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India should not sign RCEP without safeguarding its domestic interest: TPCI

Press Release:

India should not sign RCEP without safeguarding its domestic interest: TPCI

      – The agreement on services crucial for country export competitiveness 

21st May 2019, New Delhi: Trade Promotion Council of India (TPCI) is apprehensive that the RCEP deal is expected to hurt India’s export competiveness as the trade balance is already skewed and there will be  flood of goods imports in the Indian market, with relatively little gains on the export front.

Speaking on the RCEP, Chairman TPCI, Mohit Singla said, “India need to move with optimism and caution on this mega trade agreement. As the trade deficit of the partner countries of RCEP is not only skewed but also rising.  Additionally, with growing protectionist trends and rising trade tensions, the global environment has become highly volatile for business. In such a scenario, India needs to keep a tight vigil before signing any trade agreement.”

Speaking on the tariff Singla Said, “For India, issues of tariff rate are as important as other areas under negotiation, mainly because India does not have trade agreements into effect with all countries involved in RCEP. For instance, India does not have an FTA with China and the negotiations with Australia and New Zealand have not come into effect. Similarly, tariffs on many product lines are yet to be eliminated with the countries where India’s agreements are already in effect.” If we take agri-products, the present tariff rate on the import of India from the rest of the RCEP countries is more than twice its export to these countries, he added.

Further Singla informed that, ”At the commodity level, India’s import is likely to experience the highest increase in machinery, electrical and mechanical equipment followed by ships, boats and floating structures, animal or vegetable fats and oils and wood and articles of wood from these RCEP participants.”

Singla opined, “RCEP could have a negative impact on sectors like steel, pharma, e-commerce, food processing, etc. which the government wants to develop indigenously. India is already facing challenges from Singapore, Australia & New Zealand (in agriculture and dairy) and South East Asian countries (in plantations). Some of the RCEP proposals also put India’s position on e-commerce and TRIPS at the WTO, under threat.”

Commenting on services Singla stated that, “One of the key concessions demanded by India is greater mobility for its services professionals through measures like visa fee waivers and an RCEP business travel card. RCEP countries have rejected these proposals due to fears of job losses and migration. India should strongly negotiate agreement on services which is crucial for country export competitiveness of the country.”

According to the World Integrated Trade Solution (WITS) simulator, India’s imports may increase by a whopping US$ 29 billion annually during the post-RCEP period (WITS Simulator), implying a revenue loss by as much as 1.3% of GDP. Correspondingly, India’s imports are expected to increase by around US$ 30 billion post-RCEP.

In order to protect domestic interest, India had proposed a three-tier tariff reduction mechanism under which the RCEP countries were categorized into three tiers based on the level of trade imbalance and existence of free trade agreement with the member country. The first tier proposed 80% trade liberalization for ASEAN countries of which 65% would be implemented immediately and remaining 15% would come into effect in the course of 10 years.

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Trade Pattern with RCEP

Table 1 shows India’s trade relation with the RCEP countries since the year 2000. India’s total trade with these countries taken together accounted for more than one third of its total trade in the year 2017.

Table 1: India’s Average Export to RCEP countries (in US$ million)

Countries 2003-05 2006-08 2009-11 2012-14 2015-17
Australia 682 1,106 1,719 2,541 3,359
Brunei 5 23 306 39 39
Cambodia 19 49 64 134 125
China 4,616 9,138 14,843 14,860 10,329
Indonesia 1,212 2,136 4,653 5,342 3,254
Japan 2,004 3,231 4,538 6,499 4,285
Korea, Dem. Rep. 116 619 304 182 75
Korea, Rep. 1,051 2,853 3,986 4,456 3,817
Lao PDR 3 3 16 51 33
Malaysia 992 2,072 3,626 4,643 4,876
Myanmar 102 175 312 713 1,021
New Zealand 104 277 225 307 317
Philippines 390 641 835 1,342 1,454
Singapore 3,515 7,124 10,507 12,473 8,907
Thailand 883 1,512 2,206 3,699 3,222
Vietnam 516 1,309 2,592 5,391 6,477
Average RCEP (16 countries) 1,013 2,027 3,171 3,917 3,224

Source: Estimation based on WITS Database

 

Table 2: India’s average import from RCEP countries (in US$ million)

Row Labels 2003-05 2006-08 2009-11 2012-14 2015-17
           
Australia 3,495 7,917 12,739 11,245 10,832
Brunei 1 262 467 883 555
Cambodia 0 2 7 13 45
China 6,611 23,934 42,449 54,669 64,670
Indonesia 2,442 4,961 10,420 14,746 14,109
Japan 2,991 6,120 8,724 10,939 9,971
Korea, Dem. Rep. 4 251 55 62 74
Korea, Rep. 3,395 6,227 10,172 13,180 13,798
Lao PDR 0 0 35 105 188
Malaysia 2,182 5,948 6,697 10,251 9,038
Myanmar 420 806 1,189 1,368 946
New Zealand 128 346 596 666 557
Philippines 165 203 396 435 568
Singapore 2,506 6,797 7,187 7,298 7,117
Thailand 829 2,136 3,924 5,552 5,808
Vietnam 78 228 997 2,518 3,309
Average RCEP (16 countries) 1,578 4,134 6,639 8,371 8,849

 

Table 3: Average import tariffs imposed and faced by India during 2015-2017

Countries/RCEP partners Import tariff imposed by India (Avg. 2015-17) Import by India in US$ million (Avg. 2015-17) Import tariff imposed by RCEP countries on India (Avg. 2015-17) Export from India to RCEP countries in US$ million (Avg. 2015-17)
Australia 11.0 10,822 3.0 3,601
Brunei 2.3 555 0.9 43
Cambodia 1.0 45 11.1 89
Canada 9.8 4,098 2.4 3,114
Indonesia 5.3 14,101 4.2 3,419
Japan 6.5 9,732 0.7 4,938
Korea, Rep. 5.2 13,650 6.4 4,804
Lao PDR 3.2 188 4.0 26
Malaysia 4.7 9,022 4.9 3,999
Myanmar 2.1 946 3.3 860
New Zealand 11.6 552 2.7 420
Philippines 4.7 566 3.7 1,504
Singapore 4.9 7,094 0.0 6,284
Thailand 5.3 5,785 3.6 2,619
Vietnam 5.3 3,303 6.1 2,835

Source: Wits Database, World Bank.

From the above table it is clear that at the present tariff rates, the import of India from the rest of the RCEP countries is more than twice its exports to these countries.

 

Table 4: Average import tariff (on agricultural products) imposed and faced by India during 2015-2017

Countries/RCEP partners Import tariff imposed by India (avg. 2015-17) Import (HS-Agriculture) by India in US$ million (avg. 2015-17) Import tariff imposed by RCEP countries on India (avg. 2015-17) Export (HS-Agriculture) from India to RCEP countries in US$ million (avg. 2015-17)
Australia 36.9 1567.3 1.4 237
Brunei 0.0 0.1 0.0 18
Cambodia 16.6 4.2 13.2 9
China 31.3 585.8 13.5 903
Indonesia 21.2 4750.1 4.8 681
Japan 33.2 9.0 4.5 426
Korea, Rep. 28.2 12.9 43.9 478
Lao PDR 14.3 0.8 6.1 8
Malaysia 23.2 2174.0 1.9 882
Myanmar 9.9 767.1 4.5 293
New Zealand 35.0 80.6 1.6 50
Philippines 26.1 43.1 6.2 260
Singapore 33.0 73.1 0.0 289
Thailand 20.1 202.2 13.9 262
Vietnam 28.9 323.9 9.2 569

Source: Wits Database, World Bank.

 

For any further information, contact:

Sameer Pushp

DIRECTOR
MEDIA & CORPORATE COMMUNICATIONS
9, 2nd Floor, Scindia House, Connaught Circus,
New Delhi- 110001, India

T: (91) 11 40727281M: (91) 9811229110
E:  sameer.pushp@tpci.in
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