November 4, 2019 shall go down as an historic milestone for India’s bold decision to stay away from the Regional Comprehensive Economic Partnership (RCEP). The decision also cements India’s growing stature as a country that is rock solid in its resolve to not only protect its own interests, but also to boldly ward off any attempts to being arm-twisted. Under Prime Minister Narendra Modi’s leadership, New India reflects a new selfconfidence.
India’s not joining RCEP was summed up by the PM himself: ‘Whenever I try and gauge India’s interest in light of her joining RCEP, I do not get an answer in the affirmative; neither Gandhiji’s policy of self-reliance nor my wisdom allows me to join RCEP.’ What makes this decision significant is that this has yet again demonstrated that the PM can go to any extent to safeguard the interests of farmers, small and medium enterprises (SMEs), textile, dairy and manufacturing, medicine, steel and chemical industries. The PM didn’t compromise on it since the agreement didn’t seem to accommodate India’s concerns on issues like trade losses and dumping. India should not be party to any such international treaty that’s one-sided & against the interests of our farmers and entrepreneurs.
Search for News, Stock Quotes & NAV's The Congress-led UPA government failed in safeguarding the interests of India. In 2007, it had already begun thinking of engaging in a regional trade agreement (RTA) with China. How this affected India’s trade with China is borne out by the fact that during UPA’s tenure, India’s trade losses with China grew 23 times — from $1.9 billion in 2005 to $44.8 billion in 2014. This hit indigenous industries hard.
An example of Congress’ history of compromising with India’s interests is the 2013 Bali Agreement. While participating in the WTO conference, then commerce minister Anand Sharma had weakened India’s stand on its provisions for agriculture subsidy and support prices to farmers. This could have created havoc for farmers, but for the timely intervention of the PM in 2014, who ensured that then commerce minister Nirmala Sitharaman rejected the proposal.
Rebuilding the Wall
It is ironic that Congress, which has had a shaky history of dealing with such international treaties, is now desperately trying to take credit for the PM’s decision to stay away from RCEP. In fact, it was Congress’ lack of foresight that had led to India agreeing to become part of this bloc. In its original form, other than 10 Asean countries, only China, Japan and South Korea were to join RCEP.
However, thanks to Congress’ lack of concern for the kind of damages it could pose to SMEs and farmers, the UPA government agreed to become part of RCEP. It was evident from the start that this could open the floodgates for Chinese goods to enter India. India also did not share favourable terms of trade with other countries of the bloc.
Congress had also compromised India’s interests in the Asean free trade agreement (FTA). Even as countries like Indonesia and Vietnam decided to open only 50% and 69% of their market share for India, New Delhi decided to open 74% of India’s commodities for trade. Decisions like these caused India enormous loss in its trades with RCEP countries — from $7 billion in 2004 to $78 billion in 2014. In the context of current exchange rates, this translates into losses of Rs 5,46,000 crore (2014) from Rs 50,000 crore (2004).
2019 is the New 2014
Since 2014, in RCEP dialogues, GoI has aggressively protected India’s interests and worked with member countries to agree to favourable conditions, such as opening up the services sector for the first time for India, higher exports from India, etc. Congress was so eager to be a part of RCEP that it had conceded that the import duty as applicable on January 1, 2014, would be taken as the base rate, assuming the agreement would be operational by 2016.
This could have caused havoc, as the 2014 base rate would have led to unhindered imports. Also, the import duties on many products have gone up in last few years. The PM argued for 2019 as the base rate.
In the RCEP conference, along with commerce minister Piyush Goel, the PM put forward the interests of farmers, SMEs and manufacturing industries, and vigorously asked for amendments vital to India’s interest. The most prominent demands were amendment in tariff differential, changes in base rate for customs duty, changes in the most favoured nation (MFN) rule, asking for exemptions built into ratchet obligations as part of the pact, respecting India’s federal character while determining investments, etc. India was unwavering in its resolve to bring to the fore these pertinent issues.
At one point during the dialogue, out of the 70 agenda items, around 50 were of concern to India.
GoI has begun to evaluate Asean and the Comprehensive Economic Partnership Agreement (CEPA) with South Korea. It is working on getting into trade relations with Japan, the US, EU countries, and other developed nations that shall help in making India a $5 trillion economy. Considering India’s growing stature, RCEP members can’t afford to ignore it for long, and will come around to agree to GoI’s terms. Meanwhile, India has maintained successful economic relations with Asean by the means of FTA.
By rejecting RCEP, India has firmly protected its industries from any adverse effects that Chinese interests could have caused. For us, India remains first, and foremost.