india

Updated: Jul 18, 2020 06:23 IST

India on Monday decided not to join the RCEP trade agreement, with Prime Minister Narendra Modi telling leaders of the 15 other participating countries the deal doesn’t satisfactorily address New Delhi’s “outstanding issues and concerns”.

Addressing the RCEP Summit in Bangkok, Modi said: “The present form of the RCEP agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP. It also does not address satisfactorily India’s outstanding issues and concerns. In such a situation, it is not possible for India to join the RCEP agreement.”

He added: “When I measure the RCEP agreement with respect to the interests of all Indians, I do not get a positive answer. Therefore, neither the Talisman of Gandhiji nor my own conscience permits me to join RCEP.”

The Regional Comprehensive Economic Partnership (RCEP) comprises the 10 Asean states and six of the grouping’s FTA partners – Australia, China, India, Japan, New Zealand and South Korea – and an agreement will lead to the creation of one the world’s largest free trade regions.

A joint statement issued after a meeting of leaders of the 16 countries said the other nations had concluded text-based negotiations on all matters, such as rules of origin and trade in goods and services, and market access issues, and will go ahead with “legal scrubbing” to sign the agreement in 2020.

Despite New Delhi’s stated position that it wasn’t joining the deal, the joint statement noted that all participating countries will work together to resolve India’s “significant outstanding issues” in a mutually satisfactory way, and that “India’s final decision will depend on satisfactory resolution” of these matters.

The Modi government has faced tremendous pressure from various sectors of domestic industry and bodies affiliated to the Rashtriya Swayamsevak Sangh (RSS) not to join RCEP, especially over the past year as negotiations entered the final phase. Industry bodies expressed concern about the rules of origin and India proposed an auto trigger mechanism for safeguard duties to kick in when imports from other countries, particularly China, crossed a threshold.

Modi said at the summit that he cannot overlook many changes, including in the global economic and trade scenarios, that have occurred since negotiations began in 2012. The country’s farmers, traders, professionals and industries “have stakes in such decisions”, and workers and consumers who make India a huge market and the third biggest economy are equally important, he added.

The PM also said India had worked for the objective of striking a balance in the spirit of give and take since the country stands for greater regional integration, freer trade and adherence to a rules-based international order.

Union home minister Amit Shah said India’s decision not to sign RCEP reflects PM Modi’s “strong leadership and unflinching resolve to protect the national interest”.

“PM Narendra Modi’s firm stand over the years of not going ahead with a deal if our interests are not taken care of, is a welcome break from the past, where a weak UPA government ceded precious ground on trade and could not protect national interest,” he wrote in a series of tweets criticising the Congress-led United Progressive Alliance (UPA).

The Congress too said a forceful opposition had ensured that the BJP-led NDA government backs out of the deal. The party’s chief spokesperson Randeep Surjewala said the decision was a victory for all those protecting national interests, writing on Twitter: “A forceful opposition by Congress and Rahul Gandhi ensures that BJP government backs down from bartering the interests of farmers, dairy producers, fishermen, small and medium businesses at the altar of political expediency (sic).”

Secretary (East) Vijay Thakur Singh of the external affairs ministry told reporters in Bangkok that India’s decision not to join RCEP reflected the country’s assessment of the global situation, and the fairness and balance of the agreement.

“India had significant issues of core interest that remained unresolved. In his remarks... the Prime Minister highlighted he was guided by the impact it would have on the lives and livelihoods of all Indians, especially vulnerable sections of society,” she said.

She added, “In the given circumstances, we believe not joining the agreement is the right decision for India. We would continue to persevere in strengthening our trade, investment and people-to-people relations with this region.”

People familiar with developments said India’s stand reflected a mixture of pragmatism and the desire to safeguard the interests of the poor and to give an advantage to the country’s services sector. India made a strong case for an outcome favourable to all countries and all sectors, they said.

India flagged issues of concern such as the threat of circumventing the rules of origin because of tariff differential, trade deficits, opening of the services sector, market access and non-tariff barriers but received no credible assurances on these, the people said.

The lack of viability of most favoured nation (MFNO) obligations, whereby India will be forced to give similar benefits to RCEP countries that it gave to others, was raised by New Delhi, which also asked for mechanisms to prevent import surges and safeguard the interests of the domestic industry. India also had valid concerns on making 2014 as the base year for tariff reductions, the people said.

“Gone are the days when Indian negotiators caved in to pressures from global powers on trade issues. India played on the front foot, stressing the need to address its concerns over trade deficits and the need for other countries to open their markets to Indian services and investments,” said a person who declined to be named. The people also said India couldn’t sign an unequal RCEP deal without resolving issues in past FTAs with Asean countries.

The review of India’s FTA with South Korea is being fast-tracked and the country has secured an agreement for a review of the FTA with Asean. A joint working group will discuss issues to be addressed in the FTA with Japan on November 18, the people said.