India, backed by South Korea and China, has made a two-tier proposal at the Regional Comprehensive Economic Partnership (RCEP), offering wider duty eliminations to the 10 Asean countries in the trade bloc and a lower market access to the five non-Asean members.
In negotiations that concluded late last week in Thailand, New Delhi made an initial offer to give duty free access to 70% of product categories from the Asean countries versus just 40% from the rest, which includes China, Japan, Korea, Australia and New Zealand. Its previous offer was to eliminate duty on 40% items from all 15 countries. "We are comfortable in giving 70% to Asean with whom we already have a free trade pact, but at present it will not be possible to open up so much in the initial offer for the rest," said a government official.
"While we do have an FTA (free trade agreement) with Japan and Korea as well, making a further distinction will only complicate matters. Korea and China are on the same page as us on the matter."
The exact categories that will be given duty-free status will be decided in further deliberations in April, with an end-2015 deadline to conclude negotiations. RCEP is a proposed comprehensive free trade pact among the 10 Asean members of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam and their six partners, Australia, China, India, Japan, Korea and New Zealand, with whom they have FTAs. The plan is to include goods, services, investments, competition and intellectual property under the pact.
India is moving with extreme caution in the regional trade deal, as it faces huge import risk from China, with which it already has a trade deficit of $36 billion even without having any FTAs. India will keep the items which pose a risk to the domestic market out of the pact. In the initial offer, at least New Delhi will not oblige to duty concessions in dairy, textiles, automobiles, machinery, rubber, spices and steel. Lower India access to manufacturing powerhouses of Asia will help protect domestic industry as the government goes about implementing the 'Make in India' programme.
Asean has proposed a formula of three layers of duty elimination for Asean, the FTA partners and non-FTA countries. India has already opened up 79% product lines for Asean under the free trade pact. Its concerns are more about some other members.
"We will not be comfortable giving more than 40% to China, Australia and New Zealand. The real test will be battling the high ambition of Australia and New Zealand.
India also argued that with the tier approach, RCEP will no longer be a common consensus agreement," the official added. India has so far signed FTAs with Asean, Korea, Japan, Singapore and Malaysia, and it is negotiating for similar agreements with New Zealand and Australia.
"The problem is that we are talking about differential tariffs for different countries with different rules of origin. We do not know how that will take off," said Arpita Mukherjee, professor at the Indian Council for Research on International Economic Relations. "The ambition is so low. Who opens 40% in a free trade agreement.
Source:- economictimes.indiatimes.com
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