INDIA'S STRATEGY TO NEGOTIATE RCEP AGREEMENT
Ever since the countries expanded their reach in international trade they entered into International Trade Agreements for improved market access through negotiations, signing FTAs (Free Trade Agreements) or GATT, WTO or the EU agreement. Still these did not provide sufficient condition to countries for actual export growth. There are group of countries exploring ways by various forms of FTAs mainly aimed at yielding benefits that could be derived through elevated trade and investments. Many developing countries could not take the advantage of market access as free trade facilities among WTO or EU member countries came in to influence the improved trade conditions between members due to the greater flows of trade between member states and their increased influence on non-member countries. The developed countries reaped the benefits to the maximum.
Efforts were on among the counties of Asia region and with the resultant conceptualization of Regional Comprehensive Economic Partnership (RCEP) in 2011 and formally floated in 2012, was envisaged to bolster economic associations among the now 16 member countries in Asia and to promote trade and investment linked activities. 10 of them are the Association of Southeast Asian Nation (ASEAN) countries and rest six Asia-Pacific states (India and China included) with whom ASEAN has existing free trade agreements.
The RECP negotiating countries met for their crucial sixth meeting in Singapore in end-August, 2018 in an effort to create by far the largest economic integration agreement to deal with the rising trade tensions between the US and its major trading partners including those in Asia.
CNBC viewed RCEP as a potential substitute to the US backed Trans-Pacific Partnership (TPP), a proposed free trade agreement among 11 Pacific Rim (i.e., the countries that border the Pacific Ocean) economies that includes several Asian and American nations but excludes China and India. TPP failed with the US withdrawal in January 2017.
There should be no doubt that market access to goods will be the centrepiece of the RCEP. The emphasis on this issue has a well-founded basis — most economies of the region are export-oriented and, therefore, their economic prospects depend on their ability to exploit the two large markets, China and India.
But RCEP poses sets of challenges for India.
Will India be able to extract meaningful concessions for enhancing market access in RCEP Participating Countries (RPCs) as a large number of manufacturing industries like iron & steel, automobiles, and certain textile items apart from agricultural commodity producers are not measuring-up well to import competition, and that their interests have to be protected by enhancing import tariffs.
Accordingly, customs duties have been enhanced, for a range of electrical and non-electrical machines, automobiles and textiles and clothing, all of which form the core of India’s manufacturing base. India needs a tariff regime that must be flexible enough to allow tariffs to be calibrated. That way India is still comfortable with WTO’s tariff regime, which has allowed the increase in actual applied tariffs on particular products as long as they remain within their WTO bound rates — that is, the maximum tariffs that India is allowed to impose by the WTO.
Therefore India's strategy should be to ask strictly for space to give their producers the right conditions otherwise engaging in trade liberalisation may seriously hurt India's trade policy..
The 25th round of negotiations for RCEP is going on in Bali, Indonesia from February 19 to 28, 2019. There is no point India entering into a pact that would further disturb the trade deficit with the RPCs, which was $104 billion in 2017-18, up from $48 billion at the end of the previous decade.
So India cannot overlook the fact that supporting the trade liberalisation ambitions of some RPCs whose sole aim is to increase their presence in a larger market like that of India’s would badly hurt her trade benefits.
In international trade a struggle between protectionism and free trade can be resolved by allowing both types of policies to grow in tandem as economic growth and stability depend on a strategic mix of trade policies. Let us hope that Indian manufacturers and producers will not have to pay high import duties to make their product expensive and thus lose business on price war in international market.
India must negotiates with RPCs to safeguard her own interest only to ensure that the mega trade pact proves beneficial to the nation to gain competitive edge.
Efforts were on among the counties of Asia region and with the resultant conceptualization of Regional Comprehensive Economic Partnership (RCEP) in 2011 and formally floated in 2012, was envisaged to bolster economic associations among the now 16 member countries in Asia and to promote trade and investment linked activities. 10 of them are the Association of Southeast Asian Nation (ASEAN) countries and rest six Asia-Pacific states (India and China included) with whom ASEAN has existing free trade agreements.
The RECP negotiating countries met for their crucial sixth meeting in Singapore in end-August, 2018 in an effort to create by far the largest economic integration agreement to deal with the rising trade tensions between the US and its major trading partners including those in Asia.
CNBC viewed RCEP as a potential substitute to the US backed Trans-Pacific Partnership (TPP), a proposed free trade agreement among 11 Pacific Rim (i.e., the countries that border the Pacific Ocean) economies that includes several Asian and American nations but excludes China and India. TPP failed with the US withdrawal in January 2017.
There should be no doubt that market access to goods will be the centrepiece of the RCEP. The emphasis on this issue has a well-founded basis — most economies of the region are export-oriented and, therefore, their economic prospects depend on their ability to exploit the two large markets, China and India.
But RCEP poses sets of challenges for India.
Will India be able to extract meaningful concessions for enhancing market access in RCEP Participating Countries (RPCs) as a large number of manufacturing industries like iron & steel, automobiles, and certain textile items apart from agricultural commodity producers are not measuring-up well to import competition, and that their interests have to be protected by enhancing import tariffs.
Accordingly, customs duties have been enhanced, for a range of electrical and non-electrical machines, automobiles and textiles and clothing, all of which form the core of India’s manufacturing base. India needs a tariff regime that must be flexible enough to allow tariffs to be calibrated. That way India is still comfortable with WTO’s tariff regime, which has allowed the increase in actual applied tariffs on particular products as long as they remain within their WTO bound rates — that is, the maximum tariffs that India is allowed to impose by the WTO.
Therefore India's strategy should be to ask strictly for space to give their producers the right conditions otherwise engaging in trade liberalisation may seriously hurt India's trade policy..
The 25th round of negotiations for RCEP is going on in Bali, Indonesia from February 19 to 28, 2019. There is no point India entering into a pact that would further disturb the trade deficit with the RPCs, which was $104 billion in 2017-18, up from $48 billion at the end of the previous decade.
So India cannot overlook the fact that supporting the trade liberalisation ambitions of some RPCs whose sole aim is to increase their presence in a larger market like that of India’s would badly hurt her trade benefits.
In international trade a struggle between protectionism and free trade can be resolved by allowing both types of policies to grow in tandem as economic growth and stability depend on a strategic mix of trade policies. Let us hope that Indian manufacturers and producers will not have to pay high import duties to make their product expensive and thus lose business on price war in international market.
India must negotiates with RPCs to safeguard her own interest only to ensure that the mega trade pact proves beneficial to the nation to gain competitive edge.
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