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.