In 2020, India formally announced a decision to not join the Regional Comprehensive Economic Partnership (RCEP) after seven years of talks, seemingly discouraged by China’s presence in the mega deal. Since then, the Indian government has been hard at work negotiating trade pacts with individual nations or groupings such as the UK and the European Union.
But, veteran economist and former Finance Secretary, Montek Singh Ahluwalia, says India should focus on signing trade deals with blocs over individual FTAs (Foreign Trade Agreements), since the latter is not a solution in a world that is increasingly characterised by interlinked supply chains.
In an interview to Moneycontrol, the former Deputy Chairman of the erstwhile Planning Commission said that he sees merit in India joining RCEP despite China’s presence in the mega trade pact.
“I think it is too easy an assumption that India can’t compete with China. I know the government is trying to clinch FTAs with the EU, and UK, but the centre of trade and economic growth is going to be Asia not Europe. And, if we can’t join RCEP, why don’t we join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?” he asks. Beijing is not a member of this trade pact and is unlikely to become one.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement (FTA) between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.
While the National Democratic Alliance government led by the Bharatiya Janata Party had taken the call to stay out of the RCEP, negotiations had begun during the previous regime of the United Progressive Alliance led by the Congress in 2012. But, years later, the grand old party had largely supported the current government’s refusal to join the mega trade pact.
In fact, Congress had lobbied against joining RCEP citing the interests of farmers and small businesses at a time when the BJP government was still negotiating to become a part of this multi-nation trade pact.
The former bureaucrat said that if India wants to join major trade blocs or sign bilateral FTAs, the country has to lower import duties on a host of goods.
“You cannot join blocs or individual FTAs without lowering your average duties. You are providing a disproportionate benefit to the party you sign the FTA with if your external duty is higher than theirs. The first thing we should do is to lower our import duties and Indian industry must be persuaded on that. Only when they are persuaded, can there be political movement on the deals,” Ahluwalia said.
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