Singapore RCEP talks hit tariff roadblock; India to take call before Nov

Commerce and Industry Minister Suresh Prabhu represented India at the talks
A lack of consensus on tariff and market access issues would make it tough for the member nations to conclude talks on the Regional Comprehensive Economic Partnership (RCEP) pact by end of the year, according to the Commerce Ministry. It is learnt that the latest talks on the subject, between RCEP trade ministers in Singapore, remained deadlocked, adding to the uncertainties over a deal. 
Led by the 10-member Association of the Southeast Asian Nations (Asean) bloc, RCEP trade ministers adopted a joint proposal last week to decide on the broad contours of the mega-regional deal by end of 2018. This was suggested through the adoption of a ‘package of year-end deliverables’.

However, trade negotiators from New Delhi and senior Commerce Department officials, who were present in the latest round of discussions in Singapore last week, have said the package mentions only four major chapters of the goods trade, with the vast majority still seeing no progress. It was also silent on greater market access for the services trade—an area of prime interest to India.

“But India is committed to making a final attempt at reaching a deal before November, when Prime Minister Narendra Modi is expected to visit Singapore for the 33rd Asean Summit,” an official said. The latest talks, attended by Commerce Minister Suresh Prabhu and his counterparts across Asia, got stuck with India being attacked for delaying a consensus on the RCEP as a whole, he added.

The RCEP is a proposed pact between 10 Asean economies and six others (New Zealand, Australia, China, India, Japan and South Korea) with which the grouping currently has free-trade agreements (FTAs). So far, 23 rounds of talks have concluded, apart from six minister-level meets.  India has resisted calls by most nations, arguing New Delhi should slash existing tariffs on up to 90 per cent of all goods, as well as demands by developed economies such as Japan and Australia to open up the Indian market to specific products such as dairy and engineering goods. In that backdrop, the future of the mega trade bloc, under planning since 2012, is uncertain especially as several ministries have been opposed to the talks.

Disagreement among ministries had prompted the government to set up a four-member group of ministers headed by Prabhu to advise the Prime Minister on whether to continue with or withdraw from the 16-member RCEP negotiations. In mid-August, the commerce secretary briefed his counterparts across ministries, including finance, steel, textile and defence, at the Cabinet Secretariat on the current state of negotiations and the way forward, sources said. 

While the Ministry of External Affairs is reportedly on board, others, including Steel, Agriculture and Chemicals are in favour of India leaving the deal.

The domestic industry, too, has been divided over the prospect of India joining yet another trade pact with nations that are competing with India in the export space. Some want the deal as it might give them access to the huge Chinese consumer market, but most argue that existing trade agreements with Malaysia, Japan, Singapore and South Korea are grossly unfavorable to India and have led to a widening trade deficit with these nations. However, manufacturing behemoth China stands out as a prime concern. "It would be vital to ensure that non-tariff barriers affecting exports are also addressed, particularly for pharmaceuticals," CII Director General Chandrajit Banerjee said.

A report on the RCEP, commissioned by the Confederation of Indian Industry and submitted to the government, has recommended that products, the trade of which is dominated by China, should not be included for tariff reductions under RCEP. Products on which anti-dumping duties are levied have also been recommended for exclusion. India's trade deficit with its northern neighbour stood at $63.05 billion in 2017-18, shooting up from $51.11 billion in the year. "We have told industry bodies that India has offered a long-term plan to slowly eliminate tariffs for China over the next 15 plus years while other nations will see lower duties immediately," another government official said.

Civil society groups have also voiced concerns over various issues linked to a deal on RCEP, including possible drastic reductions in agricultural tariffs.

  • After being unable to complete talks even in 2017 — the 50th year of Asean's founding — the bloc is now determined to end talks soon
  • The pact aims at sweeping tariff cuts and greater market access in goods trade — something India has been cautious of
  • Domestic industry is spooked at the prospect of rising imports from China as a result
  • The PMO is still arbitrating between ministries pitched against each other on the need for joining RCEP
  • A final decision will be taken before November, when Modi visits Singapore for the Asean summit