streamline trade and investment regulations, while bilateral FTAs provide opportunities tailored to both sides’ specific interests,” he said.
Under the RCEP, India has offered tariff elimination of 42.5% to Australia, while that country has offered zero tariff on 80% of its traded goods.
The next round of RCEP negotiations for achieving a deal by the end of the year will take place during 15-19 February.
“This round is crucial as the partner countries will ask each other to improve upon their initial offers. We are preparing our list of demands and finalizing our flexibilities where we could yield to demands by other countries,” he added.
The spokesperson said RCEP negotiations are entering an intense phase; however, significant challenges remain.
“There is potential for RCEP to make genuine advances in several areas including investment, financial services, regional value chains and the digital economy,” he added.
Started in May 2013, RCEP comprises the 10 economies of the Association of Southeast Asian Nations (Asean)—Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam—and six of its free trade partners—Australia, China, India, Japan, New Zealand and South Korea.
India has followed a three-tier approach for making tariff liberalization offers based on whether it has a free trade agreement with the country or not. Among its free trade partners also, it made separate offers to the Asean on the one hand and Japan and South Korea on the other.
The grouping envisages regional economic integration, which will lead to the creation of the largest regional trading bloc in the world, accounting for nearly 45% of the world’s population with a combined gross domestic product of $21.3 trillion.
The regional economic pact aims to cover trade in goods and services, investment, economic and technical cooperation, competition and intellectual property.
India’s interests lie mostly in services, the removal of technical barriers to trade such as those taken under sanitary and phytosanitary measures, and trade in goods such as pharmaceuticals and textiles.
Ram Upendra Das, a professor at think tank Research and Information System for Developing Countries, said whichever trade agreement is concluded at a later stage should be more ambitious.
“While a bilateral trade deal with Australia can be concluded at a faster pace, the economic gain is likely to be lower. On the other hand, the RCEP deal will have greater economic benefits for India but it may take longer to conclude. The best option for India at present is to push for faster conclusion of RCEP negotiations,” he added.