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
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New Delhi- 110001, India
T: (91) 11 40727281M: (91) 9811229110
E: sameer.pushp@tpci.in
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