Updated: November 17, 2020 10:50:10 am
An official said India was not averse to trade pacts, as it has started negotiations for some 20 trade pacts with countries and groups of countries. However, the government has objections to joining RCEP “in its current form.”
An internal assessment of India’s bilateral free trade agreements with nine countries, including five signatories to the Regional Comprehensive Economic Partnership (RCEP), played a key role in consolidating the government. position against joining the mega trade pact. The assessment showed a “moderate utilization rate” of free trade agreements (FTAs) over a five-year period, and a trade deficit for India in most cases, except for the nations of the United States. SAARC, The Indian Express has learned.
While the remaining members of the RCEP went ahead and signed an agreement on Sunday, just over a year after Prime Minister Narendra Modi announced that India was pulling out of the negotiations citing “important unfinished business”, the bloc has made clear that the door for India’s return to the negotiating table will remain open.
Read | RCEP: Door still open for India, can participate in meetings as ‘observer’
However, India’s mounting political tensions with China over the past year are seen to have raised the entry barrier for the government. Furthermore, since India already has bilateral pacts with various RCEP members, including the ASEAN bloc, South Korea and Malaysia, and is negotiating agreements with some of the remaining RCEP members, such as Thailand, Australia and New Zealand , the cost of choosing Exit from the agreement is seen as not offsetting the benefits of keeping China’s imminent presence at bay.
The officials also noted the work being done to activate the trilateral Supply Chain Resilience Initiative (SCRI) with Japan and Australia that aims to increase collaboration and reduce dependence on Chinese inputs. Furthermore, there is a growing view that it would be in India’s interests to invest heavily in negotiating bilateral agreements with the United States and the European Union, which are currently in the process of being developed.
China’s looming shadow
New Delhi has cited concerns related to countries using tariffs, as well as the inability to implement automatic trigger safeguards for domestic industries, to argue that RCEP does not address their problems. India’s steps targeting Chinese investments could also fail in the RCEP if it joined the pact.
However, other RCEP signatories have been told that ‘Act East’ was the foundation of India’s economic policy and that its engagement with ASEAN countries and other trading partners would continue, said a government official involved in the out to The Indian Express.
Read also | Jaishankar defends decision not to sign RCEP
The government’s assessment of several bilateral trade agreements has revealed that growth in trade (CAGR) with partners over the past five financial years was a modest 7.1 percent. While “there has been a growth rate in both imports and exports to these NAFTA partners,” the “utilization rate” of FTAs for both India and its partners has been “moderate” across all sectors. According to this study, which covers the pacts signed with Sri Lanka, Afghanistan, Thailand, Singapore, Japan, Bhutan, Nepal, Republic of Korea and Malaysia.
The only exceptions to these findings include sectors such as iron and steel for the India-Korea Comprehensive Economic Partnership Agreement (CEPA) and CEPA India-Japan; plastics in the case of the India-Singapore Comprehensive Economic Cooperation Agreement; and cars and automotive components in the case of the India-Malaysia ECSC. What has also been mentioned, officials said, is the uneven trade deficit against India in most of these deals.
Editorial | Trade lifts all ships, New Delhi must enter the RCEP tent at the most opportune moment.
For RCEP members, India’s deficits have narrowed slightly in most cases. However, its total deficit with ASEAN as a bloc has increased between 2018-19 and 2019-20, according to data from the Ministry of Commerce and Industry.
The withdrawal of the RCEP came at a time when India is reviewing existing trade agreements based on “demand from domestic stakeholders” and “other inputs”.
Two reviews of CECA India Singapore have been completed; the Trade, Trade and Transit Agreement between India and Bhutan was renewed in 2016; and the India-Nepal Trade Agreement was extended in 2016. Eight rounds of negotiations have been completed for the review of the India-Korea CEPA, which started in 2016. India has taken over the review of the India-Japan and India-FTA CEPA ASEAN with its business partners.
While the possibility of India joining the RCEP as an observer is not ruled out, officials noted that “the current structure of the RCEP” did not reflect the RCEP Guiding Principles and did not address the outstanding issues and concerns of India.
An official said India was not averse to trade pacts, as it has started negotiations for some 20 trade pacts with countries and groups of countries. However, the government has objections to joining RCEP “in its current form.”
“China has been a central figure in the East Asia region and therefore would play an important role in driving RCEP. However, there are several steps that India has taken after the Chinese aggression earlier this year, many of which would be uncomfortable with their commitments under the RCEP, if they joined the agreement, ”said trade expert Biswajit Dhar, Professor at the Jawaharlal Nehru University Center. of Economic Studies and Planning.
“The reasons why India left RCEP last year have not changed. They have not improved and, in fact, have worsened, because before there was only an economic threat from China. Now, it also exists on the political front, ”Professor Dhar told The Indian Express.
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