India rejects Mega Trade agreement with China and ASEAN members

India  decided to go against joining the Regional Comprehensive Economic Partnership (RCEP) trade deal, holding that it did not receive any “credible assurance on market access and non-tariff barriers".

Indian industry was, however, apprehensive that the deal would lead to a surge in cheap imports from China with which India will face a huge trade deficit.

Analysts have held that India was unlikely to gain any major market access to China even if Beijing substantially reduces its tariff levels, as New Delhi has not negotiated non-tariff barriers with RCEP members, especially China.

The proposed deal took a political turn as farmer organizations, trade unions, the Swadeshi Jagran Manch affiliated to the Rashtriya Swayamsevak Sangh and political parties including the Congress openly protested the RCEP deal, making it difficult for the government to find a middle ground.

  At such a situation, it is not possible for India to join RCEP agreement as the agreement does not show any positive signs for India.

At the time of the deal it was also questioned by analysts when the Indian economy is in the midst of a severe downturn. India’s GDP grew at a six-year low of 5% in the June quarter and most international and domestic forecasting agencies have pared their growth projections for India to below 6% for 2019-20.

At the end, there were essentially three demands from India, which other countries could not accommodate. India wanted to shift the base year for tariff cuts from 2014 to 2019 as it has increased customs duties on several items in recent years. It sought to include a large number of items in an auto-trigger mechanism to prevent a sudden surge in imports from China. India also wanted stricter rules of origin to prevent China from dumping its cheaper goods through other RCEP member countries.

Beyond these three demands, It have also pressed for a better deal in services trade through liberal movement of skilled professionals to create more job opportunities.

In effect, RCEP was a free trade agreement with China from India’s point of view. So long as our serious bilateral trade issues remain unresolved, RCEP would have only aggravated our problems. By the way China had in recent years addressed our concerns with regard to trade deficit, opening up the market to our goods, we would have been confident that within RCEP,if our concerns would have been addressed also. But without China doing it bilaterally, our expectation that they would do it multilaterally, does not make any sense.