India's stand at RCEP reflects PM Modi's strong leadership, country's rising stature

New Delhi [India], November 16 : With India choosing to opt out of the Regional Comprehensive Economic Partnership (RCEP), that was signed on Sunday by 15 Asia-Pacific nations, including China, government sources have stated that India's stand was a strong reflection of Prime Minister Narendra Modi's strong leadership and the country's rising stature in the world.
In November last year, India decided not to join the RCEP agreement as its key concerns were not addressed. The key reasons behind New Delhi's decision to remain out of the world's biggest trade agreement include inadequate protection against import surge, insufficient differential with China, possible circumvention of rules of origin, keeping the base year as 2014 and no credible assurances on market access and non-tariff barriers.
Government sources stated that India's decision to not join would greatly help India's farmers, small scale industry and small entrepreneurs, and safeguard interests of the poor and the effort to give an advantage to India's service sector.
India took stands based on firm principles, based on fundamental issues that India has been raising consistently throughout the negotiations, which included the threat of circumvention of rules of origin due to tariff differential, request for a change in the base rate of Customs Duty, exclusion from Most Favoured Nation (MFN) obligations in investment chapter, carving out of local measures for applicability on only the top two levels of government in investment chapter, and more.
India's rising trade deficits with China, amounting to USD 50 billion, and the need to open markets to Indian services and goods and low utilisation of Free Trade Agreements (FTAs) were also main concerns. Therefore, in order to sign the RCEP agreement, India needed to resolve issues in previous FTAs and ensure a balanced, fair and beneficial framework in the RCEP.
The government sources further claimed that the previous governments had a weaker record in protecting Indian interests in global trade negotiations, describing India's signing of an FTA with ASEAN and South Korea in 2010, and with Malaysia and Japan in 2011.
India's trade deficit with RCEP nations increased from USD 7 billion in 2004 to USD 78 billion in 2014, with India's domestic industry is still reeling from dumping and cheap imports, and low utilisation rates by Indian exporters of FTAs.
In ASEAN, India eliminated tariffs on 74 per cent lines; but richer countries like Indonesia eliminated tariffs on only 50 per cent lines for India, and Vietnam on 69 per cent, which has led to significant trade distortion.
In 2009 during the Indo-Korea CEPA agreement, India's exports to Korea was USD 3.42 billion and subsequent to signing, India's exports to Korea have barely increased to USD 4.6 billion in 2014-15 and USD 4.71 billion in 2018-19, while in contrast, at the time of signing the agreement in 2009, Korea's exports to India was USD 8.58 billion, which have continued to grow substantially to USD 13.53 billion in 2014-15 and USD 16.76 billion in 2018-19.
Poor negotiations under previous governments of FTAs have caused harm to the Indian industry and led to the distorted trade balance, following which the Modi government has sought a review of the FTA in ASEAN and in the CEPA with South Korea, said government sources.
They also pointed out numerous pro-Indian industry steps under PM Modi, such as benefit of farmers, small scale businesses and handloom sector from decisions taken on imports, raising Minimum Import Price of cashews, launching a Steel Imports Monitoring System (SIMS), rescuing customs duty on maize imports, protecting the interests of the poor and agriculture sector, securing international support for fishermen and more.
India is exploring trade agreements with the US and European Union (EU), where Indian products and services will actually be competitive. India will also avoid joining agreements, which are in reality FTAs by stealth with countries like China, as India is already suffering huge trade imbalance and market distortions with these countries that have negatively impacted domestic producers and the Indian economy, said the sources.
The RCEP is a proposed free trade agreement in the Asia-Pacific region between the 10 member states of the Association of Southeast Asian Nations (ASEAN) namely, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam and five of ASEAN's FTA partners -- Australia, China, Japan, New Zealand and South Korea.
In May this year, China said it will welcome India back to negotiations on the RCEP at an appropriate time.