Steel, Other Industries Breathe Sigh of Relief Over India’s Retreat from RCEP Trade Pact

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For a while, whether or not India would join the Regional Comprehensive Economic Partnership (RCEP) was touch and go.

But eventually, much to the relief of domestic steel companies and those from other sectors, the Narendra Modi-led Indian government decided to sit out the controversial RCEP trade pact, which features the 10 members of the Association of Southeast Asian Nations (ASEAN), plus China, Japan, Australia, New Zealand and South Korea.

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As Prime Minister Narendra Modi told the delegates at a negotiation meeting in Bangkok, “Neither the talisman of Gandhiji nor my own conscience permits me to join the RCEP.”

India’s decision comes seven years after negotiations over the free trade agreement began.

The RCEP covers trade in goods and services, in addition to investments, economic-technical cooperation, competition and intellectual property rights.

If India had joined RCEP, it would have become the largest trade agreement in the world, accounting for one-third of global economic output and half of the world’s population.

The remaining 15 nations have decided to go ahead with the deal, led by China.

According to some media reports, like one by India Today, the RCEP was a Chinese game plan to “save its manufacturing industries from folding under their own weight.”

India decided not to join the RCEP for several reasons. Among them, India wanted an important clause included for an auto-trigger mechanism as a shield against sudden and significant import surge from countries.

President of Indian Chambers of Commerce and Industry Sandip Somany was quoted in The Hindu as saying serious apprehensions on the RCEP had been expressed by several sectors, including steel, plastics, copper, aluminum, machine tools, paper, automobiles, chemicals, petro-chemicals and others.

For the domestic steel industry, the Indian prime minister’s announcement was music to its ears. The Indian steel industry had, from the start, opposed what it had dubbed a one-sided pact.

Speaking to LiveMint, Bhaskar Chatterjee, secretary general and executive head for Indian Steel Association, said representatives of the steel industry had met with the Indian Ministries of Commerce and Steel and the Indian Steel Association, where they asserted that if the signing the RCEP was inevitable, then steel items should be kept out of the agreement.

In addition to steel, other sectors that had expressed reservations about joining the RCEP were aluminum, petro-chemicals, agriculture, dairy, steel, rubber and textiles.

Experts were of the view that if other nations were allowed to ship their goods to India without absolutely any duty, they would obviously price them cheaper than their Indian counterparts, creating a market skewed against Indian producers and manufacturers. Playing at the back of the mind of Indian steel companies was 2016-17, when Chinese companies dumped steel in Indian markets in large volumes.

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One other reason behind Modi’s decision to walk away from the deal is the fact that the Indian economy today is particularly vulnerable and weak, with GDP growth stagnating and unemployment at new highs.

Comment (1)

  1. SAMIR SARDANA says:

    The People of the Indian nation,might also note, that the private sector steel units (besides 1 unit),are all owned and controlled by Marwaris – and all the NPA and Frauds in the steel sector with bankers,STC,MSTC.MMTC are IN UNITS , owned and controlled by Marwaris.dindooohindoo

    • The Steel units have defrauded banks and STC,MSTC and MMTC of billions of dollars,by using these PSUs as financiers for their operations and then stealing the cargos and not making payments – with no recoveries to date
    • The fact is that the Marwaris follow obsolete and fraudulent business practices, which are redundant in the global markets,and they have, thus,circumvented the Indian steel policy and laws, to secure and safeguard their interests – by managing supplicant polictians
    • The steel units have been set up,based on frauds perpetrated on the Indian banking sector – and which were then, subject to CDR and OTS

    THE PEOPLE OF INDIA NEED TO CAREFULLY REVIEW THE STEEL POLICIES OF THE INDIAN STATE – WHICH CANNOT BE LEFT TO THE MACHINATIONS OF THE PARLIAMENT, OR THE SKILLS THE BUREAUCRATS – AS THE POLITICAL PARTIES HAVE LEGAL LUMINARIES,WHO WERE LEGAL COUNSELS FOR ALL THE LARGE STEEL UNITS IN INDIA – AND CANNOT BE RELIED UPON,W/O SCRUTINY , AND THE BUREAUCRATS ARE NOT SPECIALISTS AND THERE ARE SEVERAL CASES OF BUREAUCRATS AND THEIR RELATIVES,EMPLOYED WITH STEEL UNITS OR THEIR ASSOCIATES
    • THE STEEL COMPANIES HAVE IN THE PAST , STIFLED THE GROWTH OF STEEL AND ORE PSUs, BY CHANGING THE STEEL POLICIES , STOPPING FUNDING FOR EXPANSIONS, AND EVEN,PLACING KEY PERSONNEL IN THE SAID UNITS – TO BANKRUPT THE STEEL PSUs,AND THEN, ACQUIRE THE SAID PSUs AT THROWAWAY RATES
    • IF A STEEL COMPANY REQUIRES THE STATE TO INVEST IN PORTS,RAILS, RAKES, MINING INFRASTRUCTURE AND STILL NEEDS IMPORT PROTECTION – THEN WHY SHOULD THE STEEL INDUSTRY BE IN THE PRIVATE SECTOR ?
    o OR AT THE MINIMUM,WHY DOES THE STEEL INDUSTRY NEED IMPORT DUTY PROTECTION ?
    o IF FOREIGN STEEL UNITS WANT TO DUMP LOW COST STEEL DRIVEN BY HIGHER EFFICIENCIES,LOWER POWER COST,FX OR TAX SUBSIDIES,LOW INTEREST COSTS ETC – THEN WHY SHOULD THE DOWNSTREAM STEEL USERS,NOT AVAIL OF THAT BENEFIT IN INDIA – CONSIDERING THEIR PRECARIOUS FINANCIAL STATE, AND THEIR OWN LACK OF PROTECTION,FROM IMPORT OR FOREIGN COMPETITION
    o IN THE CASE OF IMPORTED STEEL – ALL THE POISON AND POLLUTION OF MINING AND PRODUCTION IS RESIDENT IN THE EXPORTING NATION – AND HOW DOES THAT HARM INDIAN OR PUBLIC INTEREST
    o IN POWER STARVED INDUSTRIES – IMPORTED STEEL, SAVES GIGAWATTS OF POWER ,WHICH WOULD HAVE BEEN USED IN THE STEEL MANUFACTURING,IN THE NORMAL COURSE – AND HOW DOES THAT HARM INDIAN OR PUBLIC INTEREST
    • HOW DO THE MILLIONS OF PEOPLE EMPLOYED IN THE DOWNSTREAM STEEL SECTOR ,AS ALSO THE MANUFACTURING UNITS GET A REPRESENTATION IN THE GOVTT POLICY, AND WHAT IS THE GOVT CALCULATION OF THE SOCIAL AND ECONOMIC GAINS TO THE NATION – IN ALTERNATIVE STEEL POLICIES ?
    o WHY SHOULD THE GOVT CALCULATIONS AND ASSESSMENT NOT BE IN THE PUBLIC DOMAIN ?
    o WHO HAS APPRAISED THE SAID CALCULATIONS AND ASSESSMENT OF THE GOVTT ?
    o STEEL IS A COMMODITY AND THE DOWNSTREAM USERS,MAKE GOODS AND PRODUCTS WHICH ARE EXPORTED AND USED BY A BILLION INDIANS – ON A DAY TO DAY BASIS
    • THE STEEL SECTORS MINING ACTIVITIES ARE A SOURCE OF GENERATING LARGE AMOUNTS OF CASH – WHICH ARE USED TO NAVIGATE AND MANAGE POLITICAL PARTIES,AND THUS,GOVERNMENT POLICIES ON STEEL,MINING AND PORT AND STEEL INFRASTRUCTURE – BESIDES CDRs ON STEEL DEBT
    o THE DOWNSTREAM STEEL USERS HAVE NO MEANS TO GENERATE CASH AND DO NOT HAVE THE FINANCIALS TO NAVIGATE THE POLITICAL APPARATUS

    • GIVEN THE RAW MATERIAL TO SALES RATIO OF A STEEL UNIT,STEEL EXPORT IS EXPORT OF ORES AND POWER – THEN WHY DOES THE STEEL SECTOR TAKE EXTRAORDINARY EFFORTS,TO BAN ORE EXPORTS ON DUBIOUS REASONS ?
    o THE STEEL POLICY OF THE GOI, IS AN INDIRECT CDR AND DEBT WRITE OFF, BY LOWERING INPUT COSTS (BY BANNING ORE EXPORTS),ASSURING NSR (BY IMPORT PROTECTION), AND THUS,MAKING A SICK STEEL UNIT VIABLE, TO REPAY THE BANK LOANS – WHEN THE BANK LOANS WERE IN THE 1ST PLACE OBTAINED BY FRAUD
     IF THE BANK HAD DONE THE CDR – IT WOULD BE IN THE PUBLIC DOMAIN AND WOULD BE RAISED IN THE MEDIA – AND WOULD HAVE REQUIRED BOARD APPROVAL BY THE BANKERS – THUS THE INDIRECT CDR VIDE TARRIFF PROTECTION
    o WHO IS PAYING FOR THE ABOVE SCHEME ?
     A BILLION INDIANS WHO ARE PAYING HIGHER DIRECT AND INDIRECT STEEL RATES
     100S OF MILLIONS OF INDIANS EMPLOYED IN DOWNSTREAM STEEL UNITS WHO ARE UNDERPAID AND UNEMPLOYED
    o THE PROFITS EARNED BY THE STEEL UNITS IN INDIA (WHICH ARE AS ASSURED MONOPOLY PROFIT),ARE INVESTED IN DOWNSTREAM STEEL USERS O/S INDIA – WHO IN TURN, COMPETE WITH INDIAN DOWNSTREAM STEEL USERS ! IS THIS NOT A SCAM ?
    o ANOTHER TOOL USED BY THE STATE TO PROVIDE INDIRECT CDR TO STEEL UNITS,IS TO SPEND BILLIONS OF USD ON INFRASTRUCTURE (LIKE RAKES/ RAILS, PORTS ETC),WHICH WILL FLOW TO STEEL,CEMENT AND POWER UNITS (IN THE FORM OF LOWER COST OF PRODUCTION AND THUS,HIGHER PROFITS)– AND THEN, BE USED TO PAY OFF BANK LOANS
     HOWEVER,WHY DOES THE STEEL UNIT NEED IMPORT PROTECTION,IF THERE IS AN ASSURED BUYER WITH NO CREDIT DEFAULT RISK, AND WHY SHOULD THE DOWNSTREAM STEEL USERS NOT BE ABLE TO IMPORT STEEL , AT THE LOWEST COSTS

    THE INDIAN STEEL SECTOR DOES NOT DESERVE PROTECTION

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