RSTV: RCEP and India

1.Recently, 7th Regional Comprehensive Economic Partnership (RCEP) ministerial meeting was held at Bangkok, Thailand in which member countries reviewed RCEP negotiations.The joint statement issued after the meeting mentioned that the 16 negotiating partners agreed that they should not lose the long-term vision of deepening and expanding the value chains in the RCEP.The grouping underscored issues raised by India by stating that certain developments in the global trade environment might affect the negotiating countries’ individual positions.

2.RCEP and India:India’s apprehension on RCEP

a.Importance given to products rather than to services

Emphasis of RCEP is on trade in goods, largely on manufacturing where China, Vietnam, Thailand etc. have comparative advantage. India’s comparative advantage  is in services sector, where the RCEP loses focus.Hence, India is contending that services should be treated like commodities in RCEP trade. Also, our competitiveness in manufacturing will worsen further if we alter the protection that we provide. This will lead to dumping of goods from China which will further worsen the 53$ Billion deficit with China and the almost 100$ Billion with ASEAN.

b.Investment Flaws

As per India, the investor state dispute settlement (ISDS) of RCEP should first use the remedies available in the country, before an investor can take country for a dispute at international forum.

c.Dumping of Cheap goods from China

Even if India manages to keep tariffs on certain items being imported from China higher than that for other RCEP members, with low value addition requirement Chinese items can be dumped into India at lower duties via other RCEP countries. Hence, India asked for strict RoO in RCEP as a safety wall to domestic producers against cheap Chinese goods.

Moreover, in the wake of US-China trade war, there is might possibility of increased flow of goods from China.

d.Investment Flaws

As per India, the investor state dispute settlement (ISDS) of RCEP should first use the remedies available in the country, before an investor can take country for a dispute at international forum.

e.Concerns Regarding the Dairy Sector:

Dairy is a sector that has seen tremendous growth in India. This has happened largely by taking two steps:Checking Imports and Secondly, a large share of market price actually goes to the farmer(as high as 61% of Market Price). This has taken India to be the largest milk producer in the world.

The National Dairy Development Board (NDDB) has recommended the government to keep the dairy sector out of the purview of negotiations under RCEP as cheap import of dairy products will adversely affect the livelihood of Indian farmers.

In this context, New Zealand is pushing for dairy imports in RCEP as it has capacity to produce milk 6 times higher than its consumption.

f.Stringent IP

India argues to remove the Stringent intellectual property (IP) agreement out of the RCEP agreement.

Countries like Japan and South Korea are pushing for Intellectual Property Rights (IPR) Policy which will make Indian pharmaceuticals much costlier and hit consumers around Asia.

g.Tariff Reductions

Tariff on  28 % of items will have to be brought down to zero immediately and more than 35% of the goods in phases when the pact is implemented.  Indian entrepreneurs will hardly have time to adjust to the new challenges that the competition would generate.

India is under pressure to agree to eliminate import tariffs on more than 90 per cent of traded goods for the 10-member ASEAN, Japan and South Korea.


3.It should be noted that any FTA, which might create dislocation for certain period, ultimately provides economic incentives to a country. However, it is not yet clear that whether Indian industries are ready to invest money in the various FTAs.

4.Out of the 25 article of RCEP, 13 article are still open for discussion. Hence, RCEP countries which have vowed to close talks on the RCEP pact by November 2019 have to catalyze the agreement process. However, during this upcoming RCEP summit, India should not compromise on dairy sector as it affects 60 million Indian households.

5.RCEP, if implemented, will be the world’s largest economic bloc, covering nearly half of the global economy.It is proposed between:

    • the ten-member countries of the Association of Southeast Asian Nations (ASEAN) (Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, Vietnam) and
    • the six countries with which ASEAN has existing FTAs (Australia, China, India, Japan, South Korea and New Zealand).6.The RCEP negotiation includes:Trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce, small and medium enterprises (SMEs) and other issues.The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement (FTA).
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