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RCEP meeting in September likely to discuss India’s proposal on services pact

Under pressure to substantially increase its tariff offer under the proposed Regional Comprehensive Economic Partnership (RCEP) trade negotiations, India has made a counter-proposal to make the bilateral services agreement between Australia and New Zealand free trade agreement (FTA) the basis of the services agreement under RCEP.

The proposal made during the Hyderabad round of negotiations last month is likely to be taken up for discussion in next month’s RCEP ministerial in the Philippines, according to a commerce ministry official, who spoke under condition of anonymity.

RCEP is a grouping of 10 members from the Asean grouping, India, China, Japan, South Korea, Australia and New Zealand, which has been negotiating a trade deal since May 2013. Asean stands for the Association of South East Asian Nations.

The grouping envisages regional economic integration, leading to the creation of the largest regional trading bloc in the world, accounting for nearly 45% of the world’s population with a combined gross domestic product of $21.3 trillion. The Australia-New Zealand Closer Economic Relations (CER) trade agreement specifies liberalization of various service sectors under the four different modes. “We believe it could be an ideal template to negotiate the services agreement under RCEP,” the official cited earlier said.

Earlier, at the third RCEP ministerial meeting in Hanoi in May, India had asked RCEP members to at least abide by their multilateral commitments on the movement of professionals, in an effort to guard against growing protectionism across the developed world that could hurt India’s information technology sector. India’s changed position from its earlier stand of seeking significant market access under RCEP services negotiation was considered a climbdown by some observers.

However, commerce minister Nirmala Sitharaman pointed out at the ministerial that a “selective approach to the detriment of services would not be in the best interest of RCEP negotiations, and would be failing to acknowledge, promote and protect the strength and mutually beneficial nature of the current relationship, where Indian companies with limited expatriate presence had created over 100,000 local jobs in the RCEP countries, apart from cost saving and enhanced competitiveness.”

“It is very difficult to get anything in services under RCEP because it is a diverse group. With little to gain on goods front, India should get out of the trade deal even if we have a loss of face,” said Rupa Chanda, professor at the Indian Institute of Management-Bangalore.

While India has so far offered to eliminate tariffs on 80% of traded goods, seeking flexibility to increase or decrease this common concession by 8 percentage points, other countries are seeking to increase the tariff elimination in 92% goods, which India finds unfeasible, given that China is part of the negotiations with whom India has a $50 billion trade deficit. Indian industry is worried that a higher level of tariff elimination for China may lead to loss of business and competitiveness for them. India is currently proposing to offer around 72% tariff elimination for China over a 20-year period.

Source: Live Mint

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