Seek exclusion from tariff elimination/reduction for several items due to competition from China, other nations
India has got a much-needed breather with the deferring of the conclusion of the Regional Comprehensive Economic Partnership (RCEP) pact, but at least three Central Ministries are still not convinced about the usefulness of the agreement.
“We have more convincing to do within the government. The Ministries of Steel, Heavy Industry and Textiles continue to be apprehensive as they feel their sectors are not ready to face competition from China and some others,” a government official said.
Trade Ministers from the 16 RCEP countries, which includes India, China, the 10-member ASEAN block, Japan, South Korea, Australia and New Zealand, decided in Singapore on Tuesday to give up the year-end deadline for a ‘substantial package’ and instead focus on concluding the trade deal by 2019.
The RCEP, which includes goods, services, investments, e-commerce, government procurement, once completed could be the largest free trade bloc in the world covering about 3.5 billion people, 30 per cent of the world’s Gross Domestic Product and 40 per cent of world trade.
In the inter-ministerial consultations conducted by the Commerce Ministry, the Heavy Industry, Textiles and Steel Ministries have continued to seek exclusion of items pertaining to their respective sectors from tariff elimination/reduction obligation at the RCEP.
“The Steel Ministry, for instance, is insisting on excluding the entire range of finished steel products from the pact,” the official said.
Highlighting the position of the domestic steel industry on the RCEP negotiations, Abhyuday Jindal, Managing Director, Jindal Stainless, said, “We strongly oppose inclusion of stainless steel flat products in the RCEP agreement. The move will open flood gates of Chinese imports into India through zero duty access making operations for domestic producers non-viable.”
“A case in point is the existing FTA of India with Korea and Japan. Though the FTAs were envisaged to promote trade between the two countries, much of the trade post-FTA has been one-sided and India has substantial trade deficit with both Korea and Japan,” Jindal said.
Similarly, the Heavy Industry Ministry has apprehensions about the effect of RCEP on the automobile industry and manufacturers of machinery.
The Textiles Ministry, too, wants a large number of items to be insulated from the RCEP pact as it fears competition from China and ASEAN nations such as Vietnam and Philippines, the official said.
These Ministries are especially worried as there is pressure on India to take on commitments for eliminating tariffs on more than 90 per cent of items for most RCEP partners while allowing slightly lower commitments for countries such as China, which pose a huge challenge to the Indian industry.
“One has to understand that the list of items on which no reduction commitments would be taken will be very small and include the super-sensitive items which would mostly be agricultural products,” the official added.
The Commerce Ministry has been trying to drive home the point that all sectors will gain tariff-free access to the entire RCEP region and exports would grow. “If India is not part of the RCEP agreement, Indian exports will face tariffs in the region whereas all other countries that are part of the grouping wouldn’t and the competitiveness of Indian products would take a serious hit,” the official said.