RCEP members fail to finalize talks template

Source: Livemint

8 Dec 2014

RCEP members fail to finalize talks template

Trade minister Nirmala Sitharaman said India sees RCEP as an opportunity for its trade and industry to expand its markets by leveraging its manufacturing capabilities and strength in services. Photo: PTI

New Delhi: Members of the regional comprehensive economic partnership (RCEP) grouping were unable to agree a template for negotiations on a proposed mega regional trade agreement at the sixth round of talks held in Greater Noida near New Delhi last week.

“There are at least four or five options on the table. The modalities, based on which negotiations need to move, could not be agreed in this round. Negotiations will resume in the next round to be held in Thailand from 9-13 February,” a commerce ministry official said speaking under condition of anonymity.

The official said for negotiation in goods, India has proposed a low level of initial offer but has suggested deviations for individual countries on a reciprocal basis after the initial offer. In services, India has proposed negotiations based on a positive list.

Another official, also requesting anonymity, said: “There are no outcomes expected at this stage. Negotiations are just continuing.”

Started in May 2013, RCEP comprises the 10 economies of the Association of Southeast Asian Nations (Asean) region—Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam—and six of its free trade partners, Australia, China, India, Japan, New Zealand and South Korea.

The grouping envisages regional economic integration, leading to the creation of the largest regional trading bloc in the world, accounting for nearly 45% of the world’s population with a combined gross domestic product of $21.3 trillion.

The regional economic pact aims to cover trade in goods and services, investment, economic and technical cooperation, competition and intellectual property. India’s interests lie mostly in services, the removal of technical barriers to trade such as those taken under sanitary and phyto-sanitary measures and the trade in goods such as pharmaceuticals and textiles.

A trade delegate from a member-country who was present at the negotiations said members were disappointed with the low level of ambition proposed by India under the investment chapter. In services, the delegate, requesting anonymity, said India showed aggression and sought higher level of commitment from member countries in Mode 4 of services trade through which a country seeks more professional visas for its citizens.

While RCEP members are keen to finalize an agreement in goods to begin with, India insists on negotiations in goods and services moving in tandem—given the nation’s bad experience while negotiating the Asean free trade agreement, where it lost its bargaining power for a strong services agreement by concluding the goods agreement first.

However, the RCEP trade deal is crucial for India since it is not part of the other two mega-regional trade deals that are under negotiation—the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). Both are led by the US.

Trade minister Nirmala Sitharaman, while inaugurating the sixth round of negotiations last week, said India sees RCEP as an opportunity for its trade and industry to expand its markets by leveraging its manufacturing capabilities and strength in services.

Sitharaman, however, cautioned that the talks have to move beyond a narrow “bilateral benefit” paradigm into one of a “balanced regional benefit”.

“India would remain constructive in the RCEP negotiations and hope we all understand the imperatives of each other as we progress. We must realize that this is a complex negotiation among so many countries and across many areas. There is no ‘one size fit all’,” she added.

India will be under intense pressure to cut its high tariffs on many agricultural and manufacturing goods from the member-countries, as well as to liberalize its investment regime and adhere to higher standards on intellectual property rights. The biggest challenge before Indian negotiators is to handle China within the grouping. India, with a $36 billion trade deficit with China, is reluctant to provide any substantial tariff concessions to its northern neighbour.

Manoj Pant, professor of economics at the Jawaharlal Nehru University, said he does not think India is getting isolated at the RCEP. “We are just buying more time as our position is not a very comfortable one,” he added.

Pant said India should follow a negative list approach in services negotiations rather than the proposed positive list approach.

In a positive list-based approach, member-countries have the right to choose the sectors and the modes of supply in which they would undertake commitments while in a negative list-based approach members agree to open all sectors for trade with member countries, except for a sensitive list of sectors.

After the end of the RCEP ministerial meeting held in Nay Pyi Taw, Myanmar on 27 August, a joint statement had said the ministers were encouraged by the progress made after five rounds of negotiations in the areas of trade in goods, services and investment and reiterated their aim to complete the negotiations by the end of 2015.

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