India offered fresh tariff deal to rejoin RCEP talks

May 4, 2020: The India Economic Times reports that 15 countries still trying to finalise the proposed Regional Comprehensive Economic Partnership have made an offer to India on market access, and asked it to respond by May 15. These 15 countries say they are determined to finalise the proposed agreement by November 2020, whether India comes back in or not.

The 15 countries are China, Japan, South Korea, Australia, New Zealand and the 10 ASEAN countries. India already has free trade agreements with all of these except for China, Australia and New Zealand.

This new offer is based on India’s preference to use more recent most-favoured nation tariff rates than the 2014 base rates in making market access offers, and for a safety mechanism against a surge in imports. However, it appears that the 15 countries want both the market access and the safety mechanism limited to a few specific items. The 15 appear to have rejected India’s request for stronger rules of origin, aimed at stopping Chinese products entering through a third RCEP country.

The package states in part: “The proponents would welcome updated market access offers from India using 2019 MFN tariffs on a limited number of products of concern to India to be negotiated bilaterally with RCEP Participating Countries… This is offered on the understanding that the outcome on market access, which will be achieved through bilateral negotiations, will remain balanced and that. India’s tariff commitments will be acceptable to all”.

India withdrew from the RCEP talks at a meeting in Bangkok in November 2019. India’s trade deficit with the RCEP nations is US$105 billion, of which China alone accounts for US$54 billion. India fears Chinese manufactured goods and dairy products from New Zealand flooding Indian markets.

On February 1, 2020, India increased tariffs on a significant range of imported goods as part of its 2020-21 National Budget, reflecting Prime Minister Narendra Modi’s “Make in India” program. These tariff increases will make it harder for the RCEP countries to reach an agreement with India.

In addition to opposition from Indian local business groups, there is a broad-based opposition to the RCEP from Indian civil society, especially women, small farmers and rural communities, who have been concerned about more than the tariffs on goods. They have opposed any increased monopolies on medicines, patenting of seeds and plants, deregulation of e-commerce, privatisation of public services and any role for Investor-State Dispute Settlement.