Tough decisions ahead for India at RCEP

Tough decisions ahead for India at RCEP

RCEP is a mega free trade agreement of 10 ASEAN countries with their six FTA partners, India, China, Japan, South Korea, Australia and New Zealand

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The commitment to the Regional Comprehensive Economic Partnership (RCEP), is probably one of the toughest decisions the National Democratic Alliance (NDA) needs to take. Starting October 10, 17 ministers of RCEP member countries will sit in Bangkok for three days of negotiations, perhaps for the last time to conclude the deal. The pressure is on India to express the stance at the negotiating table. In the September round of negotiations, the ASEAN countries firmly asked India to clear its position; whereas, India insisted on ensuring safeguard of domestic industry, farmers and their interests. The other negotiating members are planning a parallel RCEP 15 -a deal without India as well.

Over the last two weeks, PM Narendra Modi along with Home Minister Amit Shah are meeting several stakeholders, academicians, ministerial colleagues, RSS ideologues, to make up their mind on this. In fact, the tour of Chinese premier Xi Jinping has RCEP on the agenda of bilateral conversation. But to their disappointment, the views of the party and their ideological parent RSS along with their affiliates are vertically opposite and are not yielding.

Commerce Minister Piyush Goyal is leaving for the Bangkok round on Wednesday night. In India, RSS affiliate Swadeshi Jagran Manch (SJM) is planning protests nationally. This will be for the first time in Modi 2.0 that RSS affiliates would be coming to the streets against the Modi-led regime. RSS affiliates, Bharatiya Mazdoor Sangh, Laghu Udyog Bharati, Swadeshi Jagran Manch, Bharatiya Kisan Sangh and Grahak Panchayat have firmly opposed the deal in the present structure. In fact academicians aligned to the BJP too are not backing the deal.

RCEP is a mega free trade agreement of 10 ASEAN countries with their six FTA partners, India, China, Japan, South Korea, Australia and New Zealand. Other than the commerce ministers of these 16 countries, the secretary general of ASEAN nations also sit on the negotiating table. The negotiations went through 28 rounds already and is expected that the deal will be signed on November 21.

The issue is complex. Ministries led by agriculture minister Narendra Tomar, textile minister Smriti Irani, steel minister Dharamedra Pradhan, mines and minerals ministry of Prahlad Patel  have already ether opposed the deal or are seeking protection for farmers and domestic industry. They all fear cheaper dumps from China will wipe out local players, while the dairy industry fears Australian and New Zealand imports. Meanwhile, finance minister Nirmla Sitharaman and Suresh Prabhu -both were commerce ministers earlier-have also shown reservations to this deal.  

The elephant in the room is China, with which India has a $57 billion trade deficit. India already has a trade deficit with 11 nations. Those who favour the deal, argue trade deficits can be compensated by capital inflow and trade-offs are involved in most of the trade negotiations. They see that this trade off can come in the defence and aerospace sectors.

The deal in the present structure may benefit the services sector or secondary manufacturing units (especially the global value chain segment). There are three global value chains in the world; US, EU and East Asia. Those who advocate that since the churn is happening East Asia along with manufacturing is moving out of China and is looking for a new home; India could integrate as a component of East Asia global value chain. India is evaluating the price it is required to pay to get this integration.

The advocates for the RCEP case too are seeking safeguards. The officials at Piyush Goyal-led commerce ministry believe that recently pushed automatic trigger safeguard mechanism or ATSM is good enough to check the import surge. However, RSS affiliates are not buying this argument. They argued it is not good enough, neither was it tested before. In his blog, SJM's national co-convener Ashwani Mahajan argued the country doesn't even have infrastructure to implement ATSM.

Now that Xi is in India and Goyal is set to fly to Bangkok, India's stance for RCEP will be known in Thailand by end of this week.

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