India fails to convince Asean bloc in RCEP talks

As part of India’s current three-tiered approach, Asean countries are being offered 80% tariff liberalisation

Subhayan Chakraborty, Business Standard |  June 23, 2016

The sudden impasse in the recent trade negotiations in New Zealand on a Regional Comprehensive Economic Partnership (RCEP) was triggered by China, sources here said.

It led to some nations, particularly those belonging to the Association of Southeast Asian Nations (Asean), refusing to continue discussions on tariff liberalisation along India’s approach.

As part of India’s current three-tiered approach, Asean countries are being offered 80 per cent tariff liberalisation. Of this, 65 per cent elimination is to take effect right away and another 15 per cent over 10 years.

In the second tier, India has offered 65 per cent tariff elimination to South Korea and Japan, with which it has Free Trade Agreements (FTAs). These two countries offered India 80 per cent tariff elimination.

In tier three, India proposed 42.5 per cent reduction in tariff lines to China, Australia and New Zealand. These countries will offer India 42.5 per cent, 80 per cent and 65 per cent tariff line reductions, respectively.

The 10 Asean members, more than half the participants of the proposed RCEP, gave an opposing note after China’s alleged goading to junk India’s approach of selective trade liberalisation.

However, there was also a rift within Asean over this. “China, having demanded greater tariff reduction before, too, pushed Asean members Laos and Cambodia into opposing India’s approach, later followed by Malaysia and Indonesia,” said one of the sources. However, Philippines and Singapore were not on board with this stand, he added.

The Asean nations want to see the agreement through as soon as possible and this being played by China against India for leverage over negotiations on services, where India has taken an aggressive stance, said a commerce ministry official.

While other countries have earlier, too, formally argued against the tiered approach, Asean nations have said the entire value chain is not being covered in India’s stand, said an expert. However, he said, the scope of the current talks had been decided much before and discussion on the value chains dealt with earlier.

The Asean nations comrprise Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam. The proposed RCEP also involves six countries with which Asean has FTAs – Australia, China, India, Japan, South Korea, and New Zealand.

Japan and China had earlier pressed India for either a common tariff for all member-countries in 10 years or to make the initial tariff liberalisation more ambitious. India had asked Japan to find common ground on the issue. The next round of talks, in Indonesia next year, is expected to see a hardening of stances from all countries.

The RCEP countries account for almost a third of global Gross Domestic Product, at $23 trillion, and a fifth of global services trade, covering a little more than three billion people.

Since negotiations were formally launched in November 2012, there have been 13 rounds. Topics for discussion include trade in goods and services investment, intellectual property, rules of origin, and sanitary & phytosanitary measures.

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