The Economic Times - 28 September 2019
India may cut duties on 80% of Chinese imports under RCEP
By Kirtika Suneja
India may cut or eliminate tariffs on 80% of products imported from China under a 16-country free trade agreement, the last round of negotiations for which is underway in Vietnam.
The concessions will, however, be less than what it has offered to other countries that are part of the Regional Comprehensive Economic Partnership (RCEP) as India tries to avoid cheap Chinese goods flooding the country once the agreement is signed. The RCEP is a proposed FTA between the 10 member states of the Association of Southeast Asian Nations (Asean) and its six FTA partners – China, India, Japan, South Korea, Australia and New Zealand. RCEP negotiations began in November 2012.
India plans to cut duties on 86% of imports from Australia and New Zealand, and 90% for products coming in from Asean, Japan and South Korea, officials said.
Discussions on with China
There is a possibility that the negotiations would extend into the night. “Discussions with China are on and it is a work in progress. We have still not finalised the offer,” an official said, indicating the offer India was likely to push.
As per the plan, India would immediately eliminate customs duties on 28% of goods, while tariffs on other imports from China would be reduced or eliminated over a period of 5,10, 15 and 20 years.
This will give India time to strengthen its domestic manufacturing. Last week, the government cut taxes on new manufacturing plants to 15% to attract investments.
“We are trying for 20 years and beyond for some countries and certain products. However, there will be some products whose tariffs would be immediately eliminated,” the official said.
Sources also said New Delhi had not made much headway with its proposal for strict rules of origin, to prevent Chinese goods from entering India through other RCEP member states.
The rules of origin are criteria to determine the source country of a product, based on which they either get tariff concessions or are subjected to duties. India had proposed that the last country from which a product is exported should do the most value addition with the help of indigenous inputs.
Strict origin norms are crucial as India had a trade deficit with 11 RCEP members.
The trade deficit with China in 2018-19 was a whopping $53.6 billion.
There has, however, been progress on the auto-trigger mechanism. This mechanism gives India the option to raise duties if it sees a sudden surge in imports on particular items from a partner country and protect itself.
India has also managed to keep the controversial investor-state dispute settlement out of the trade agreement for now. But, whether that would be permanently removed from the pact was still being deliberated, officials said.
India had advocated that local remedies should be exhausted before an investor can ask for third-party arbitration to resolve a dispute. The country had opposed this mechanism fearing loss of sovereignty that comes with such arbitration, as had happened in the case of tax disputes with oil and gas explorer CairnNSE 0.81 % and telecom operator Vodafone.
While the ongoing round is said to be the last for the agreement, some meetings are likely before a ministerial meeting next month, as stakeholders present, including those from industry, have aired their concerns on Chinese imports flooding into the country once a trade deal is sealed.