India and China have agreed to remove import duties on close to half the goods traded between them under the proposed Regional Comprehensive Economic Partnership (RCEP) pact, a development that is likely to give the domestic industry sleepless nights.
The RCEP countries — which include the 10-member Asean bloc, India, Japan, China, South Korea, New Zealand and Australia — reached a breakthrough on the initial offers for eliminating tariffs on goods at a meeting of trade ministers in Kuala Lumpur late last month.
“India and China have agreed to remove duties on 42.5 per cent of traded items in the initial offers,” an industry representative who attended a recent stakeholder meeting in New Delhi told BusinessLine . “We are nervous as no sector would want zero duty access for Chinese goods. But a pragmatic approach needs to be taken as we will also gain duty-free access into China,” the industry representative added.
India’s trade deficit with China crossed $40 billion last fiscal and is about a third of the total.
“Detailed offers on items to be opened up will be made by the RCEP members in Busan, South Korea, in October which will be followed by requests for improvement, subsequent revised offers, and their finalisation,” a Commerce Ministry official said.
Stakeholder consultations The Commerce and Industry Ministry has started stakeholder consultations with industry representatives to identify goods where duties can be eliminated and those that need to be protected. There will be more such meetings in Mumbai, Kolkata and other cities. The elimination of duties will be carried out over a 10-year period. RCEP members hope to conclude the negotiations by the end of the year, which could lead to the creation of the largest free trade bloc, accounting for 45 per cent of the world population and a GDP of over $21 trillion.
New Delhi has offered to open its markets widest for the Asean, by agreeing to eliminate tariffs on 80 per cent of items, and this will be reciprocated by all the members of the bloc. As India has already committed to removing tariffs on 74 per cent items in the bilateral FTA (free trade agreement) signed with the Asean, the additional commitment under RCEP is not substantial.
For Japan and South Korea, India has offered to open 65 per cent of items, which is lower than what it has already committed under its existing bilateral FTAs with the countries, but may include slightly different items as both countries have to be given the same offer under RCEP. The two have agreed to reduce tariffs on 80 per cent of goods from India.
India has offered Australia and New Zealand — neither has an FTA with India — duty elimination on 42.5 per cent items. New Zealand and Australia have, in turn, offered to reduce tariffs on 62.5 per cent and 80 per cent of items from India, respectively.
The RCEP will also open up markets for services and investments, the initial offers for which have also been exchanged, and include chapters in moving ahead together in areas such as government procurement and e-commerce.