Hopes are fading for the conclusion of a 16-nation Asia-Pacific trade deal before the end of this year, with mounting Indian opposition and a spat between New Delhi and Malaysia over Kashmir overshadowing final talks this week on the Regional Comprehensive Economic Partnership.
China, Australia, Japan, South Korea, New Zealand and the 10 ASEAN nations are pushing to finalise the deal by next month amid fears over the impact of the US-China trade war and a region-wide economic slowdown.
The trade agreement would reduce the cost and burden of doing business across a region that represents almost half of the world’s population and 40 per cent of global trade. It would also slash barriers to trade with protectionist India, a country with which Australia has not yet secured a bilateral trade agreement.
Scott Morrison will attend the East Asia Summit in Bangkok this weekend and said in Jakarta earlier this month he was hopeful of some good progress before the November meeting.
Final RCEP negotiations occur this Thursday, before leaders of all 16 nations gather in the hope of announcing the successful conclusion of a deal seven years in the making.
But it now looks increasingly likely negotiators will miss their own December deadline to bring into force the wide-ranging agreement that covers trade in goods, services, investment, rules of origin, intellectual property and electronic commerce.
Indonesia’s Trade Minister has described as “very urgent” the need for participating countries to finalise RCEP by November amid escalating trade tensions between China and India.
Indonesia has estimated RCEP could boost its exports by as much as 11 per cent in the first five years after ratification, and up to 27 per cent in the years after.
But India’s commitment is looking increasingly shaky. Last Friday, the opposition Congress Party officially opposed India joining the deal, warning it would cause the “third big jolt” to the Indian economy after demonetisation and the introduction of a goods and services tax.
Indian industry, led by its dairy sector, has stepped up the campaign against RCEP amid concerns it would open the floodgates to cheap Chinese imports. Opponents say India’s trade deficits have consistently widened with nations with which they have signed free-trade agreements.
There is also rising domestic pressure for New Delhi to boycott Malaysian palm oil after Prime Minister Mahathir Mohamad last month accused India at the UN of having “invaded and occupied” Kashmir. India revoked the state’s autonomous status last August.
PwC partner and Asia practice leader Andrew Parker said it was now unlikely the trade deal would be concluded this year unless it went ahead without India.
“There are still a lot of details to be ironed out among a lot of countries with some fairly diverse interests,” he said on Monday.
“Having said, that the current environment is providing huge incentive to conclude the deal because we are seeing not only in China but in a lot of Asian countries and Australia too that growth is starting to slow down.
“I wouldn’t be surprised if RCEP happens early in the new year but the question is going to be, in what form? It’s a very real possibility that it goes ahead without India.”
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman Shinta Widjaja Kamdani said Indonesia needed RCEP because it was not part of the 11-nation Trans-Pacific Partnership deal, which also includes several ASEAN states.
“The upcoming meeting is very important and if they don’t come to an agreement, then India will be left behind,” Ms Shinta said.
RCEP negotiators have agreed on 14 of 20 issues, including tariff cuts, customs procedures, trade facilitation and intellectual property rights, but sticking points remain on e-commerce and dairy.
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