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THE GIST of Editorial for UPSC Exams : 06 August 2019 (India should act tough and exit RCEP (The Hindu))

India should act tough and exit RCEP (The Hindu)

Mains Paper 2: International Relations
Prelims level : RCEP
Mains level : Major highlights of the RCEP agreement

Context

India at last seems to have found its lost voice at the on-going Regional Comprehensive Economic Partnership negotiations.
The Indian negotiating team finally went to attend the RCEP Ministerial meet in Beijing last week with a clear mandate.
An aggressive posture and listed out India’s demands individually to the partner countries of the RCEP in the bilateral meetings on the sidelines of the event.
The message to each of the partners be it the ten-member ASEAN, China, South Korea, Japan, Australia or New Zealand seemed to be common: if you don’t humour us, we may quit the game.

Can it face the diplomatic pressure from its friends in the ASEAN?

It doesn’t have very long to decide as the year-end deadline for implementing the pact, that was reinforced at the Beijing meeting, is looming near.
While from the looks of it, the proposed RCEP with a third of world’s GDP, almost half its population and 40 per cent of exports seems to be too big a market for India to ignore, if one thinks lucidly enough the country may not lose out on much if it decides to keep out of the pact.

Key demands from India

India has demanded that the 10 countries improve their offers in the services sector so that Indian professionals and workers can have easier entry into their market, it is doubtful whether much would come from it.
The very reason the ASEAN had not offered anything to India in services in the FTA they have already in place is that most of its members are very sensitive about protecting the sector and have not offered much liberalisation even within the bloc to each-other.
So, in terms of enhanced market access, India would get relatively much less from its RCEP partners than it would be giving to them.
In fact, tariff elimination could worsen the trade deficit with RCEP, at $105.2 billion in 2018-19. Since import duties are also a source of revenue for India, it could experience a disproportional loss of customs revenue if it gets into the pact.

Change in stance

The fact that Commerce Minister Piyush Goyal stayed away from the Ministerial meeting and sent the Commerce Secretary to take his place was the first indication of the change in India’s defensive stance adopted so far.
While the official reason for the Minister skipping the meeting was the extended Parliament session, many in the Ministry say that it was the industry consultations on RCEP that Goyal held just a few days prior to the Ministerial meet that left him confused and unsure.
The marathon sessions that Goyal had with the Indian industry pointed towards the total disaster that the pact could end up being for the country.
Of the over 500 representatives that the Minister met from numerous sectors ranging from steel, engineering goods and plastics to dairy and sea-food, most were completely against dismantling of tariffs for the RCEP countries, especially China.

Outcome of the RCEP agreement

Almost every sector registered its apprehension that once the RCEP agreement was in place, China would wreak havoc in the domestic market with its cheap exports and would also dump its products.
The Indian industry also feared that Japan and South Korea, which were already reaping huge benefits for items like steel and electronics from the bilateral free trade agreements signed with India, would penetrate the local markets further.
A large number of farmer organisations also came together to appeal jointly to the government not to sign the RCEP as they said that it would threaten farm livelihoods, autonomy over seeds and also endanger the country’s self-sufficient dairy sector.
Thus, when Wadhawan left for Beijing with his team for the RCEP meeting where all countries were expected to move towards final outcomes, the instruction was to be offensive rather than defensive.

Way forward

It is important to ensure that this offensive posture does not dissipate after the Beijing meeting. India already has had an unhappy experience with many of the RCEP members it had earlier signed FTAs with.
There are a number of research papers that point out how the Indian industry has suffered after signing FTAs with its regional partners, one done by the NITI Aayog explicitly says that India’s trade deficit with the ASEAN, Korea and Japan has widened post-FTAs.
True, the lure of being part of the largest free trade bloc in the world can indeed be very strong.
But when it is difficult to find any support for a pact from the sections it is intended to serve it shouldn’t be very difficult for the government to decide what to do.
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Prelims Questions:

Q.1) With reference to the Energy Efficiency Services Ltd (EESL), consider the following statements:
1. It is a joint venture of The Energy and Resources Institute (TERI) and Ministry of New and Renewable Energy (MNRE).
2. It is a Super Energy Service Company (ESCO) and leads the market-related activities of the National Mission for Enhanced Energy Efficiency (NMEEE).

Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. Both
D. None