India Rejects RCEP With US And European Union, Will Seek To Speed Up Trade Talks With Large Markets
India won’t re-join the China-dominated Regional Comprehensive Economic Partnership (RCEP) pact but will rather seek to expedite trade talks with large markets like the US and the EU, senior government officials told FE, a day after 15 nations clinched the biggest trade deal, while leaving the door open for New Delhi to re-enter.
The country will refrain from joining any pact that is effectively “free trade agreement (FTA) by stealth with China”, one of the officials said, making clear New Delhi’s anxiety over joining back the RCEP bloc. The focus is on not just free but also fair trade, he added.
Moreover, as reported by FE on June 24, while fears of massive Chinese dumping had always persisted, Beijing’s belligerence at the borders, especially the Galwan clash, just hardened New Delhi’s intent to stay away from RCEP talks.
India’s decision comes at a time when Joseph R Biden’s election as the 46th American President has revived the prospect of the US’ re-entry into the ambitious Trans-Pacific Partnership (TPP) trade deal with 11 others. Any such move, on top of the RCEP deal, will pressure New Delhi to redraw its trade ties to avoid being left behind in integrating with global supply chain, analysts have said.
India and the US were close to clinching a “limited” trade deal that was expected to cover an annual trade of over $13 billion, or roughly 15% of bilateral shipments. However, with Biden at the helm now, the deal may be delayed, as the US may now seek to review the broad contours of even the settled issues. The two countries also had plans to launch talks for a broader FTA once this deal was signed.
India was also open to the idea of a preferential trade agreement with the EU to get faster outcomes before hammering out a more ambitious free trade agreement (FTA) that is being negotiated since 2007, commerce and industry minister Piyush Goyal had said last month.
The RCEP (with India) was meant to encompasses less than a third of global gross domestic product (GDP), while the TPP, with the US, was to cover 40% of it. Interestingly, as many as six countries— Australia, Japan, Malaysia, New Zealand, Singapore and Vietnam —feature in both the mega trade deals. The TPP, negotiated by the Obama regime and rejected by Donald Trump, was an attempt at countering China’s growing clout in world trade.
India had pulled out of the RCEP talks in Bangkok on November 4 last year and made its return incumbent on adequate redressal of its concerns. New Delhi was unwilling to budge on its demands for an “auto-trigger” mechanism for safeguarding its industry from dumping, and strict rules of origins of imported products to check the abuse of tariff concessions.
Also, New Delhi was steadfast in certain demands, including credible steps and market access to address India’s $105-billion trade deficit with RCEP members, change in the base year to implement the tariff abolition from 2014 to 2019 and a more balanced deal on services.
Earlier in February, India had skipped a meeting in Bali where its concerns on the mega regional trade deal were sought to be discussed. New Delhi had reportedly received another invitation in April to join the talks. India’s decision to refrain from talks had come in the wake of China showing no flexibility in its negotiating positions.
Even without RCEP, India’s merchandise trade deficit with China stood at $53.6 billion in FY19, or nearly a third of its total deficit, and $48.7 billion in FY20, even without factoring in the deficit with Beijing-proxy Hong Kong.