New Delhi: India has decided not to join RCEP. India’s stand at RCEP is a strong reflection of PM Modi’s strong leadership and India’s rising stature in the world. India’s decision will greatly help India’s farmers, MSMEs and dairy sector.

 

India’s stand is a mixture of pragmatism, the urge to safeguard interests of the poor and the effort to give an advantage to India’s service sector. While not shying away from opening up to global competition across sectors, India made a strong case for an outcome which is favourable to all countries and all sectors.

 

Indeed, India was consistent in raising these issues right from day one during the RCEP negotiations. Some issues on which India made its stance clear included the threat of circumvention of Rules of Origin due to Tariff Differential.India pushed for a fair agreement which addressed the issues of trade deficits and opening of services. India also asked for safeguard mechanisms to prevent against import surges and safeguard the interests of domestic industry. India also raised the unviability of MFN obligations where India would be forced to give similar benefits to RCEP countries that it gave to others. There was also no credible assurance for India on market access and non-tariff barriers. India also had very valid concerns on keeping 2014 as the base year for tariff reductions.

 

Gone are the days when Indian negotiators craved in to pressures from the global powers on trade issues. This time, India played on the front foot, stressing on the need to address India’s concerns over trade deficits and the need for other countries to open their markets to Indian services and investments.

 

PM Modi’s firm stand

 

In his speech at the RCEP summit, PM Modi said that “India stands for greater regional integration as well as for freer trade and adherence to a rule-based international order. India has been pro-actively, constructively and meaningfully engaged in the RCEP negotiations since inception. India has worked for the cherished objective of striking balance, in the spirit of give and take.

 

Today, when we look around we see during seven years of RCEP negotiations, many things, including the global economic and trade scenarios have changed. We cannot overlook these changes. The present form of the RCEP Agreement does not fully reflect the basic spirt and the agreed guiding principles of RCEP. It also does not address satisfactorily India’s outstanding issues and concerns In such a situation, it is not possible for India to join RCEP Agreement.

 

Our farmers, traders, professionals and industries have stakes in such decisions. Equally important are the workers and consumers, who make India a huge market and the third biggest economy in terms of purchasing power parity. When I measure the RCEP Agreement with respect to the interests of all Indians, I do not get a positive answer. Therefore, neither the Talisman of Gandhiji nor my own conscience permit me to join RCEP.

 

Thousands of years before RCEP was conceived, Indian traders, entrepreneurs and common people built abiding contacts with this region. For centuries, these contacts and ties made valuable contribution to our shared prosperity.”

 

This is not the first time that Indian Government under Prime Minister Narendra Modi has demonstrated a strong resolve in matters of international trade and related negotiations. US President Trump who is known for his negotiation skills has himself called PM Modi a tough negotiator. Even Obama aide Ben Rhodes has written in detail on how President Obama had a hard time convincing PM Modi during the Paris climate change summit.

 

UPA’s weak record in protecting Indian interests in global trade negotiations

 

India signed FTA with ASEAN and South Korea in 2010. It also signed FTA with Malaysia and Japan in 2011.

 

Govt. of India during UPA opened 74% of its market to ASEAN countries but richer countries like Indonesia opened only 50% for India. Govt of India under UPA also agreed to explore an India-China FTA in 2007 & join RCEP negotiations with China in 2011-12.

 

The impact of these decisions has resulted in India’s trade deficit with RCEP nations increasing from $7 Billion in 2004 to $78 Billion in 2014.

 

Indian domestic industry is still reeling under the impact of these decisions. Govt. under PM Modi has sought to solve these issues and these negotiations are continuing. It is therefore evident that India could not sign a further unequal deal under RCEP without resolving past issues in previous FTAs including ASEAN and ensuring a strict and fair framework in RCEP.

 

Here are a series of such pro-Indian industry steps taken so far:

 

Korean FTA review started 3 years ago and is being fast tracked.

 

Poor negotiations under previous Government of FTAs caused harm to Indian industry and led to distorted trade balance. India has already secured agreement in ASEAN for a review of the FTA.

 

A Joint Working Group is discussing the issues to be addressed in Japan FTA on 18/11 and will also discuss review of FTA.

 

Various industries especially farmers, small scale and handloom sector are benefitting from decisions taken on imports.

 

Import of Agarbatti put from ‘Free category’ to ‘Restricted category’ – This has boosted domestic industry especially small scale sector.

 

Suitable safeguard duty of 5% imposed on palm oil to address import surge and protect the interest of the domestic industry. This will benefit Indian farmers as well.

 

In order to safeguard the interest of local cashew planters, Minimum Import Price of Cashew Kernel Broken from Rs.288per kg to Rs.680 per kg and Cashew Kernel Whole from Rs.400 per kg to Rs.720 per kg.

 

In order to ensure remunerative price to the farmers, import of peas and pulses has been restricted and import of only 4 lakh MT of Toor and 3 lakh MT of Moong and Urad has been allowed for the fiscal year 2019-20.

 

In order to monitor the import of Steel, a Steel Imports Monitoring System (SIMS) has been launched. All stakeholders will have advance information about the imports of different steel products and it will enable timely policy interventions.

 

In order to mitigate the shortages of maize (feedgrade) for poultry and dairy farming, import of 5 lakh MT of feed-grade Maize has been allowed at lower 15% customs duty instead of normal customs duty of 50%. This will boost poultry production and dairy farming.

 

India has been at the vanguard in protecting the interests of the poor especially agriculture sector. India managed to protect its farmers’ interests and ensure food security for its poor in WTO in Buenos Aires under PM Modi.^[1]

 

India has secured international support for Indian small fishermen –  India’s plan for small fishers gets backing of 80 countries.^[2]

 

India will continue to pursue its economic and strategic interests

 

Under PM Modi, India has become one of the world’s most open economies with very few barriers to trade both tariff and non-tariff. It is exploring trade agreements with USA and European Union, where Indian industry and services will be competitive and benefit from access to large developed markets. It will also avoid the pitfalls of joining agreements, which are in reality FTAs by stealth with countries

^[1] https://economictimes.indiatimes.com/news/economy/agriculture/india-manages-to-shield-farmers-interests-ensure-food-security-at-wto/articleshow/62059553.cms?from=mdr

^[2] https://economictimes.indiatimes.com/news/economy/agriculture/indias-plan-for-small-fishers-gets-backing-of-80-countries/articleshow/70036299.cms?from=mdr