India hopes RCEP leads to 'equitable, inclusive and balanced' trade agreement

With 11 Asia Pacific nations recently signing a new trade deal, India has come under renewed pressure from the ASEAN to show greater "political will" and help conclude the Regional Comprehensive Economic Partnership (RCEP) agreement expeditiously.

Thailand and other members of the ASEAN (Association of South East Asian Nations) are keen to conclude the RCEP negotiations by the end of this year. They are citing the recently concluded Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to prod India and China to add new momentum to the negotiations on the RCEP.

"Especially, as the CPTPP agreement has been concluded already, I think the countries like China and India need to find some other agreement so that they can counter-balance the CPTPP. We are working very hard to conclude the RCEP within this year," Kobsak Pootrakool, the vice minister in the office of Thai Prime Minister Prayut Chan-o-cha, said.

The CPTPP agreement has been inked by Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, Japan, New Zealand, Peru, Singapore and Vietnam in Santiago on March 8. The agreement was negotiated and concluded by the 11 nations in just a few months, after President Donald Trump's administration withdrew the United States from the original 12-member Trans-Pacific Partnership (TPP) deal soon after taking office in January 2017.

Four of the 10 ASEAN nations already joined the CPTPP agreement. Pootrakool said that the Government of Thailand was studying the agreement and would soon decide whether or not it should join the new trade bloc now known as TPP 11.

The negotiations on the RCEP, on the other hand, was launched in 2012 by the 10 ASEAN nations — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, Vietnam and the Philippines — and six other countries, India, China, Korea, Japan, Australia and New Zealand, which already had separate trade deals with the South East Asian bloc. The negotiations could not make much progress in the past five years though.

India has been resisting pressure from China and the other RCEP nations to bring down or eliminate the tariff on 90% of the traded items.

New Delhi is ready to give higher tariff concession to 10 South-East Asian nations, as it already has free trade agreements in both goods and services with the ASEAN.

India, however, is reluctant to open up its market so much for China in view of the growing deficit in its bilateral trade with the communist country. The India-China bilateral trade reached $ 84.44 billion in 2017, while the trade deficit grew to $ 51.75 billion, registering 8.55 per cent year-on-year rise. New Delhi is cautious about committing higher tariff concession for Australia and New Zealand too.

"We have to agree with India. This is our target. I think we have to work it out. But at the end, you have to have the political will to have it. This is very critical and important trade negotiations in the region," said Pootrakool.

Thailand will take over as chair of the ASEAN from Singapore after the 32nd summit of the bloc later this year.

If signed, the RCEP would cover 16 Asia-Pacific nations with a total population of 3.4 billion people and a total Gross Domestic Product of $ 49.5 trillion. The proposed deal seeks to bring together the economies that account for 39% of the world's GDP.

New Delhi is concerned over the reluctance of the other countries to make commitments for substantially opening up the services sector under the proposed RECP agreement. India has been insisting that the RCEP negotiations should lead to an "equitable, inclusive and balanced" trade agreement, which would do "equal justice to manufacturing, services and investment sectors".

Prime Minister Narendra Modi hosted the 10 South East Asian leaders in New Delhi on January 25 this year for a special ASEAN-India summit to commemorate the 25th anniversary of New Delhi's engagement with the bloc. Indonesian President Joko Widodo, Singaporean Prime Minister Lee Hsien Loong and several other ASEAN leaders used the opportunity to prod India to soften its stand and make it sure that the RCEP negotiations could be concluded by the end of the year. Modi reiterated New Delhi's commitment to the RCEP negotiations, but stressed that the talks should lead to "a balanced outcome".

The 21st round of negotiations on the RCEP was held from February 2 to 9 at Yogyakarta in Indonesia. This was followed by a meeting of the trade ministers of the RCEP participating nations in Singapore on March 3.

The trade ministers "recognized the divergence in the levels of ambitions (of the participating nations) in some areas, and tasked the negotiators to work out creative, innovative and pragmatic landing zones to address the challenges and sensitivities faced by some participating countries, including, but not limited to, transition period and capacity building".
The ministers are likely to meet again in July.

"We hope to have some progress in July," said Chotima Iemsawasdikul, a senior official at the Department of Trade Negotiations of the Ministry of Commerce of Thailand Government.

The draft of the chapters of the proposed RCEP deal — one on Economic and Technical Cooperation and another on Small and Medium Enterprises — have already been agreed upon. The negotiators are expected to conclude a few more chapters in the coming months.

The ASEAN is India's fourth largest trading partner. India's trade with the ASEAN nations has increased to $ 70 billion in 2016-17 from $ 65 billion in 2015-16. India's export to the ASEAN nations has increased to $ 31.07 billion in 2016-17 from $ 25 billion in 2015-16. India's import to the South East Asian nations increased by 1.8% and stood at US$ 40.63 billion in 2016-17.

The investment from the ASEAN nations account for approximately 12.5% of the investment flows into India since 2000. The Foreign Direct Investment inflows into India from the ASEAN between April 2000 to August 2017 was about $ 514.73 billion, while outflows from India to ASEAN countries was about $ 38.672 billion from April 2007 to March 2015.

The India-ASEAN Agreement on Trade in Goods was signed in 2009 and became effective from 2010. They inked the Agreement on Trade in Services and Investment in September 2014, but some of the ASEAN nations are yet to ratify it.