India's new dialogue with China to cover its RCEP woes

Talks led by Finance Minister, Chinese Vice Premier may help address India's concern over post-RCEP surge in imports from China

Chinese President Xi Jinping and Prime Minister Narendra Modi (Photo: AP/PTI)

The new high-level dialogue mechanism recently set up by New Delhi and Beijing to address India's concerns over its trade deficit with China may give an opportunity to both sides to discuss the “outstanding issues” Prime Minister Narendra Modi cited to opt out of the proposed Regional Comprehensive Economic Partnership (RCEP) pact.

New Delhi and Beijing may try to work out a bilateral protocol, which may be incorporated into the proposed RCEP agreement later, of course, if Modi Government decides to reconsider its decision to stay out of the pact. 

A day after Prime Minister announced New Delhi's decision to stay out of the RCEP, China said that it would follow the principle of “mutual understanding and accommodation” to resolve the “outstanding issues” cited by India as reasons for its not joining what would have created the largest free trade area of the world.

New Delhi decided to stay out of the RCEP, primarily because it was of the view that the draft agreement had not provided adequate protection against the surge in cheap imports from China to India, when the agreement would come into force.

“The RCEP is open. We will follow the principle of mutual understanding and accommodation to negotiate and resolve those outstanding problems raised by India and we welcome an early joining by India,” Geng Shuang, a spokesperson of the Ministry of Foreign Affairs of Chinese Government, said in Beijing on Tuesday. 

The earliest opportunity for India and China to discuss the issues bilaterally will be the first round of the high-level dialogue Modi and Chinese President Xi Jinping agreed to set up when they met at a seaside resort near Chennai on October 11 and 12 for the second “informal summit”. 

Modi and Xi had agreed that the bilateral “High-Level Economic and Trade Dialogue” mechanism would be jointly led by Finance Minister Nirmala Sitharaman and Chinese Vice Premier Hu Chunhua and it would explore ways to narrow trade deficit and raise volume of bilateral commerce as well as to explore manufacturing partnership between India and China. 

The diplomats of the two nations are currently in touch to schedule the date and venue of the first round of the newly-institutionalized dialogue. 

New Delhi was cautious during the RCEP negotiations in view of India's huge trade deficit with China, which widened from $ 51.72 billion in 2017 to $ 57.86 billion in 2018. 

India asked on an “auto-trigger mechanism” within the RCEP to protect its own industries from surge in cheap imports, particularly from China. The “auto-trigger mechanism” would have ensured that safeguard duties would be automatically imposed after imports from another country would reach a certain threshold.

Modi and Xi had discussed about the proposed RCEP agreement during the second “informal summit” last month. Chinese President had taken note of Prime Minister's views on the negotiations for the trade pact and said that China and India should hold more discussion on this and the concerns of New Delhi would be taken into consideration

“This is two-way and complementary (deal) and I should point out that China and India are both emerging major developing countries. We have a huge market of 2.7 billion people and there is a big potential in the market,” Geng, the spokesperson of the Chinese Ministry of Foreign Affairs, said. He added that the RCEP was a regional trade agreement and mutually beneficial in nature. “If it is signed and put into implementation it is conducive for the Indian goods' entry into China and other participating countries. In the same vein, it will also help Chinese goods to enter the markets of India and other participating countries,” he said.

The 10 ASEAN (Association of South East Asian Nations) nations – Brunei, Vietnam, Cambodia, Laos, Thailand, Indonesia, Malaysia, Myanmar, Philippines and Singapore – as well as the six free trade partners of the bloc – India, China, Japan, Australia, New Zealand and South Korea – launched the RCEP negotiations in November 2012.

Modi on Monday joined the leaders of the 15 other RCEP negotiating countries at a summit in Bangkok and conveyed to them India's decision to stay out of the agreement. 

The statement issued at the end of the summit noted that the 15 of the 16 negotiating countries had “concluded” text-based negotiations for all 20 chapters of the proposed agreement and “essentially” resolved “all market access issues”. The leaders of the 15 nations had tasked officials of the respective governments to carry out the legal scrubbing of the proposed agreement so that signing could start in 2020.

They also noted that India had “significant outstanding issues”, which remained unresolved. “All RCEP participating countries will work together to resolve the outstanding issues in a mutually satisfactory way. India’s final decision will depend on satisfactory resolution of these issues,” added the statement issued in Bangkok.

There was no official word from Modi Government on the possibility of its reconsidering the decision to stay out of the RCEP. But a source aware of New Delhi's position on the RCEP told the DH on Tuesday that New Delhi could review its decision only if adequate safeguards were put in place to protect the markets in India against an import surge from China. The source also said that India and China might explore a bilateral protocol to address New Delhi's concern and it might be incorporated into the RCEP agreement later. 

If such a bilateral protocol between New Delhi and Beijing puts into place the safeguard to prevent cheap imports from China from flooding markets in India, it could lead to a review of the decision on the RCEP by the Government, said the source. 

If India re-joins the RCEP pact, the agreement will create a free trade area which would have covered 3.6 billion people or the half of the global population and accounted for 39.5 % ($ 49.5 trillion) of the GDP of the world.

“We do not deliberately pursue trade surplus against India. We can expand and increase our cooperation in investment, production capacity and tourism and make a bigger pie out of cooperation for sustainable and balanced development.” the PTI quoted the spokesperson of the Chinese Ministry of Foreign Affairs, Geng Shuang, saying in Beijing. 

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