Japan not in the mood to join RCEP if India doesn't come on board

Abe has sought to beef up ties with India across a range of fields to balance China's regional dominance.

Japan is not considering signing a Chinese-backed regional trade pact without India, the top Japanese negotiator said Friday, ahead of a series of diplomatic exchanges in the coming weeks that include a visit to Delhi by Prime Minister Shinzo Abe.

India announced this month it was withdrawing from the Regional Comprehensive Economic Partnership, citing the deal’s potential impact on the livelihoods of its most vulnerable citizens. China said that the 15 remaining countries decided to move forward first and India was welcome to join RCEP whenever it’s ready.

“We aren’t thinking about that at all yet,” Deputy Minister for Economy, Trade and Industry Hideki Makihara, said in an interview with Bloomberg. “All we are thinking of is negotiations including India.”

Abe has sought to beef up ties with India across a range of fields to balance China’s regional dominance. Japanese and Indian foreign and defense ministers hold their first joint meeting in a so-called ‘two plus two’ format this weekend. Both countries are also part of four-way security talks with Australia and the US called the Quad, a move that Beijing has complained could stoke a new Cold War.

Japan Seeks to Keep India in China-Backed Regional Trade Pact

“It is meaningful from the economic, political and potentially the national security point of view,” Makihara said of the inclusion of the world’s largest democracy in the pact. “Japan will continue to try to persuade India to join.”

Trade Minister Hiroshi Kajiyama will accompany Abe on next month’s trip to India, Makihara said.

The other countries taking part in the RCEP talks are Australia, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand and Vietnam.

China has sought to accelerate the RCEP deal as it faces slowing growth from a trade war with the U.S. An agreement would further integrate Asia’s economies with China just as President Donald Trump’s administration urges nations in the region to shun Chinese infrastructure loans and 5G telecommunications technology.

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Why India opted out of the RCEP agreement: Explained in six charts

Some experts, in addition to the government, have maintained that the reason for the walkout is India's adverse trade balance. However, many critics view this as a protectionist step.

India decided to walk out of the biggest regional trade partnership the world could have seen. The Regional Comprehensive Economic Partnership could have given — possibly it still can — almost unrestricted access of each other’s markets to the members.

Some experts, in addition to the government, have maintained that the reason for the walkout is India’s adverse trade balance. However, many critics view this as a protectionist step.

The data shows India has been protecting its domestic interests for long. The average tariff on imports into India, according to the World

Trade Organization, went up between 2010 and 2015. Most of it was due to farm products.

The (weighted) average tariff applicable to most favoured nations to sell their goods in India is highest among the 10 Asian peers, at 7.6 per cent. This is not strictly comparable with WTO data. Moreover, India only has about 3 per cent of tariff lines at zero duty, lowest among its peers, and lower compared to Vietnam’s 32 per cent .

The data also shows trade growth has largely been independent of trade deals: India's share of trade with NAFTA countries has grown as fast as its share with North-East Asian countries, and ASEAN, as well . While India does not trade preferentially with any of the NAFTA members, it does, with two members of NEA and with ASEAN.

In terms of acting against dumping of cheap and excess goods, India has become more proactive in recent times. More dumping cases now reach their conclusion. But, on the flip side, members of the probable RCEP lead in dumping goods into India .

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What's the RCEP and what does India's exit mean for the trade deal?

India pulled out of the deal saying it wanted to protect service workers and farmers.

Business Standard : When it comes to sweeping global free-trade agreements, President Donald Trump isn’t the only party-pooper. Two years after Trump withdrew the U.S. from a 12-nation deal known as the TPP, Prime Minister Narendra Modi has pulled India out of a 16-nation grouping led by China known as the RCEP. In both cases, protectionism played a part; in both cases, the show goes on.

1. What is the RCEP?

What began in 2012 as a routine harmonizing of agreements between members of the Association of Southeast Asian Nations, or Asean, turned into a deal creating potentially the world’s biggest free trade bloc. The Regional Comprehensive Economic Partnership, to give its full name, is aimed at strengthening trading ties among China and others with Asean members. Broadly speaking, it would lower tariffs and other barriers to the trade of goods among the 16 countries that were in, or had existing trade deals with, Asean.

2. But that’s now down to 15 nations?

Correct. India pulled out in November saying it wanted to protect service workers and farmers. There were also worries the country would be flooded by cheap goods from China. Modi had pushed the other nations to address concerns over deficits and to open their markets to Indian services and investments.

3. Is India’s loss a big deal?

It would have been the third-biggest economy in the RCEP, so yes. On the other hand, China has been seeking to tie up the deal expeditiously as the country faces slowing growth from a trade war with the U.S. It is also looking to further integrate with regional economies just as the Trump administration urges Asian nations to shun Chinese infrastructure loans and 5G technology. China says India is welcome to come back aboard whenever it’s ready.

4. What’s different about the RCEP?

Unlike the TPP and other U.S.-led trade deals, the RCEP wouldn’t require its members to take steps to liberalize their economies, protect labor rights and environmental standards and protect intellectual property. According to U.S. Commerce Secretary Wilbur Ross, it’s a “very low-grade treaty” that lacks the scope of the Trans-Pacific Partnership, or TPP.

India opts out of RCEP: Axe on Chinese imports, trade deal with US likely

The latest twist in India's policy on foreign trade may, however, benefit the US.

Further curbs on Chinese imports and a trade deal with the United States may follow India's move to pull out of the Regional Comprehensive Economic Partnership (RCEP).

China figured prominently in New Delhi's move on Monday to pull out of the pact after 7 years of back and forth negotiations. India said on Monday that a lack of assurance on safeguards to protect the domestic industry from dumping by China and no credible promise by Beijing to allow market access to Indian goods were reasons it was quitting the pact.

As a result, the government will double down on its efforts to curb imports from China, which were more than $70 billion in 2018-19, senior officials in the know said. "Presence of significant amounts of major non-tariff barriers that are publicly known and China's unwillingness to remove them were major hindrances towards a treaty," a trade expert said.

India had also feared that rules of origin would continue to be flouted by Chinese producers, who ship high-value goods such as mobile phones and electronics through Vietnam and other Asean nations, to dodge relatively higher tariffs.

Possible US deal

The latest twist in India's policy on foreign trade may, however, benefit the US. "US President Donald Trump has over the past two years continued to put pressure on India for a broad based free-trade agreement (FTA) talks. These may start sooner rather than in the distant future," a senior trade expert said.

Case in point: During Prime Minister Narendra Modi's last visit to the US, Trump had promised a trade deal with India “very soon”, and a larger deal down the line. This was followed up by Commerce and Industry Minister Piyush Goyal last month batting for 'closer trade engagement' with the US. "India and the US have resolved most of their broad trade differences and the countries must look at a much larger deal like a bilateral agreement," Goyal had said in no uncertain terms.

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Bargain hard but go for RCEP deal: NITI Aayog's Arvind Panagariya

Panagariya said there was a huge scope for India to improve medical treatment.

Former NITI Aayog Vice-Chairman Arvind Panagariya on Monday said India should bargain hard for the proposed Regional Comprehensive Economic Partnership (RCEP), but this should not become an excuse for not clinching the deal.

When an economy opens up, it has to set its house in order to compete, which brings the best out of it, he said.

“We need to be a little more aggressive. Compete with the best in the world. It brings the best out of you,” Panagariya, professor of Indian Political Economy at the Columbia University, said at the US-India Strategic Partnership Forum in New Delhi.

He was responding to an observation by former foreign secretary Kanwal Sibal that India needs to bargain hard in RCEP due to security concerns that go beyond trade. Sibal said China was pressing for accelerating negotiations for RCEP due to its trade war with the US. “China wants to dominate RCEP because it is the biggest economy. It did not play by WTO rules, so will it play by RCEP rules? Will there be a dispute settlement 

mechanism?” he said. Panagariya sought to dispel the myth that import substitution leads to less imports. “If you import less, you export less as well. When India liberalised it imported more, but then it exported more as well,” he said.

AI boost to health sector

At a panel discussion earlier at the same event, Panagariya said there was a huge scope for India to improve medical treatment by taking advantage of technical developments such as AI (artificial intelligence) and data analytics. “With AI, data analytics and all the technology there, treatments can perhaps be done better (in India) as we go forward,” he said.

By taking advantage of the technological changes such as AI and data analytics, India can bring good treatments almost anywhere in the country, he added. On the pricing issue in the medical industry, he said clearly this is being recognised in the trade agreements as well, citing that in some visible cases, prices have been negotiated between the companies (exporting and importing).

Panagariya said the health sector was still evolving and very informal as it was largely dominated by the private sector and the government’s role largely had been into setting up medical colleges.

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