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India walks a tight rope as RCEP negotiators meet in Vietnam for final talks

The Hindu Business Line - 23 September 2019

India walks a tight rope as RCEP negotiators meet in Vietnam for final talks
By Amiti Sen

For New Delhi, protecting vulnerable sectors from competition remains a challenges
The negotiations for the Regional Comprehensive Economic Partnership (RCEP) are poised towards conclusion with negotiators from the 16 member countries are trying to tie all the loose knots in an on-going meeting in Vietnam this week.

But, India continues to grapple with the dilemma of wanting to stay in the group while protecting the interests of its vulnerable sectors and is yet to reach an understanding with other members, including China, on market opening commitments.

“Negotiators from India now have a clear mandate of not exiting the talks coming right from the top. Yet so many domestic sectors are continuing to demand protection. In fact, the dairy and textile sectors held intense meetings with the Commerce Ministry just before the Vietnam meeting. It is a tricky situation as other RCEP members are not willing to be very flexible on their ambitious demands for market access,” a government official told BusinessLine.

New Delhi is under pressure to agree to eventually eliminate import tariffs on more than 90 per cent of traded goods for the 10-member ASEAN, Japan and South Korea. For China, Australia and New Zealand, with which India does not have bilateral free trade agreements, the demand reportedly is that India eliminate duties on about 80-86 per cent of goods.

“The greatest fear amongst various sectors, be it steel, engineering goods, chemicals, dairy or agriculture, is that tariffs on about 28 per cent of items will have to be brought down to zero immediately when the pact is implemented while the rest of the elimination is to be done in phases. They will hardly have time to adjust to the new challenges that the competition would generate,” the official explained.

Time is running out for India as the on-going Trade Negotiations Committee meeting in Vietnam could be the last meeting of the group followed by a possible inter-sessional meeting of Trade Ministers.

The results of the negotiations would be announced at the ASEAN Summit in November this year, said Thailand’s Deputy Prime Minister and Commerce Minister Jurin Laksanawisit at a press conference after chairing the 7th RCEP Ministerial Meeting in Bangkok earlier this month. The signing of the RCEP pact is likely in 2020, he added.

Another area of concern for India is the liberal rules of origin (ROO) that most RCEP members adopt. ROO lays down the minimum value addition required by a particular country on an imported product for it to qualify as an item originating from there. So, even if India manages to keep tariffs on certain items being imported from China higher than that for other RCEP members, with low value addition requirement Chinese items can be dumped into India at lower duties via other RCEP countries.

“India has been insisting on high value addition requirements but it has found little support till now. All major RCEP members including the ASEAN, Japan and Australia are opposing it and pushing for less restrictive rules,” the official said.

Indian negotiators are also trying to make the RCEP countries agree to a special safeguard mechanism that would have an auto-trigger allowing members to raise import duties on items when a certain pre-decided import limit is breached.

The RCEP, which includes a number of sectors such as goods, services, investments, government procurement, intellectual property, could be the largest free trade zone in the world accounting for 39 per cent of global GDP, 30 per cent of global trade, 26 per cent of global foreign direct investment flows and 45 per cent of the total population.

 source: The Hindu Business Line