RCEP talks: India may reduce tariff on 80% Chinese goods over 20 years

30/09/2019    37

RCEP is a proposed mega trade pact between the 10 Asean members, India, Australia, China, Japan, South Korea and New Zealand. According to initial estimates, it accounts for 25% of global gross domestic product, 30%

Shedding initial inhibitions, India will likely endorse a 16-nation Regional Comprehensive Economic Partnership (RCEP) deal in November but to protect its industry from the onslaught of cheaper imports, it may agree to trim or remove tariffs on Chinese goods only in five phases over a 20-year period, a source aware of the negotiations told FE.

Similarly, India’s tariff concessions would be the least ambitious for China — it plans to reduce or abolish import duties on a total of 80% of imports from China, against 86% from New Zealand and Australia, and 90% from Asean, Japan and South Korea, the source said.

To start with, New Delhi will likely remove tariffs on 28% of Chinese goods immediately. The duty concession could then be extended to cover more goods in every five years until the desired reduction/removal of duties on 80% of goods is completed over 20 years, in a total of five phases. Tariffs on the most sensitive items will be the last to go.

India may also seek a similarly long time frame for phasing out tariffs for New Zealand and Australia. Of the 16-nation grouping, India currently doesn’t have any free trade agreement (FTA) with only China, Australia and New Zealand, although the RCEP deal will be far more ambitious than any of its existing FTAs with Asean, Japan and South Korea.

RCEP negotiators held the last-scheduled round of talks in Vietnam last week. The potential members want to hammer out a deal by as early as November, seeking to assuage the impact of an escalating trade war between the US and China. New Delhi is learnt to have impressed upon the negotiators that it would not take additional commitment on intellectual property rights beyond the TRIPS agreement it has already accepted at the World Trade Organization (WTO).

Similarly, uncertainties prevailed over the proposal for an investor-state dispute settlement (ISDS) mechanism, as many members, including India, are not keen on it. Nevertheless, if at all such an architecture is firmed up to improve the confidence of investors, it would be limited to cases relating to only a few sectors. India, and some others, want that an investor could approach third-party arbitration under the ISDS mechanism only when domestic remedies available under the country of disputes are fully exhausted.

In recent years, the Indian government has been dragged to international arbitration by Cairn and Vodafone over tax disputes.

India had earlier proposed to eliminate tariffs on 80% of products with a margin of 6%, depending on the level of development of the other country. However, many RCEP members wanted India to commit to abolish duties on 92% of goods.

While trade analysts and economists have highlighted the importance of India joining RCEP to better integrate with the global value chain and improve its trade competitiveness, several domestic industries — including steel and pharma — have strongly resisted any such deal, on fears that cheap Chinese products, diverted from the US due to the ongoing trade war, will flood our markets. The dairy industry, including players like Amul, are opposing any such deal with New Zealand, a major dairy producer and exporter.

Earlier this month, commerce and industry minister Piyush Goyal said India favoured fast conclusion of the RCEP negotiations as long as its national interest was protected. However, he also stressed that just one or two domestic industries couldn’t hijack the free trade talks for their own interest. At the same time, he had sought to play down domestic resistance to RCEP, saying industry was vertically split in its opposition.
Nevertheless, to protect domestic industry from any irrational spike in imports, Goyal has cleared critical changes in anti-dumping, countervailing and safeguard rules.

Even without the deal, India’s merchandise trade deficit with China was as much as $53.6 billion in FY19. New Delhi wanted to link meaningful market access from Beijing in key sectors — including IT, pharma and agriculture — to its endorsement of an RCEP deal. India’s overall merchandise trade deficit widened to $176 billion last fiscal from $162 billion a year before.

RCEP is a proposed mega trade pact between the 10 Asean members, India, Australia, China, Japan, South Korea and New Zealand. According to initial estimates, it accounts for 25% of global gross domestic product, 30%

Source: Financial Express