Opposition to RCEP grows within government, now from dairy ministry

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Opposition to India’s ongoing negotiations on the proposed Regional Comprehensive Economic Partnership (RCEP) from within the government continues to get stronger.

After a significant pushback from the dairy industry, voices of discontent have now emerged from the Ministry of Fisheries, Animal Husbandry and Dairy, because it is felt that the RCEP will be detrimental to the country’s strong and growing dairy sector.

Sources said the newly created ministry strongly objected to the negotiations on the grounds that it would hurt the livelihood of millions of small and marginal farmers. A senior minister in the ministry met Commerce and Industry Minister Piyush Goyal, requesting him not to go ahead with the negotiations in their present form, officials said.

Goyal is in Bangkok, meeting trade ministers from RCEP countries at a crucial meet, which has seen a major push from the bloc of the countries constituting the Association of Southeast Asian Nations (Asean). With discussions on tariff reduction and trade in services and investment stuck, Asean is adamant on at least deciding the key outline of the pact by the end of this year.

The RCEP is India’s most ambitious trade pact under negotiation. Based on India’s existing free-trade agreement (FTA) with the 10-nation Asean bloc, the RCEP will include all the nations with which Asean has trade deals — China, India, Japan, South Korea, Australia and, most importantly, New Zealand. 

New Zealand is the largest exporter of milk and dairy products, sending out nearly 20 per cent of global exports, $5.4 billion, in 2018, according to the International Trade Centre. Indian dairy has warned it would dump its surplus milk and milk products once the RCEP is finalised. 

The Swadeshi Jagran Manch, which is RSS-affiliated, had opposed RCEP negotiations on the same grounds.

Fears of dumping

Gujarat Chief Minister Vijay Rupani too is against the deal for the same reasons. Gujarat is one of the leading milk-producing states and home to the country’s largest dairy brand, Amul, and several cooperatives supplying milk to it.

Amul Managing Director R S Sodhi has opposed the deal. He said India’s dairy sector should be kept out of the negotiations, adding that policymakers were being misled by biased trade experts who claimed that by allowing cheaper imports, only 

5 per cent of New Zealand's milk and byproducts would find their way to India.India’s dairy sector stresses that even 5 per cent of New Zealand’s dairy exports ($270 million) is nearly 10 times India’s current imports at $28 million.

“At a time when milk prices in India are going up after years of remaining low due to rise in exports of skimmed milk powder (SMP), the FTA will further push it into deep distress,” a senior industry official said. 

Rough estimates of reports show that around 60 million households are directly or indirectly dependent on India’s dairy sector and it is main source of livelihood for millions of small and marginal farmers. Reports say India’s dairy market is expected to reach nearly Rs 19 trillion by 2023, with a compound annual growth rate of 15 per cent during 2018-23. But commerce department officials say fears of sudden rise in milk imports are unfounded. 

“India is the largest producer of milk globally. While imports of high-value foreign produce may rise in certain categories, there’s nothing to suggest that the entire sector will be affected,” an RCEP negotiator said.

Deep divisions

Over the past two years, other ministries such as agriculture, steel, chemicals, and MSME (micro, small, and medium enterprises) have opposed the deal, arguing it will lead to an influx of cheap Chinese imports and decimate local manufacturing. However, the Ministry of External Affairs is reportedly on board while the commerce department claims the deal would be crucial to expanding export markets.

Taking into account the disagreement among ministries, the government in August last year set up a four-member group of ministers headed by then commerce minister Suresh Prabhu to advise the prime minister on whether to continue with or withdraw from the negotiations. 

Subsequently, the Prime Minister’s Office (PMO) assessed the pact and its fallout one year after PM Narendra Modi promised to seal the deal by the end of 2017. Commerce department officials say multiple stakeholder consultations have been held with other ministries and the current negotiations has been approved by the PMO.

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