India decides not to join RCEP as key concerns not addressed, PM Modi outlines stance

India has decided not to join the Regional Comprehensive Economic Partnership (RCEP) agreement as its key concerns have not been addressed.

Government sources said that Prime Minister Narendra Modi stood firm as India's key concerns were not addressed reflecting a "strong leadership" and the decision not to join RCEP will help country's farmers, micro, small and medium enterprises (MSMEs) and dairy sector.

Sources said the Prime Minister made it clear that there will be no compromise on the country's core interests.

They said the RCEP agreement does not reflect its original intent and the outcome is not fair or balanced.

The key issues behind India's decision include inadequate protection against import surge, insufficient differential with China, possible circumvention of rules of origin, keeping the base year as 2014 and no credible assurances on market access and non-tariff barriers.

The sources said that in his speech at the RCEP summit, the Prime Minister said India stands for greater regional integration as well as for freer trade and adherence to a rule-based international order.

He said India has been pro-actively, constructively and mengfully engaged in the RCEP negotiations since inception and has worked for the cherished objective of striking balance in the spirit of the give and take.

The Prime Minister said during seven years of RCEP negotiations, many things including the global economic and trade scenarios have changed and "we cannot overlook these changes."

He said that "the present form of the RCEP agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP and does not address satisfactorily India's outstanding issues and concerns."

"In such a situation, it is not possible for India to join the RCEP agreement," the Prime Minister said.

Sources said the Prime Minister stated that India's farmers, traders, professionals and industries have stakes in such decisions.

"Equally important are the workers and consumers, who make India a huge market and the third biggest economy in terms of purchasing power parity. 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 permits me to join the RCEP," he said.

Modi said thousands of years before the RCEP was conceived, Indian traders, entrepreneurs and common people built abiding contacts with this region.

"For centuries, these contacts and ties made a valuable contribution to our shared prosperity," he said.

The Prime Minister had said earlier that India remains committed to a comprehensive and balanced outcome of RCEP negotiations and seeks balance across goods, services and investments and also within each pillar.

The RCEP is a proposed free-trade agreement between the 10 member states of the Association of Southeast Asian Nations (ASEAN) and six dialogue partners -- China, Japan, South Korea, India, Australia and New Zealand.

Sources said India's stand at RCEP was a mixture of pragmatism, the urge to safeguard interests of the poor and the effort to give an advantage to India's service sector.

While not shying away from opening up to global competition across sectors, India made a strong case for an outcome which is favourable to all countries and all sectors.

India was consistent in raising these issues right from day one during the RCEP negotiations.

Some issues on which India made its stance clear included the threat of circumvention of Rules of Origin due to Tariff Differential.

India pushed for a fair agreement which addressed the issues of trade deficits and opening of services.

India also asked for safeguard mechsms to prevent import surges and safeguard the interests of domestic industry.

India also raised the unviability of MFN obligations where India would be forced to give similar benefits to the RCEP countries that it gave to others.

There was also no credible assurance for India on market access and non-tariff barriers.

India also had "very valid concerns" on keeping 2014 as the base year for tariff reductions, sources said.

Sources said India will avoid the pitfalls of joining agreements, which are in "reality FTAs by stealth with countries with whom it is already suffering huge trade imbalance and market distortions that have negatively impacted domestic producers and the Indian economy".

They said gone are the days when Indian negotiators caved in to pressures from the global powers on trade issues and this time India played on "the front foot", stressing on the need to address its concerns over trade deficits and the need for other countries to open their markets to Indian services and investments.

Sources said it is not the first time that the Indian government under Prime Minister Narendra Modi has demonstrated strong resolve in matters of international trade and related negotiations.

US President Trump, who is known for his negotiation skills, has himself called PM Modi "a tough negotiator".

They said Ben Rhodes, an aide of former US President Barack Obama, had also mentioned how President Obama had a hard time convincing PM Modi during the Paris Climate Change summit.

Sources said Congress-led UPA had a "weak record" in protecting Indian interests in global trade negotiations

India signed FTA (Free Trade Agreement) with ASEAN and South Korea in 2010. It also signed FTA with Malaysia and Japan in 2011.

They said the UPA government opened 74 per cent of its market to ASEAN countries but richer countries like Indonesia opened only 50 per cent for India.

The UPA government, they added, also agreed to explore an India-China FTA in 2007 and join RCEP negotiations with China in 2011-12 and the impact of these decisions resulted in India's trade deficit with RCEP nations increasing from USD 7 billion in 2004 to USD 78 billion in 2014.

Sources said Indian domestic industry is still reeling under the impact of these decisions. They said that the Modi government sought to solve these issues and the negotiations are continuing.

Sources said it was evident that India could not sign a further unequal deal under RCEP without resolving past issues in previous FTAs including ASEAN and ensuring a strict and fair framework in RCEP.

Referring to pro-Indian industry steps taken so far, they said that Korean FTA review started three years ago and is being fast-tracked and India has already secured agreement in ASEAN for a review of the FTA.

A Joint Working Group is discussing the issues to be addressed in Japan FTA. The sources said that various industries especially farmers, small scale and handloom sector are benefitting from decisions taken on imports.

Sources said India has become one of the world's most open economies with very few barriers to trade both tariff and non-tariff under the Modi government.

India is exploring trade agreements with the USA and the European Union, where the Indian industry and services will be competitive and benefit from access to large developed markets.

It was the third summit meeting of nations negotiating a RCEP and there were reports that the agreement may not be signed this year. The negotiations began in 2012.

Thailand, as the chair of ASEAN, had announced in September that the members and all RCEP dialogue partners had agreed to conclude the negotiation by the end of this year. The proposed agreement would have covered nearly half of the global economy.

Even if the negotiations had concluded, the signing of the RCEP agreement would not have happened until 2020 as each country had to meet the legal process.

( With inputs from ANI )