China has sought from India a duty- free import of 85% of its products into the country’s market. This is pressuring policymakers as they are holding and fighting with the complex negotiations for Regional Comprehensive Economic Partnership (RCEP) in order to mend the world’s largest free- trade agreement.
India has offered to open up 74% of its market to Chinese goods in a phased manner but Beijing is not satisfied with the proposal. During bilateral discussions with China, officials were told that the Asian giant was willing to give duty-free access to 92% of Indian exports, provided New Delhi raised the bar by opening up more.
Compared to other countries where over 90% of imports can come duty-free, India has offered lower concessions to China. Even the current offer is fraught with the risk of goods from across the border swamping Indian markets and further impacting the massive trade deficit, which was estimated at $63 billion during the last financial year.
But officials conceded that there is little option before India but to open up its market gradually with a long tariff phase-out period so that domestic players have time to adjust to competition. “We have opportunities in segments where China may be a dominant player. Plus, we are seeking up to 20 years to dismantle the import duties,” said a senior trade official.
The domestic industry is, however, not entirely convinced with the need to push a massive trade opening up.
Talks for RCEP have been underway for over six years now but India is seen to be holding up a deal, given its worry over cheap imports entering the country and wiping out several sectors. Apart from India and China, Asean members, Australia, New Zealand, Japan and South Korea are negotiating a deal, with 2019 being the latest deadline to clinch a deal.
During a meeting last week, trade ministers from the 16 countries vowed to intensify negotiations to conclude talks over the next few months. A final decision on the detailed sectoral concessions that are to be offered as part of the opening up is only expected after a new government assumes office this summer but the direction is towards further liberalisation.