RCEP deal: India seeks more concessions; dairy sector may be kept out

As negotiations on the Regional Comprehensive Economic Partnership (RCEP) free trade agreement reach a decisive stage, while sticking to the broader contours of the agreement, India is looking to extract greater concessions from China. It is also  considering whether to insist that dairy be kept out of the negotiations for the time being to protect the interests of farmers.

Sources said the decision to stick to the multi-country negotiations and not abandon it at this stage was taken at a recent review meeting chaired by Prime Minister Narendra Modi.

Increasingly, sectors such as apparels and MSMEs have turned  vocal against the pact, fearing a flood of Chinese goods. Domestic dairy industry players believe that cheap imports from New Zealand – also a signatory to RCEP – will pull down farmers’ income.

Armed with India’s new position on the talks, Commerce and Industry Minister Piyush Goyal is expected to leave on Friday for the last planned trade ministers’ meet on RCEP. The meet in Bangkok is scheduled for October 10-12.

The Bangkok meet follows several interactions within the government. Ahead of the PM-led deliberations on Monday, Home Minister Amit Shah chaired a meeting last Friday. The Bharatiya Janata Party also brainstormed on the subject at the party headquarters earlier this week.

Sangh Parivar affiliates, including the Swadeshi Jagran Manch (SJM), have opposed the agreement. However, Rashtriya Swayamsevak Sangh (RSS) chief Mohan Bhagwat in his Viajayadashami address on Tuesday seemed to suggest that the world economic scenario was such that India should be willing to digest a bitter pill, even if for the time being.

On trade, Bhagwat said “forgetting the Swadeshi consciousness, while seeking answers to pressures of the situation, will also lead to loss”. But he indicated that the domestic industry needed to be more competitive.

According to the English translation of his speech the RSS sent, Bhagwat said, “As per any yardstick, those who have got the capacity to be self-reliant and provide employment for all in the country, keeping themselves secured, can only build and expand international trade relations and offer a secure and healthy future for the entire humanity.”

“Considering our economic scenario, even if we have to choose any circuitous route, we must overcome the compulsions once and for all by setting a destination and direction based on our own strength,” he said.

Agriculture and Farmers’ Welfare Minister Narendra Singh Tomar on Tuesday said, “Farmers' interest is foremost for us and as far as RCEP is concerned, we have already informed the Commerce Ministry about our stand. We try to ensure that our products are not harmed by the products of other countries.”

So far, SJM’s Ashwani Mahajan has campaigned extensively against the agreement. BJP spokesperson Gopal Agarwal said the government was committed to protecting the interests of the domestic industry. There were indications that India could explore options, including ‘staggering’ that removal of tariff barriers on dairy and agro-products.

Officials said India believes that pending issues, mostly around tariff reduction, would be resolved before leaders from RCEP nations come together on November 4 to make a formal announcement on the deal. All technical rounds of talks have already ended.

The demand by the dairy industry to keep it out of the talks is still being considered by the government, sources said.

RCEP is India’s most ambitious trade pact, currently under negotiation. Based on India’s existing free trade agreement (FTA) with the 10-nation Asean bloc, the RCEP will include all the nations with which the Asean has trade deals — New Zealand, Australia, China, India, Japan and South Korea.

So far, talks have seen 29 rounds of negotiations, apart from multiple minister-level meets. New Delhi has apparently made it clear that significant tariff concessions have already been made and further talks would be based only after an equal push by China.

Chinese question

The Bangkok meeting would, however, not be the end of talks with China, trade deficit with which crossed $53 billion in 2018-19. The wide range of pending issues with China, ranging from non-tariff barriers to the country of origin and investments, would lead to separate meetings later, an official said later.

The latest stance is a shift from India’s earlier position of adopting a “package of early deliverables” created by the trade-negotiating committee of the RCEP.

Sources said this was necessitated by Beijing rebuffing India's plans to impose an import ceiling for inbound goods from China. The 'automatic trigger safeguard mechanism' will ensure that higher import duties kick in once imports reach a certain threshold. This is the first time New Delhi is aiming to attempt such a mechanism in any trade deal.

Earlier, India had agreed to reduce tariffs on 74 per cent of traded goods for China. While developed nations have demanded New Delhi open up at least 90 per cent of all items, China has refused to open up 'commensurate to India's demands,' an official said.

Currently, it is broadly accepted the RCEP will lead to tariffs being eliminated on 28 per cent of the traded goods to begin with. This will be followed by 35 per cent of all products being eliminated in phases.

Industry fears

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 the RCEP. Many ministries, including agriculture, steel, chemicals and MSME, among others, have also opposed the deal.

"We have suggested some caution be exercised during the talks on reducing tariffs for textile products. Accordingly, we have asked that some items be kept in the negative list when it comes to China," a senior functionary of Apparel Exports Promotion Council, said.

Similarly at the last such meeting on RCEP, the Confederation of Indian Textile Industry had cautioned the government to tread carefully while ceding space to China in the global textiles and clothing (T&C) sector.  Half of India’s T&C trade in RCEP is with China, with which it had a big trade deficit of almost $1 billion in 2018, it had said.

Dairy Industry, meanwhile, fears that livelihood of almost 100 million small and marginal farmers would be put into jeorpardy if cheap skimmed milk powder imports from New Zealand come into India after tariffs are lowered as part of the deal. New Zealand is one of the biggest milk producers in the world and is sitting on huge surpluses due to bumper harvest and weak global markets.

Within the Modi government too, a lot of divergent views have emerged on the impact of RCEP negotiations on certain sectors like dairy.

Sources said top officials from the newly created Animal Husbandry Ministry along with National Dairy Development Board (NDDB) have repeatedly approached the government to keep dairy out of the negotiations to ensure that interest of Indian farmers are protected.