China's Assurance to India: Potential Benefits of RCEP for Indian Exports

BEIJING (Reuters) – China on Wednesday sought to assure India over the Regional Comprehensive Economic Partnership (RCEP), saying the trade deal could provide many opportunities for India’s exports. China joined 14 countries this week in agreeing terms for RCEP, which could become the world’s biggest free trade deal if officially signed next year as planned. But India pulled out at the last minute amid worries that the deal would unleash cheaper imports from countries like China that render its own industries uncompetitive and hurt its farmers, businesses, workers and consumers.

India’s Pullout from RCEP

India’s pullout from the Regional Comprehensive Economic Partnership (RCEP) at the last minute has raised concerns about the potential impact on the country’s economy. The trade deal, which was agreed upon by 14 countries, including China, could become the world’s biggest free trade deal if officially signed next year as planned. However, India’s decision to pull out was based on concerns that the deal would unleash cheaper imports from countries like China, which would render its own industries uncompetitive and hurt its farmers, businesses, workers and consumers.

China’s Assurance to India

  • In response to India’s concerns, China’s Vice Commerce Minister, Wang Shouwen, sought to assure India that the RCEP could provide many opportunities for India’s exports. He acknowledged India’s concerns about the deal, but stated that it could benefit Indian exporters and help create more local jobs. He added that the deal includes a protection mechanism that can be used to put tariffs back on if India finds the deal damaging to its domestic industries.

Benefits of RCEP

  • Despite India’s pullout, China has applauded the trade pact, stating that it would provide a “very significant boost” to investor confidence in the global economy against the rise of unilateralism and protectionism that has depressed trade growth across the world. He said the deal would also greatly benefit Chinese firms, workers and consumers, as it would remove tariffs and non-tariff barriers, and bring down costs.

India’s Concerns

  • India’s decision to pull out from the RCEP was based on several concerns. For one, the final document did not meet any of the three parameters that India had set for a comprehensive, fair and a balanced agreement. It remained weak on services, especially in areas where India had a competitive advantage. But the breaking point was the absence of specific safeguards on imports from China.
  • One circuit breaker was the steep rise in imports; another, because RCEP permits differential coverage of market access between countries, India wanted, but did not get, full assurance that China would not be able to take advantage of the higher coverage permitted to Association of South East Asian Nations (Asean) countries. And a third was adequate protection on tariff increases it had instituted on some products since the negotiations commenced, partly to remove anomalies such as levies on inputs being higher than those on finished goods.

Synopsis

China’s assurance to India regarding the potential benefits of the RCEP for Indian exports is a positive step towards addressing India’s concerns about the deal. However, it is important for the country to consider all factors and potential impacts on its economy before making a final decision on the trade pact.

Written by IAS POINT

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