5 Solutions for India's RCEP Apprehensions

1. Protect & Promote domestic industry: Given the costs and benefits in RCEP, it is important for India to strike a balance between domestic and external interests to minimise the adverse effects of RCEP on its domestic engineering industry. If domestic industry has to thrive, it needs protection as also the enabling conditions created by factor and product market reforms.
2. Use of skilled labour: India has been insisting on capitalising on its pool of 'skilled' labour force to gain from improved access to employment opportunities in these economies. This has been expected to come about by increasing the ease of movement of professionals through the liberalisation of what is called Mode 4 in services trade.
3. Protect tariff structure: India should continue to maintain its position of proposed dual tariff structure in the RCEP as it will help India to protect its tariff lines which are more vulnerable to cheap Chinese imports. It must emphasise on a special and differential treatment based on stages of economic development.
4. Restrict Rules of Origin (RoO): It can be used as a strong instrument in RCEP to curb the free flow of Chinese goods into the domestic market. India should restrict RoO to high value-addition to prevent the imports of cheap Chinese goods, which may come to India through our existing FTA partners. Strict RoO in RCEP will provide a safety wall to domestic producers against cheap Chinese goods.
5. Placing suitable safeguards: Within the FTA, provision should be made for safeguard measures like antidumping etc which should be invoked if a volume or price trigger for the concerned products is reached.

5 Apprehensions of India Regarding RCEP

1. Trade deficit: India’s trade deficits have always widened with nations after signing free-trade-agreements (FTAs) with them. India’s merchandise trade deficit with the RCEP grouping hit $105 billion in FY19 (60% of its total deficit).
2. Threat to domestic market: RCEP members, particularly China, are demanding zero tariffs over 90 per cent tariff lines which is a major concern for India as low cost Chinese manufacturing goods will swamp its domestic market by dumping cheaper goods. A large number of Indian industry including iron and steel, dairy, marine products, electronic products, chemicals and pharmaceuticals and textiles have expressed concerns that proposed tariff elimination under RCEP would render them uncompetitive
3. Low labour productivity: Despite low relative labour cost, labour productivity in India in manufacturing is still one of the lowest in the world, and spatially fragmented labour laws escalate costs of transaction. Under such circumstances, the Indian industry is hardly in a position to compete in a level playing ground in a freetrade region.
4. Strict IPR policy: The “stringent IP provisions” have been stumbling blocks for a while, with India arguing for these to be taken out of the agreement. The provisions, if adopted, would lead to domestic pharma companies not being able to launch or export affordable life-saving drugs across the world. While in the agriculture sector, farmers would lose the right to save or sell seeds or the harvested produce from plant varieties that have been granted intellectual property.
5. Competition from China: It is evident that the size and scale of Chinese manufacturing industry backed with extensive financial and non-financial support provide a clear edge to Chinese manufacturing producers.

5 Benefits of RCEP to India

1. Market Access: Owing to its size, it is expected to provide market access for India’s goods and services exports and encourage greater investments and technology into India.
2. Alternative to APEC: RCEP offers alternative to Asia-Pacific Economic Co-operation (APEC) on economic front in which India has been attempting to join APEC since 1993, but still has not got the membership.
3. FDI gains: The arrangement is expected to harmonise the trade-related rules, investment and competition regimes of India with those of other countries in the group. There would be a boost to inward and outward foreign direct investment, particularly export-oriented FDI.
4. Aligned with India’s initiative: India wants its ‘Make in India’ to become a global success, it must participate positively to become a part of the Asian value and supply chain which either begins or ends in India. It also aligns with Act East Policy which make both economic and strategic sense for India to be the part of the agreement.
5. Growth of supply chains: Signing the RCEP treaty will enable India to enter the global supply chain as it will be helped by frictionless movement between 16 members.