TWN Info Service on WTO and Trade Issues (Nov19/03)
13 November 2019
Third World Network

India declines to join RCEP Agreement for time being
Published in SUNS #9013 dated 6 November 2019

Geneva, 5 Nov (D. Ravi Kanth) - India has decided against joining the proposed "Regional Comprehensive Economic Partnership (RCEP)" Agreement for the time being, since it "does not address satisfactorily India's outstanding issues and concerns."

The RCEP negotiations involve the ten members of the ASEAN (Association of South-East Asian Nations), China, Japan, Korea, Australia, New Zealand, and India.

At the concluding summit of the leaders from the RCEP member countries in Bangkok, Thailand on Monday (4 November), the Indian Prime Minister Narendra Modi delivered a hard-hitting statement that "the present form of the RCEP Agreement does not fully reflect the agreed guiding principles of RCEP."

"In such a situation," said the Indian prime minister, "it is not possible for India to join RCEP Agreement."

"When I measure the RCEP Agreement with respect to the interests of all Indians, I do not get a positive answer," he stated.

"Therefore, neither the talisman of the Gandhiji nor my own conscience permit to join RCEP," Modi said.

Prior to the signing ceremony in Bangkok, members of the civil society, industry and farmers' bodies in India cautioned the government against rushing into an agreement "that is imbalanced and harmful for the interests of the poor Indian farmers and workers."

After more than 25 rounds of RCEP negotiations that started in 2012, India concluded that the price it is required to pay on market access as well as in the other 19 chapters of the RCEP will not secure commensurate gains for the Indian farmers and industry, particularly the movement of natural persons, said a source, who asked not to be quoted.

Although market access negotiations of the RCEP are yet to be concluded in the first quarter of 2020, India felt that the RCEP commitments would result in prying open the Indian market with extremely adverse consequences for the Indian agriculture and industry, the source said.

Modelled on the lines of the failed Trans-Pacific Partnership (TPP) Agreement, the RCEP would require the participants to settle for "deep integration" in which major traders such as China, Japan, Korea, Australia, New Zealand, and Singapore have a distinct comparative advantage, according to negotiators, who are familiar with the final commitments.

The RCEP Agreement covers 20 chapters listing new liberalization commitments.

The chapters include: (1) initial provisions and general definitions, (2) trade in goods, (3) Rules of origin, including annex on product-specific rules, (4) customs procedures and trade facilitation, (5) sanitary and phyto-sanitary measures, (6) standards, technical regulations and conformity assessment procedures, (7) trade remedies, (8) trade in services, including annexes on financial services, telecommunication services, and professional services, (9) movement of natural persons, (10) investment, (11) intellectual property, (12) electronic commerce, (13) competition, (14) small and medium enterprises, (15) economic and technical cooperation, (16) government procurement, (17) general provisions and exceptions, (18) institutional provisions, (19) dispute settlement, and (20) final provisions.

India raised several concerns on the commitments and demanded specific assurances on issues such as measures to contain the trade deficit, special safeguard mechanism for containing unforeseen surges in imports, particularly from the world's second largest economy China, strong rules of origin provisions to curb circumvention, and more importantly, the movement of natural persons in both labour-intensive services and software professionals among others.

New Delhi also demanded easy visa provisions for its software professionals.

India was also not happy with market access commitments with 2014 as the base year. India has registered a trade deficit of around $105 billion with RCEP members, in which the trade deficit with China was around $51 billion. New Delhi sought market access for generic pharmaceuticals to China.

Further, India remained opposed to ambitious commitments in the e-commerce and trade remedies, according to a report in The Economic Times of 4 November.

"The main worry is over Chinese manufactured goods and dairy products from New Zealand flooding the Indian markets," the ET suggested.

In the run-up to the summit, the Indian prime minister told The Bangkok Post that "it needs to be recognized that opening the vast Indian market must be matched by opening in some areas where our businesses can also benefit."

After India chose to walk out of the RCEP Agreement, the remaining 15 members of the RCEP issued a "Joint Leaders' Statement" saying that they had committed at the time of the launching of the negotiations "to achieve a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement."

"Against the backdrop of a fast-changing global environment, the completion of the RCEP negotiations will demonstrate our collective commitment to an open trade and investment environment across the region," the leaders argued.

According to the 15 leaders, the RCEP will "further expand and deepen regional value chains for the benefit of our businesses, including small and medium enterprises, as well as our workers, producers and consumers."

They claimed that the deal "will significantly boost the region's future growth prospects and contribute positively to the global economy, while serving as a supporting pillar to a strong multilateral trading system and promoting development in economies across the region."

The RCEP participating countries stated that they "have concluded text-based negotiations for all 20 chapters, and essentially all their market access issues."

India, according to the statement, "has significant outstanding issues, which remain unresolved."

"All RCEP Participating countries will work together to resolve these outstanding issues in a mutually satisfactory way [and] India's final decision will depend on satisfactory resolution of these issues," the joint leaders' statement suggested.

India had apparently conveyed its decision not to join the RCEP Agreement at the summit on Monday (4 November) due to lack of fairness and balance, according to various media reports.

But a senior official overseeing the negotiations told the SUNS that "chapters concluded were the result of negotiations where India was IN."

"India asked for article on TD [trade deficit] then on country-specific safeguard mechanism; we worked them out and the articles [were] agreed," the official said.

"We all understand that market access negotiation is not over yet and we will continue in first quarter next year," the official said.

Also, there is a glaring disconnect in RCEP between trade in goods and trade in services where India has a comparative advantage.

The developed countries in the RCEP as well as China are indifferent to India's demands for greater movement of skilled and semi-skilled workers - which is India's biggest strength.