Modi shuts the door on RCEP, dubs trade agreement against India’s interests

NEW DELHI: Junking years of negotiations, Prime Minister Narendra Modi on Monday announced India was pulling out of the much-hyped Regional Comprehensive Economic Partnership (RCEP) — touted to be the world’s largest trade bloc, comprising 30% of global GDP and half of the world’s population. 

“The present form of the RCEP agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP. It also does not address satisfactorily India’s outstanding issues and concerns. In such a situation, it is not possible for India to join RCEP Agreement,” Modi said, adding that whichever way he looked at it, he wasn’t convinced how joining the bloc would benefit the poorest of the poor in the country. 

After India opted out, the leaders of 15 RCEP countries reportedly issued a statement resolving to sign the free trade pact next year.

While the Prime Minister said the deal does not address India’s concerns about protecting its domestic industry — without which the pact would adversely impact the livelihood of millions of Indians — the door is technically still open for India to sign the free trade agreement before it becomes a reality next year. 

Sources said the core issues raised by India includes the threat of circumvention of Rules of Origin. India also pushed for a better pact addressing the issues of trade imbalance and opening of trade in services. It also wanted the right to raise customs duties in case of an unexplained surge in imports. 

Sources said India also raised the unviability of MFN (Most Favoured Nation) obligations. Under this, India would have to extend MFN status to all RCEP partners if it has given investment or services-related concessions to a trading partner. 

Signs of discord emerged when China refused to accept India’s demands on back-loading tariff reductions on a host of products ranging from textiles to automobile parts to electronics. New Zealand sought access to the dairy sector, but India wanted to shield it from the competition. 

“There was also no credible assurance for India on market access and non-tariff barriers,” sources added. 

Australian Prime Minister Scott Morrison said the door will remain “wide open” for India to join the 16-nation pact whenever it decides to do so, indicating that the rest of East Asia-Pacific would go ahead with the deal.

“It has always been our view, and the view of many who sit around the table, that this is a bigger and better deal with India in it,” Morrison said.

Indian officials want an auto-trigger mechanism which will allow India to charge higher import duties if it finds there is an unexplained surge in import of any product. To safeguard Indian industry, negotiators also plans to try and backload tariff reductions which are expected to reduce duties on 74 per cent of India’s imports to nil over a 20-year period.

While hosts Thailand and several Asean countries like Singapore and Vietnam want to accommodate India, several other countries, including Malaysia and Cambodia, are on China’s side in the tussle. Australia and New Zealand have limited points of conflict with India, simply wishing for opening up of the farm and dairy trade with India.

“The deal offered currently is detrimental to India’s farmers and industry. We can use this window to negotiate better terms,” said Prof. Biswajit Dhar of the JNU, a well-known trade expert.

However, other analysts said India had to be seen as negotiating a better deal than what China is offering, as much as because its industry fears that Indian markets may be swamped by cheaper Chinese produce as to counter political opposition to the deal from both the Congress and affiliates of the RSS, including the Swadeshi Jagran Manch.

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