Govt ropes in think tanks, IIM-B to assess economic impact of RCEP deal

Centre wants such independent assessment to be framework for all future FTA talks, similar to the BIT

Facing major opposition from India Inc and various central ministries on whether India should sign any further Free Trade Agreements (FTAs), the commerce ministry has roped in three independent bodies to assess the economic impact of the Regional Comprehensive Economic Partnership (RCEP), the mega trade deal on which talks have reached a crucial stage.

The report will be considered by the government to decide the future course of action on RCEP, senior commerce department officials said.

This includes Delhi-based economic think tank Indian Council for Research on International Economic Relations (ICRIER), trade policy think tank Centre for Regional Trade (CRT) and the Indian Institute of Management (IIM) Bangalore. The three institutions will talk to domestic industry, which include exporters, importers, manufacturers and retailers, to submit a report by January 2019.

The government wants the latest policy move to be the set framework for all current and future FTAs. The idea has been borrowed from the Bilateral Investment Treaty, which provides a set variable for investment talks with other nations.

“While we have taken inputs from the domestic industry and trade bodies multiple times, this is the first time that institutions from outside have been commissioned to prepare a comprehensive report on the possible economic benefits or damage of an trade deal being discussed,” a senior commerce department official disclosed.

Opposition to RCEP remains

Disagreement among ministries had prompted the government to set up a four-member group of ministers headed by Commerce Minister Suresh Prabhu to advise the Prime Minister on whether to continue with or withdraw from the 16-member RCEP negotiations. In mid-August, the Commerce Secretary briefed his counterparts across ministries, including finance, steel, textile and defence, at the Cabinet Secretariat on the state of negotiations and the way forward, sources said.

While the Ministry of External Affairs is reportedly on board, others, including Steel, Agriculture and Chemicals are in favour of India leaving the deal.

The domestic industry, too, has been divided over the prospect of India joining yet another trade pact with nations that are competing with India in the export space.

A report on the RCEP, commissioned by the Confederation of Indian Industry and submitted to the government, has recommended that products, the trade of which is dominated by China, should not be included for tariff reductions under RCEP. Products on which anti-dumping duties are levied have also been recommended for exclusion. India's trade deficit with its northern neighbour stood at $63.05 billion in 2017-18, shooting up from $51.11 billion in the year.

Civil society groups have also voiced concerns over various issues linked to a deal on RCEP, including possible drastic reductions in agricultural tariffs allowing a flood of foreign produce and looser investment norms that may exposing the country to litigation from foreign commercial interests.

No stopping deal now

However, other officials warned that a negative assessment may not necessarily mean that the deal may be put on hold as significant time and effort has been put in by the Commerce Department. As a result, certain changes in the negotiating stance may be done.

"We have told industry bodies that India has offered a long-term plan to slowly eliminate tariffs for China over the next 15 plus years while other nations will see lower duties immediately," another government official said.

Also, last month, Prime Minister Narendra Modi had joined leaders from RCEP nations in Singapore, to pitch for an early conclusion of the pact by the end of next year.

New Delhi will have to negotiate on the tricky services trade issue as pressure from manufacturing behemoth China and the Association of Southeast Asian Nations (Asean) grouping mounts on a speedy deal.


Mega Push
 

• ICRIER, CRT and IIM will talk to domestic industry, including exporters, importers, manufacturers and retailers, to create a report by this date
• The pact is proposed between 10 Asean economies and six others - New Zealand, Australia, China, India, Japan, and South Korea - with which the group has FTAs
• So far, 24 rounds of talks have concluded, apart from six minister-level meets and two leaders' summits
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