Map of the RCEP trade block -- From the web
At a time when the call for deglobalisation is gaining momentum and increasing protectionism has lead to pulling down of global growth in merchandise trade for the second quarter this year, India’s foray into the Regional Comprehensive Economic Partnership (RCEP) treaty, a mega trade agreement between 16 countries of Asia-Pacific region, is being seen as an overtly risky adventure. More so at a time when agriculture is passing through a terrible agrarian crisis and manufacturing sector continuous to limp.
The latest round of negotiations that ended at Singapore in mid-November abandoned the proposal of reaching a basic agreement by the end of this year, and set a new goal for reaching a final conclusion by the end of 2019. This is primarily because India, Thailand and Indonesia are scheduled to go for general elections next year, and none of these countries is willing to bite the bullet before the formation of the new government. The news agency Nikkei quoted an Indian diplomat as saying: “if a basic deal on lowering tariffs was announced, the government in New Delhi will collapse.”
Seeking greater commitment to liberalise trade, RCEP is a mega trade agreement between 10 Asian countries and their six FTA partners – Japan, South Korea, China, Australia, New Zealand and India. This trading block, when the treaty comes into place, will cover 45 per cent of the global population and account for 25 per cent of global GDP and a whopping 40 per cent of global trade. The treaty has been under negotiations for six years, and is focused on three pillars – goods, services and investment. When signed, the RCEP will turn into world’s biggest trade block.
Since India’s trade deficit with the RCEP countries exceeds $ 100 billion, which is roughly 64 per cent of the total trade deficit, India is looking forward to bridge the yawning trade gap in the years to come. But given the huge trade deficit that India has with China, Korea, Indonesia and Australia, and given the huge domestic market that India will provide by eliminating import duties and bringing these to zero on a majority of the tradable goods will invite flood of cheaper imports. Already several Ministries have raised the red flag, and domestic industries, including steel and metal; pharmaceuticals, food processing and dairy have expressed serious concern.
The RCEP framework entails providing zero duty on 92 per cent of the tradable goods, with another 5 per cent added over the years. This is what the ASEAN nations and Japan, countries with which India has free trade agreements, are insisting; the three other major non-FTA partners are seeking elimination of import duties on 80 per cent products with an inbuilt margin of plus and minus 6 per cent. As per reports India is willing to provide tariff concessions on 72 to 74 per cent of goods to China, Australia and New Zealand. It has sought 20 years to remove these tariffs. But with China, it wants still more time to eliminate duties for which negotiation are underway.
Over the past few decades, especially after the World Trade Organisation (WTO) came into existence, rich countries have been seeking steep reduction in farm subsidies and demanding more market access. What was attempted initially under the WTO was subsequently pushed aggressively under the free-trade agreements (FTAs) and numerous bilateral agreements. While a number of studies have shown how reduction in import duties have turned a majority of the developing countries into net food importers, destroying in the process millions of farm livelihoods, the implications of the proposed RCEP treaty on India’s food security have been least studied. What makes the implications more worrisome is that the RCEP negotiations are being held in secrecy, with not even the industry and NGOs being allowed to participate.
Isn’t it strange that six years after the RCEP negotiations began India is now initiating studies to understand the implications and potential losses from the proposed trade agreement? It has belatedly entrusted the task to Centre for Regional Studies, New Delhi and IIM, Bangalore. Meanwhile, several experts and industry representatives, including steel and pharma, have expressed uneasiness. According to Jayan Mehta, senior general manager of Amul dairy cooperative, 15-crore livelihoods engaged in dairy farming will be severely hit from the current RCEP negotiations.
Let’s examine what is at stake. With production exceeding 176 million tonnes this year, India is the biggest producer of milk in the world. Presently, the imports of milk and milk products are allowed with an import duty ranging between 40 to 60 per cent. This provides enough protection for the local dairy industry to build its level of competitiveness. At a time when US/EU dairy industry is in a terrible crisis, opening up the flood gates will inundate India with cheaper milk flowing in from Australia/New Zealand. Let us not forget that while Australia which has only 6,300 dairy farmers; and New Zealand with 12,000 dairy farmers are pushing in aggressively to protect the economic interests of their small dairy farming community, India is willing to put the dairy sector on the chopping block.
At a time when reduction in import tariffs have already flooded the country with edible oils, turning the country into world’s second biggest importer, and the zero duty import of pulses in the past three years have caused a steep fall in farm gate prices for farmers, opening up for imports of wheat from Australia, which has been wanting India to lower import duties for several years now, will be the final nail. Coupled with the WTO pressure to restrict MSP payments for public stockholding, it will only destroy India’s ability to retain food sovereignty and erode farm livelihoods.
Still worse, such floods of imports coming in food crops, plantation crops, fruits and vegetables as well as in processed foods will strike a severe blow to Indian farming already reeling under distress. Member countries on the other hand are already seeing tremendous trade opportunities. Australia’s Trade Minister Simon Birmingham, who was in New Delhi last week, said almonds exports from Australia have grown five-fold in the past decade and items such as these showcased the opportunity to diversify the trade basket.
I therefore wonder why agriculture can’t be kept out of RCEP. After all, if US President Donald Trump could pull out of the ambitious 12-nation Trans-Pacific Partnership (TPP) treaty to save American jobs, India too needs to protect its food security built so assiduously over the decades. Let’s not forget that importing food is akin to importing unemployment, and a vibrant agriculture has the potential to revitalise the economy more so at a time when the country is faced with jobless growth. #
India must keep agriculture out of RCEP. The Tribune. Dec 5, 2018.
https://www.tribuneindia.com/
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