context: China prioritises regionalism in its Regional Comprehensive Economic Partnership (RCEP) negotiations, but many have seen India's attitude as a major roadblock to the deal’s conclusion. Other members’, including China’s, flexibility and concessions have shown a common interest in jointly resolving issues with the weakening global economy.
India agreed to remove duties on 80 percent of its trade goods with China in the last round of RCEP negotiations, according to Yicai.
- India will eliminate its 28 percent tariff on Chinese imports immediately
- remaining duty cuts will phase in over the next five to 15 years
Delaying tariff cuts over a longer staging period for China shows both India's prudence and hesitation, says Shen Minghui 沈铭辉 Chinese Academy of Social Sciences National Institute of International Strategy secretary-general. He attributes this to India’s weak economic structure, as India’s trade deficit with China was US$57.2 bn in 2018, one-third of its total trade deficit.
India’s softened RCEP stance could benefit regional exploration of production networks and trade, while resisting protectionism and maintaining regional economic integration, says Shen. Now that India is pressing ahead, it is possible to conclude most RCEP clauses by end 2019, says Zhang Mei 张梅 China Institute of International Studies Department of World Economy and Development Studies researcher.
India’s position shifted partly because it cannot afford to miss out on RCEP. Some members threatened to exclude India from negotiations if it persisted in its position, which would be a huge loss for the country, says Zhang. As CPTPP is concluded and WTO reform faces deadlock, missing out on RCEP means missing out on a significant opportunity to reconstruct the global trade system, Shen notes: RCEP
- covers 39 percent of world GDP, 25 percent of global FDI, and 45 percent of the global population
- is predicted to become the world's largest FTA
- is an opportunity for India to enter the most important Asian market
- is particularly important given India has never signed an FTA with China
The Indian government also introduced policies to support local industries opposing the deal, including cuts or tariff removals, and provides lower exchange rates for local exporters. But India still needs to overcome challenges such as infrastructure to improve its industrial competitiveness, argues Yicai.