Trade calculations: India offers to parley on RCEP tariff terms

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India’s seeks easier movement for its IT professionals in the RCEP negotiations

The Economic Times | 24 May 2017

Trade calculations: India offers to parley on RCEP tariff terms

Faced with slow progress on the issue of easier movement of professionals across borders, there is now increased pressure on India to eliminate import duties on 92% of its traded goods with 15 countries including China under a regional trade agreement.

India, instead, has offered to eliminate tariffs on 80% of products with a margin of 6% depending on level of development of the other country as part of the Regional Comprehensive Economic Partnership (RCEP). With this math, India may have to eliminate duties on 74% of its traded goods with China over the long run.

India’s trade deficit with China was about $53 billion in 2015-16. Officials said countries are likely to ask India to reduce this margin (known as deviation in trade parlance) to 1% as India prepares to host the next round of negotiations in July in Hyderabad. “Ambitions will have to be elevated to keep deviations at minimum and reduce the staging period,” said an official aware of the matter, referring to a second offer on duty cuts before July.

Services Imbalance

Cautioning against protectionist trends creeping into RCEP talks, India said the progress on services negotiations is not keeping pace with that on goods. In fact, countries’ positions have tightened on services although India hasn’t sought further relaxations to avoid ruffling any feathers.

We want them to give commitment on the most favoured nation position. It is worrying that this is also becoming a negotiating issue now,” the official said. Commerce and industry minister Nirmala Sitharaman recently stressed the need for the RCEP fraternity to remain guarded and united against recent protectionist trends and be supportive of inclusive trade policies at the third Regional Comprehensive Economic Partnership inter-sessional ministerial meeting on May 21-22.

New Delhi has maintained that the progress on services is not keeping pace with the progress on goods in the negotiations as countries have sought more discussions on India’s proposal for easier movement of its IT professionals. "Some countries have made offers on Mode 1and Mode 3 but they say more talks need to take place on Mode 4 services," the official added.

Mode 1 is cross-border supply between countries. Mode 2 refers to consumption abroad. Mode 3 means commercial presence, which includes joint ventures between foreign service providers and domestic businesses. Mode 4 is for movement of people. Mode 4 services is of key interest to India.

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