India threatens to leave RCEP trade deal as year-end goal abandoned

05, Nov. 2019

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By Tomoyuki Tachikawa

BANGKOK, Kyodo - India warned on Monday that it could pull out of negotiations for a sprawling Asia-Pacific free trade agreement after leaders from 16 nations effectively gave up on finalizing the deal by year's end while singling out the South Asian country as a stumbling block.

In a joint statement released after their summit in Thailand, the leaders of the Regional Comprehensive Economic Partnership, which includes Japan and China, pledged to sign an agreement on creating the world's largest free trade area in 2020, indicating that the negotiations will continue.

Some nations have expressed optimism on the progress of the RCEP free trade talks, though an apparent jab at India, which has maintained a cautious stance on opening up its market, could blur the outlook for the 16-country framework.

“We noted 15 RCEP Participating Countries have concluded text-based negotiations for all 20 chapters and essentially all their market access issues; and tasked legal scrubbing by them to commence for signing in 2020,” the statement said.

“India has significant outstanding issues, which remain unsolved,” it added, suggesting that the South Asian country and other RCEP members failed to agree on key fields such as tariffs and market access.

“All RCEP Participating Countries will work together to resolve these outstanding issues in a mutually satisfactory way. India's final decision will depend on satisfactory resolution of these issues,” the statement said.

Indian foreign ministry official Vijay Thakur Singh, on the other hand, said at a press conference, “India conveyed its decision at the summit not to join the RCEP agreement.”

Prime Minister Narendra Modi “highlighted that he was guided by the impact (that RCEP) would have on the lives and livelihoods of Indians, especially vulnerable sections of society,” she said, adding, “We took the right decision in the national interest.”

Thai Commerce Minister Jurin Laksanawisit told reporters that India decided to drop itself from the text-based conclusion. Thailand is the chair of RCEP talks this year.

But India will continue to be in RCEP talks and join the deal “when the country can reach a satisfactory resolution,” he added.

Covering a third of the global economy, RCEP has a history of missed deadlines with varying degrees of ambition among the members, which include the 10 countries comprising the Association of Southeast Asian Nations. Talks began in 2013 with the initial goal of wrapping them up in 2015.

India is believed to be reluctant to lower its trade barriers, as the country claims that it has suffered massive and chronic trade deficits with China for many years.

If the free trade area -- which would cover half of the world's population -- is put into practice, trade and investment activities among RCEP nations would intensify on the back of measures like the elimination and reduction of tariffs.

Nevertheless, there is concern in India that the deal would result in an influx of cheap agricultural and industrial products such as smartphones from China, further increasing the trade surplus of the world's second-biggest economy, RCEP sources said.

Fears linger that India will withdraw from the RCEP framework altogether if negotiations do not move forward, the sources added.

At Monday's summit, Japanese Prime Minister Shinzo Abe emphasized the importance of building a mega free trade area with India, which has a population of more than 1.3 billion.

“The strategic and economic significance of RCEP is extremely huge,” Abe was quoted as saying at the meeting by a senior Japanese government official.

“The 16 countries will aim to conclude negotiations as soon as possible to complete the world's largest free and fair economic zone as soon as possible,” the official quoted Abe as telling other RCEP leaders.

China, meanwhile, has been eager to hammer out the RCEP deal at an early date, as the nation's economy has been slowing down against the backdrop of a tit-for-tat tariff trade war with the United States, the sources said.

Beijing also sees RCEP as a necessary step to ensure the success of Chinese President Xi Jinping's “Belt and Road” initiative for the development of infrastructure and trade across Asia, Europe and Africa -- which it touts as a modern Silk Road economic zone.

If the coming negotiations do not go smoothly, China could call on other RCEP countries to sign the free trade pact without India, the sources said.

RCEP brings together Australia, China, India, Japan, South Korea and New Zealand, as well as the ASEAN states -- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Expectations have grown that RCEP will become a major push to counter rising trade protectionism, as U.S. President Donald Trump has pushed his “America First” agenda and shied away from multilateral arrangements. (Kyodo)

(Petchanet Pratruangkrai contributed reporting.)

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Pool photo: Indian Prime Minister Marendra Modi (L) and Japanese Prime Minister Shinzo Abe ®
Pool photo: Indian Prime Minister Marendra Modi (L) and Japanese Prime Minister Shinzo Abe ®