15 members of RCEP --Wikipedia map
Soon after assuming office, when the US President Donald Trump withdrew from the Trans Pacific Partnership (TPP) mega-trade agreement between 12 countries, which shared a common coastline on the Pacific and made up for 40 per cent of the global GDP, it came in for a lot of criticism. Terming it as a “horrible deal” President Trump was convinced that the treaty, which was meant to remove 18,000 tariffs on agricultural and manufactured goods, would steal American jobs.
Withdrawing from another mega-trade deal -- the Regional Comprehensive Economic Partnership (RCEP) -- which covers 45 per cent of the global population and accounts for 25 per cent of world’s GDP, Prime Minister Narendra Modi in a statement a few days ago, said: “When I measure the RCEP Agreement with respect to the interests of all Indians, I do not get a positive answer. Therefore, neither the Talisman of Gandhiji nor my own conscious permits me to join RCEP.” Remarkable words, indeed. Again, like US President Trump, what perhaps weighed on Prime Minister’s mind were the massive job losses and livelihood destruction expected on removing tariffs on 92 per cent of the tradable goods, including manufacturing and agriculture.
At a time when the dominant economic thinking is swayed towards globalisation, a strong leader demonstrating political courage to withstand the tide is certainly admirable. More so, at a time when dominant economic thinking creates a fear of the unknown – how much the country will miss out by not being a part of the proposed free trade agreement (FTA), some term the phenomenon as Fear of Missing Out (FOMO), the Prime Minister’s assertion for fairness and balance is legitimate. Such a precautionary approach becomes absolutely essential knowing that in the past too India had entered into free trade agreements with 12 of these RCEP countries (including the 10-member ASEAN grouping) with the same illusion of finding an access into their markets only to register a whopping trade deficit of $ 107.28 billion. The assumption that getting into an RCEP agreement at this stage will further widen the trade deficit and hit agriculture the most therefore is not entirely unfounded.
Similarly, the over enthusiasm with which India went on signing Bilateral Investment Treaties (BITs) on the presumption that it will promote investments were in reality vague and without proper homework. As the number of arbitrations increased, India terminated 58 of these BITs.
Given this backdrop, it is quite obvious that the fear of unknown has been over-hyped. If the FTAs with the Asian countries were pushed in the search of penetrating important markets and participating in the value chains of East Asian economies, it didn’t work. To Illustrate, India’s trade deficit with the 10-member ASEAN, signed in 2010, has increased by 250 per cent. It is therefore quite obvious that the Indo-ASEAN Agreement was signed without any adequate assessment, no proper scrutiny and was perhaps based more on the unknown FOMO factor. Otherwise there is no reason that the exposure to 10 Asian countries markets should fail to provide any significant trade outcomes. It is therefore heartening to know that the Prime Minister has now called for a review of Indo-ASEAN trade agreement. In fact, not only Indo-ASEAN there is a dire need to review all the bilateral and plurilateral trade agreements that India has so far signed.
There are lessons in store. When the multilateral World trade Organisation (WTO) treaty came into effect, a lot of euphoria was generated. We were told that a multilateral trading system – based on one country one vote principle – would obliterate the need to get in cumbersome and time consuming bilateral agreements. But over the years, this was proved wrong with more than 300 bilateral free trade agreements (FTAs) signed, which in principle were WTO plus treaties with stronger intellectual property rights (IPRs) and aggressive push to open up markets. Since most countries already are into bilateral agreements – with emphasis on zero tariff imports and removal of non-tariff barriers -- I fail to understand how any incremental growth can be expected from regional treaties where majority members are already having separate FTAs. Unless of course the new grouping includes a giant like China (with which India has a trade deficit of $ 53 billion) and countries like Australia and New Zealand (like in the RCEP) which desperately eye to get a foothold into India’s dairy (and farm sectors) to pull out their own dairy sector from distress.
The extra precaution with which India wants to engage with RCEP trade partners is therefore quite justified. Although the Commerce Minister Piyush Goyal lays out three conditions – strict rules of origin, updated base duty period, from 2014 to be moved to 2019, and auto-trigger mechanism – to be addressed before re-entering the RCEP negotiations, India’s decision making should be guided by more detailed studies and more open and transparent stakeholder dialogues. The Ministry of Commerce cannot be allowed to work in isolation, and needs to take other ministries on board. Reports saying that China was upset at India opening up issues like auto-trigger at times of volume surge, changing the base duty etc a few months before the treaty was being finalised raises questions over the competence of Indian negotiators. How come for seven years of RCEP negotiations, they failed to bring up these crucial issues that India is in any case fighting for in the ongoing Doha Development Round of WTO.
India holds its own. The Tribune. Nov 15, 2019
https://www.tribuneindia.com/
0 comments:
Post a Comment