In this webinar, Ms Sulaimah Mahmood and Dr Pralok Gupta discussed the implications of the recently concluded Regional Comprehensive Economic Partnership (RCEP) for ASEAN as well as Indian perspectives on the trade deal.
ASEAN STUDIES CENTRE WEBINAR
Tuesday, 15 December 2020 – The ASEAN Studies Centre at the ISEAS – Yusof Ishak Institute hosted a webinar on ‘‘Trade Implications of RCEP for ASEAN and India’’. The webinar was delivered by Ms Sulaimah Mahmood, Singapore’s Chief Negotiator for the RCEP agreement and Dr Pralok Gupta of the Indian Institute of Foreign Trade, New Delhi. The webinar was moderated by Professor Tham Siew Yean, Visiting Senior Fellow, ISEAS – Yusof Ishak Institute.
The webinar commenced with a presentation by Ms Mahmood on an overview of the RCEP. RCEP, which comprises the 10 ASEAN member states and five Dialogue Partners, namely Australia, China, Japan, New Zealand, and the Republic of Korea, is the world’s largest free trade agreement covering a third of the world’s population and 30% of global GDP. The objective of the RCEP is to be a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement that will broaden and deepen ASEAN’s economic engagement with its FTA partners. As an important strategic and economic initiative, the signing of the agreement amidst the global pandemic and trade wars signals the commitment and support of the participating countries to regional economic integration, and confidence in the post-pandemic recovery.
Ms Sulaimah spoke of the challenges during the negotiations of the 20 chapter-trade deal over the past eight years. RCEP includes four areas that are not in the ASEAN Plus One FTAs, including intellectual property rights, e-commerce, competition, and government procurement. The negotiations had to account for not only the substantive technical issues but also the challenges of different cultures and attitudes given the diversity among the participating countries. In addition, the existing FTAs that ASEAN has with Dialogue Partners and some AMS’ CPTPP membership also brought a different set of dynamics and challenges to the negotiations.
Ms Sulaimah highlighted that it was ASEAN centrality and capability that drove the RCEP negotiations and brought participating countries together despite the geopolitical differences. RCEP has changed the character of previous ASEAN FTAs by having a single undertaking approach where all chapters were negotiated in parallel to ensure that ‘nothing is agreed until everything is agreed’. As a comprehensive agreement both in coverage and depth of commitments, RCEP comprises traditional areas such as trade in goods, rules of origin, customs procedures and trade facilitation, as well as new emerging areas such as competition policy, intellectual property rights and e-commerce. It streamlines the rules of origin by applying a single set of rules for exporters to enjoy tariff preferences. The agreement will also be reviewed and upgraded along the way. Ms Sulaimah shared that Singapore aimed to ratify the agreement by 2021 and the agreement was expected to come into force in January 2023.
With regards to India’s withdrawal from the RCEP negotiations in 2019, Ms Sulaimah shared that participating countries were aware of India’s concerns and the door is always open for India to re-join the RCEP when ready.
Dr Gupta provided an overview of ASEAN-India trade relations which largely concentrated on trade in goods. Currently, ASEAN is India’s fourth largest trading partner and India is ASEAN’s seventh largest trade partner. While the bilateral trade in goods between ASEAN and India accounts for around 11% of India’s global trade, trade in services is much lower and is concentrated in a few countries and in certain sectors. The ASEAN-India services trade agreement did not provide significant improvements over the General Agreement on Trade in Services (GATS). Further, along with market access, mutual recognition agreements (MRAs) between India and ASEAN members have not progressed much, although ASEAN has concluded a few MRAs with its members. On investment, India’s inward and outward FDI stock with ASEAN has been growing and largely driven by Singapore only. India’s inward FDI from ASEAN accounts for one-fourth of India’s total global FDI and India’s outward FDI to ASEAN also occupies about one-fourth of India’s outward FDI to the world.
Dr Gupta then proceeded to explain India’s perspectives on RCEP and the reasons for its withdrawal from the agreement. India has a trade deficit with 11 of the 15 RCEP countries, which are likely to worsen in future with the reduction of tariffs in RCEP. A possible solution to this was some form of ‘auto-trigger’ protection mechanism, which India demanded but did not receive. Dr Gupta spoke of India’s deep concern over cheaper goods from China that would flood its domestic market and a possible ‘circumvention’ of rules of origin for products if there are no sufficient safeguards in the trade deal to prevent the product routing. Another concern for India was the protection of domestic industries, such as dairy, which is a matter of livelihood, especially for its rural population. Other issues included the differences in the choice of base year for tariff reduction rates between India and RCEP countries, market access issues such as non-tariff barriers, and India’s desire to exclude most-favoured nation (MFN) obligations for investment. As India’s concerns of these fundamental issues were not resolved, India withdrew from the agreement as it felt that ‘no deal is better than a bad deal’.
Given these concerns and geopolitical sensitivities, Dr Gupta was of the view that India was unlikely to join RCEP in the near future. Instead, bilateral FTAs with RCEP countries could be a better option for India. Dr Gupta suggested that reviewing the existing bilateral FTAs with ASEAN, Japan, and Korea and restarting negotiations with Australia and New Zealand would be a better avenue for India. While ASEAN-India trade relations can be deepened through the existing FTA, areas of greater engagement in global and regional production networks could be explored, especially in the automobile sector, electrical and construction equipment, industrial machines, and telecommunications. The pharmaceuticals, R&D, and health services would be important areas for cooperation and integration in the post-Covid-19 recovery.
The presentations were followed by a Q&A session. The discussions touched on topics such as complementarities/redundancies between the RCEP and the CPTPP, the possibility of early ratification of the RCEP, implementation and compliance measures of the agreement, streamlining non-tariff measures, regional supply chains, the purpose of the RCEP Secretariat, exclusion of an environmental chapter in RCEP, and India’s management of rules of origin across multiple FTAs, among others.
