Bangkok: After much deliberation on the impact a mega free trade deal would have on India's trade deficit, Prime Minister Narendra Modi said on Monday that India will not join the Regional Comprehensive Economic Partnership (RCEP).
Prime Minister Modi made the announcement during his speech at the RCEP Summit here, which was attended by several world leaders.
"The present form of the RCEP Agreement does not fully reflect the basic spirt and the agreed guiding principles of the 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 RCEP Agreement," Modi said.
The RCEP comprises 10 ASEAN nations and six of its FTA (free trade agreement) partners - China, India, Japan, South Korea, India, Australia and New Zealand. However, India opted out of the RCEP.
"India stands for greater regional integration as well as for freer trade and adherence to a rule-based international order. India has been pro-actively, constructively and meaningfully engaged in the RCEP negotiations since inception. India has worked for the cherished objective of striking balance, in the spirit of give and take," the prime minister said.
"Today, when we look around we see during seven years of RCEP negotiations, many things, including the global economic and trade scenarios have changed. We cannot overlook these changes," 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 permit me to join RCEP," Modi said.
Commerce and Industry Minister Piyush Goyal took to Twitter to inform that India has consistently stood its ground to uphold its demands particularly over the trade defecit, stronger protection against unfair imports and better market opportunities for domestic goods.
"Congratulate PM @narendramodi for his bold and courageous decision to not join RCEP, since it was against our economic interests and national priorities. Modi hai to mumkin hai!," Goyal said in a series of tweets.
This is not the first time that the Indian government under Prime Minister Modi has demonstrated a strong resolve in matters of international trade and related negotiations. US President Donald Trump who is known for his negotiation skills has himself called Modi a tough negotiator, sources said.
"Gone are the days when Indian negotiators caved-in to pressures from the global powers on trade issues. This time, India played on the front foot, stressing on the need to address India's concerns over trade deficits and the need for other countries to open their markets to Indian services and investments," government sources said.
The sources said except India, all 15 RCEP member countries were on board in finalising the deal at Monday's summit.
On Saturday, the trade ministers from 16 RCEP countries failed to resolve the outstanding issues identified by India, though back-channel talks continued on the sidelines of the ASEAN summit to resolve the sticky issues.
Why India opted out?
The original RCEP was aiming to facilitate the creation of the biggest free-trade region in the world as the 16-nation grouping is home to 3.6 billion people, or nearly half the world's population.
India has been forcefully raising the issue of market access as well as protected lists of goods mainly to shield its domestic market as there have been fears that the country may be flooded with cheap Chinese agricultural and industrial products once it signs the deal.
The deal is also likely to adversely affect the struggling agriculture sector which may not be able to compete with the global standards once the trade barriers are lowered.
The RCEP negotiations were launched by ASEAN leaders and six other countries during the 21st ASEAN Summit in Phnom Penh in November 2012. The objective of launching RCEP negotiations was to achieve a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement among the ASEAN member States and its FTA partners.
The RCEP was also considered to be China's counter move to the Trans Pacific partnership, a United States headed trade agreement which failed to take off in 2016 after US backed out.
If finalised, the RCEP would have become the world's largest free trade area, comprising half of the world population and will account for nearly 40 per cent of the global commerce and 35 per cent of the GDP.
The sources said except India, all 15 RCEP member countries were on board in finalising the deal at Monday's summit.
Industry, traders & farmers welcome India's decision to not sign RCEP
Industry, traders and farmers on Monday appreciated the Modi government's decision not to join China-backed mega Regional Comprehensive Economic Partnership (RCEP).
The country's leading milk supplier Amul described the move as "landmark".
"CII appreciates Government of India's stance on addressing all outstanding issues before joining RCEP," said Vikram Kirloskar, President, Confederation of Indian Industry.
He said the CII will continue to support and work with government in its endeavour to integrate with the global economy through mutually beneficial trade agreements.
The long term interest of industry in India is to get well integrated in global value chains and beneficial trade agreements could play important roles in realizing this interest, said Kirloskar.
FICCI President Sandip Somany said the chamber fully supports the prime minister's decision against joining RCEP, as India's several concerns remain unaddressed and various issues are unresolved so far in the proposed deal under negotiation.
In recent months serious apprehensions and reservations on RCEP have been expressed by a large number of sectors including steel, plastics, copper, aluminium, machine tools, paper, automobiles, chemicals, petro-chemicals and others, he said.
Further, there were not enough positive developments in the area of trade in services including easier mobility for our professionals and service-providers, Somany said.
Traders' body CAIT said Chinese products, which are very low priced and of substandard quality, are creating a disequilibrium in Indian markets.
CAIT Secretary-General Praveen Khandelwal appealed to the prime minister that after "this landmark move", the government should now work dilligently towards creating a more conducive environment for retail trade in India and also erase all anomalies and disbalances created by the Law violating e-commerce companies.
The dairy industry had expressed apprehension that the 16-nation trade pact would severely impact dairy farmers because of cheaper imports from Australia and New Zealand.
Dairy major Amul MD R S Sodhi described the move as "daring" and "landmark" which will protect the interest of 10 crore farmers engaged in production of milk and related products.
Sodhi said the Prime Minister has assured the industry that the government would protect their interest.
Commenting on the move, All India Kisan Sangharsh Coordination Committee (AIKSCC) it is happy that "good sense" has prevailed on the government and its decision to barter away the life and livelihood of crores of farmers, workers, and small businesses, has been averted.
"AIKSCC sincerely hopes that this Government will not try any back-door method of sabotaging the interest of Indian farmers and farm-workers through trade deals," it said in a statement.
Nitin Kunkoleinker, President, MAIT said the decision is "a very encouraging step" for Indian manufacturing, especially the IT and electronics manufacturing sector, as it reiterates the government's strong support to the industry's growth.
(With inputs from PTI)