India ready to abolish tariff structure if RCEP promises FDI

By Kritika Suneja, The Economic Times | August 10, 2016

NEW DELHI: India is willing to let go of the three­tier structure for tariff reduction for goods under the proposed Regional Comprehensive Economic Partnership (RCEP) if it gets commitment on foreign direct investment in services from its 15 partners.

Officials said India may agree to do away with the basic tenet of the RCEP that involves tariff reduction on the basis of each country’s free trade agreement with Asean and other members if it gets suitable offers on services and investment. RCEP is a comprehensive free trade agreement subsuming goods, services, investment, competition, economic and technical cooperation, dispute settlement and intellectual property rights between the 10 countries under the Association of Southeast Asian Nations and their six free trade agreement partners ­ Australia, China, India, Japan, Korea and New Zealand.

An official said that the commerce department wants RCEP to go the Trans Pacific Partnership (TPP) way while discarding the three­ tier structure.

The TPP has offered its members countries to phase out tariffs over long periods of time stretching up to 20 years in cases of some products.

“We will take time in collapsing the structure…It will be like TPP where phase out period for different country would vary,” the official said, requesting not to be identified. At the recently concluded ministerial in Laos, India proposed to liberalise trade in 120 services, stating that in half of these the service provider should offer 100% foreign direct investment without limits under Mode 3, which deals with commercial presence. Besides, India sought offers on Mode 4 services, or movement of professionals. “For RCEP to be WTO consistent, it is important that we have a substantially all trade covered agreement,” said Ram Upendra Das, professor at Research and Information System for Developing Countries. Despite its change in stance on goods, India is insisting on a single undertaking, meaning nothing is agreed until everything is agreed.

“Negotiations are on and we will finally agree on a single tariff only when we get better offers on services. We also want countries to share their negative lists and carveouts in investment,” another official said. Other countries have opposed India’s proposal to have such a detailed analysis on the investment pillar of the talks.

With India showing flexibility, though, the RCEP agreement is likely to take shape by the next ministerial conference in November, officials said. “We will try to minimise the differences before November,” the second official added.

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