Imports are propelled by RCEP countries -- China, Malaysia, Australia, South Korea, New Zealand, Japan, Thailand, Singapore and other ASEAN (Association of South East Asian Nations) nations. Majority of aluminium imports into India are coming under the FTA route. The domestic aluminium industry suspects rerouting happening from China taking advantage of existing FTAs like the India-ASEAN and India-Malaysia FTA.
“The ongoing negotiations for RCEP includes China and ASEAN as partner countries. The presence of China is a severe threat which will worsen India’s trade deficit, adversely affecting the Indian aluminium industry. Due to fallout of recent global developments, the Indian aluminium industry is facing immense threat by imports post imposition of US tariffs on aluminium and sanctions on Russia, followed by China imposing 25 per cent duty on US scrap,” an industry source said.
India's aluminium industry fears that if the laxity on Rules of Origin (RoO) is not overcome, China may dump its products into the country. “Circumvention of RoO criteria can lead to a surge in imports from China. Thus, a strict RoO criteria is needed to check cheaper imports into India”, the source said.
Historically, India has not profited much from FTAs. Imports from FTA countries into India increased more than India’s exports to FTA partner countries. The trade deficit with ASEAN, Korea and Japan have almost doubled since the signing of the respective FTAs. Moreover, metals are most sensitive to import surge due to reduction in tariffs.
With China too, India's trade balance is heavily skewed in favour of the former. Data from NITI Aayog shows aluminium imports from China into India are almost 30 times of India's aluminium exports to China. According to a report by the Parliamentary Standing Committee on Commerce, India's trade deficit with China stood at $63 billion (as on July 2018), accounting for 40 per cent of our global trade deficit. The Parliamentary panel felt that trade remedial measures like anti-dumping and countervailing duties in certain cases of imports are not effective as Chinese suppliers are apparently re-routing the products from markets of other countries with which India has FTAs. There are also concerns about the RCEP Agreement where India is constructively engaged with China, the panel noted.
The Aluminium Association of India (AAI), too, feels that RCEP be a potential disaster to Indian aluminium industry by way of complete elimination of tariff lines.