As India gets ready to sign a new free trade agreement – Regional Comprehensive Economic Partnership (RCEP) - political parties and industry experts are opposing the move as it could threaten the survival of local industries, particularly the dairy and farm sectors.
Livelihoods of over 2 crore people engaged in India’s dairy farming sector are likely to be affected by this. Swadeshi Jagran Manch (SJM) has opposed the agreement. It feels that Australia and New Zealand are at an advantage as their dairy industry is highly mechanised and their retail price is almost half of that of India. The trade agreement will allow them to dump their low-cost dairy products in India. New Zealand has just over 38,000 people and Australia around 42,600 people employed in the sector.
The RCEP is a free trade pact between 10-member States of the Association of Southeast Asian Nations (ASEAN), which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam and its Free Trade Agreement (FTA) partner countries – India, China, Japan, South Korea, Australia and New Zealand.
The RCEP is in its final leg of negotiations and is likely to be signed in November and will be implemented next year. It appears that RCEP was discussed with Prime Minister Narendra Modi by
Chinese president Xi Jinping during their meeting at Mahabalipuram, but government has not talked about it. The Modi government is aware of the trappings. India may have to sign, but experts argue that a system needs to be put to protect Indian agriculture and industry.
When implemented, the proposed 16-nation trading bloc will become the largest - representing 3.4 billion people and over 39 per cent of world GDP. Says Deepak Sharma of SJM “Signing RCEP in its present form is disastrous. It will ruin our dairy farming, agriculture and industry, especially, small and medium industry and overall our economy.”
“Agriculture is a state subject. The Centre cannot agree to this partnership without consulting us. ASEAN countries will dump agricultural produce, particularly dairy products,” says Sheelu Francis, State president, Women’s Collective, an NGO that promotes women’s empowerment through collective farms.
Experts believe textiles, steel and automobile component industries, which employ millions of people, will also be adversely affected. It is learnt that textiles, steel and electronics ministries have opposed the agreement in its present form, asking for import restrictions to continue to protect domestic industries. RCEP proposes that 92 per cent of India’s goods should be tariff-free over the next 15 years.
Most countries want tariffs to be brought down to 90 per cent. As per reports, India has agreed to reduce tariffs on 74 per cent of the goods traded with China over the next 20 years.
Terming the proposed agreement “suicidal”, the main opposition party Congress, which initiated the negotiations in 2013 under Manmohan Singh’s prime ministership, is planning a nationwide protest against the deal.
“In any regional trade agreement, survival depends on capability, capacity, and competitiveness. Before signing the agreement, we have to build our own capacity and competitiveness. When we sign without capability, our industry will be washed out,” says Dr K J Joseph, director of Gulati Institute of Finance and Taxation.
Citing the example of the Information Technology Agreement that India signed in 1996 as part of the WTO agreements, he said, “Without doing any homework on protecting our electronic industry, we killed that industry.” At present, India imports $65.5 billion worth of electronic goods, mainly from China. If this continues, in the next few years electronics import will exceed India’s oil imports.
China was outside the ambit of the WTO before 2001. It meticulously built large capacities in every segment of manufacturing before joining WTO. Now it is the unchallenged ‘factory of the world’ and has become the second largest economy. China’s economy is five times larger than the Indian economy.
The main beneficiary of the trade pact, experts say, will be China. India has a trade deficit of $53 billion with China and it is growing year by year. Communist ruled authoritarian China has built robust manufacturing ecosystems, which are difficult to beat. Now China is also progressing in the technology sector. Even the US is insecure over China’s growing presence and intensifying its trade war with the country.
India is a fast growing economy with over 300 million people in the middle class, an attractive market. Says Sharma, “India has its own unique development model. We have to further develop our economy keeping in view our own strengths, requirements, weaknesses, and opportunities. It should be poor-centric, rural centric and should protect our employment, agriculture and industries.” It should be sustainable and that is the only way out, he added.
A note on Free Trade Agreements and their Costs prepared by NITI Aayog member Dr V K Saraswat suggests that before getting into any multilateral trade deal, India should review and assess its existing FTAs in terms of benefits to the various stakeholders and changing trade patterns in the past decade. It adds, FTA should be signed keeping in mind - mutually reciprocal terms and focus on products and services with maximum export potential. From the available information it is not going that way.
It is ironical that while the new mantra in the international trade regime is protectionism with US
President Donald Trump leading the bloc and the relevance of the WTO is being questioned, India is entering into a free trade regime.