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India's Trade Challenges in RCEP

The document discusses India's concerns regarding the Regional Comprehensive Economic Partnership (RCEP). RCEP is a proposed free trade agreement between the 10 ASEAN countries and their six FTA partners including India, China, Japan, South Korea, Australia and New Zealand. India already has trade deficits with many of these countries that could worsen under RCEP. India is worried that its domestic industries may be negatively impacted by a surge of cheap imports, especially from China, if tariffs are reduced under RCEP without adequate safeguards. For RCEP to benefit India, it needs to ensure non-tariff barriers faced by Indian exports are reduced and that the agreement does not turn the country into a "dumping ground"

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20 views3 pages

India's Trade Challenges in RCEP

The document discusses India's concerns regarding the Regional Comprehensive Economic Partnership (RCEP). RCEP is a proposed free trade agreement between the 10 ASEAN countries and their six FTA partners including India, China, Japan, South Korea, Australia and New Zealand. India already has trade deficits with many of these countries that could worsen under RCEP. India is worried that its domestic industries may be negatively impacted by a surge of cheap imports, especially from China, if tariffs are reduced under RCEP without adequate safeguards. For RCEP to benefit India, it needs to ensure non-tariff barriers faced by Indian exports are reduced and that the agreement does not turn the country into a "dumping ground"

Uploaded by

KiranKumar
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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India & RCEP

Why in news?

The trade deficit of India with its RCEP partners is rising.


The multilateral trade agreement like Trans Pacific Partnership (TPP) and
Transatlantic Trade and Investment Partnership (TTIP) between the
European Union and the US seems threatened under the present
dispensation in US.

What is RCEP?

The Regional Comprehensive Economic Partnership (RCEP) is a mega-


regional economic agreement being negotiated between the 10 ASEAN
(Association of South-East Asian Nations) governments and their six FTA
partners: Australia, China, India, Japan, New Zealand and South Korea.
In the absence of the TPP, the RCEP will emerge as the largest regional
trading bloc in the world, accounting for nearly 45 per cent of the worlds
population and with a combined gross domestic product of $21.3 trillion.
The RCEP has chapters on intellectual property, investment, goods, services,
telecommunications and e-commerce, and goods and services.

What is Indias experience with trade agreements?

Within the RCEP, India has existing FTAs in merchandise goods with ASEAN,
South Korea and Japan.
With all the three it has witnessed a higher trade deficit after signing the
FTA.
Post-FTA, bilateral trade volumes did increase, but imports from partner
countries have increased at a faster pace than Indias exports with partners.
India also has a trade deficit with Mercosur (Common Market of the South).
Afghanistan, Nepal, and Bhutan remain largely inconsequential given the
size of those markets.
The only bright spot has been Sri Lanka and Singapore, where India has
been successful in achieving a positive trade balance.

What are the problems for India in RCEP?

The RCEP concept when mooted by ASEAN was an alternative to the TPP.
This might turn detrimental for India given the size of the trade deficit it has
with the proposed bloc. Overall trade deficit with RCEP is of $97 billion in
2015.
India has a huge trade deficit with China alone. During the last ten years, it
has increased from around $7.8 billion in 2006 to $52 billion in 2015 i.e 54%
of total deficit with RCEP.
This is despite the fact that India has frequently used anti-dumping duties,
safeguard duties and other countervailing measures to protect the domestic
industry from unfairly low-priced imports from China.
Some of the RCEP members have already refused to agree to Indias three-
tier approach to tariff reduction over a period of time.
Under the ambit of RCEP, countries like China, South Korea and Japan are
manufacturing powerhouses, and Australia and New Zealand have strengths
in processed foods, wine, and dairy products, while Asean has comparative
advantages in plantations, electronics and auto-components.
Therefor sectors of India such as plantations, automobiles, textiles,
pharmaceuticals, and engineering goods would be impacted negatively.

How can India benefit from RCEP?

While consumers would benefit from FTAs, the Indian manufacturing sector
which remains relatively uncompetitive vis--vis the RCEP countries, would
be at a disadvantage.
RCEP should not convert India into a dump yard for cheap imports from the
Asia-Pacific, particularly China.
Sanitary & phytosanitary issues and technical barriers to trade measures are
the most frequently used against Indian exports. Thus the non-tariff barriers
in RCEP countries should be negotiated transparently before negotiating
market access.
RCEP has the East Asian economies as partners, who have thrived on export-
led growth model, unlike India whose domestic economy is its strength.
Therefore India should choose a model that will complement this setup.
India also needs to introspect as to what it can get from negotiating the
proposed RCEP that it has not already obtained from prevailing trade
agreements.
India has achieved significant success in services, and hence should seek
greater liberalisation of trade in services, including pushing for greater
access for its professionals in these markets.

Source: Business Line

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