Will Modi sign up India for the RCEP today?

Prime Minister Narendra Modi. AFP Photo

What is the proposed RCEP agreement all about?

The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement being negotiated by the 10 South-East Asian nations (ASEAN) – Brunei, Vietnam, Cambodia, Laos, Thailand, Indonesia, Malaysia, Myanmar, Philippines and Singapore – and six other countries: India, China, Japan, Australia, New Zealand and South Korea. The ASEAN grouping already has separate free trade agreements with each of the six other nations that are participating in the RCEP negotiations. If all negotiating countries sign up for it, the RCEP will create the largest free trade area in the world, covering 3.6 billion people or half the global population. The 16 participating nations account for 39.5% ($49.5 trillion) of the world’s GDP. 

What is the status of the RCEP negotiations?

Trade ministers of the 16 nations endorsed the ‘Guiding Principles and Objectives for Negotiating the RCEP’ in August 2012. The leaders of the participating nations formally launched



negotiations in Phnom Penh in November 2012. The negotiations covered trade in goods and services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce, small and medium enterprises (SMEs) and other issues. Though the negotiation was expected to be concluded by 2015, it has missed several deadlines. The negotiation gathered pace in 2019 after the 28th round of negotiations in Vietnam last September resulted in finalization of 13 of the 20 chapters in the proposed agreement, raising hope for its completion by the third RCEP summit, which is to be held in Bangkok today (4 Nov). The hope, however, dimmed again over the past few weeks as the negotiators could not reach consensus on some of the remaining chapters.

What is India’s approach to the RCEP negotiations?

India has been cautious during the RCEP negotiations in view of its huge trade deficit with China, which widened from $51.72 billion in 2017 to $57.86 billion in 2018. New Delhi is worried that cheap imports from China would flood India when the RCEP comes into effect. Delhi has been insisting that the RCEP negotiations should lead to an “equitable and inclusive” trade agreement, striking a balance among trade in goods, trade in services and investments. India has also been concerned over the reluctance of the other countries to make commitments for substantially opening up the services sector under the RCEP.

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What caused the latest roadblock in the negotiations?

The negotiation hit a roadblock after India demanded an “auto-trigger mechanism” to protect its own industries from a surge in cheap imports, particularly from China, after signing
of the RCEP pact. The “auto-trigger mechanism” will ensure those safeguard duties would automatically kick-in when imports from another RCEP country hits a certain threshold. India also has reservations about the proposed Investor-State Dispute Settlement (ISDS) body being set up within the RCEP framework. Delhi is not ready to allow its domestic legal the process to be challenged outside India. The other nations are, however, keen to have an ISDS mechanism, ostensibly in view of the history of the Supreme Court of India cancelling 2G licences granted to international telecom companies. Delhi is also demanding more stringent ‘Rules of Origin’ as it is apprehensive that India’s market could be flooded with cheap imports from non-RCEP countries, too, which might be routed through an RCEP country. Several farmers’ organizations in India have threatened to launch a nationwide stir if the government goes ahead and signs the RCEP pact, which they fear would severely hit their interests. The dairy industry is also apprehensive about the proposed agreement. The Confederation of Indian Industry (CII), however, has said that not signing the RCEP would stymie India’s efforts to increase its integration into regional and global chains, as preferential and comprehensive agreements facilitate investments and foster the growth of value chains.

What is likely to happen during the RCEP summit on Monday?

India remains the holdout, with 15 of the 16 negotiating nations having more or less agreed on most of the chapters of the proposed agreement. Though some countries had proposed
to go ahead and sign the agreement without India, it is unlikely that that will happen. Prime Minister Narendra Modi and the leaders of the other nations will review the progress of the negotiations during the third RCEP summit in Bangkok on Monday. They may issue a joint statement pledging to speed up negotiations and conclude the deal in 2020.

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