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Congress messed up the FTA they signed and are now blaming others

Government sources have thus said that the RCEP agreement will be far better placed to protect domestic interests than the previous deals signed by the Congress government with ASEAN bloc

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Amit Kelkar
a Pune based IT professional with keen interest in politics

Former Karnataka Chief Minister and senior Congress leader Siddaramaiah took to Twitter today to slam the Free Trade Agreement that the government has decided to sign with ASEAN countries under RCEP.

Siddaramaiah, using the hashtag #IOpposeRCEP said that the Modi government’s proposal to sign Free Trade Agreement (FTA) of Dairy products under RCEP is against the interests of farmers and it shall be vehemently opposed by Congress.

“More than 10 crore farmers are dependent on dairy farming for their livelihood. Import of cheap products will hurt them and inturn cause rural distress. Karnataka alone produces more than 86 lakh litres of milk and other dairy products. Under Ksheera Dhare, we had increased the subsidy to producers to ₹5 per litre. We also launched Ksheera Bhagya to ensure full utilisation of excess milk & address malnourishment issues in Children. FTA will only nullify all these. Dairy products of Australia & New Zealand are much cheaper which will make it difficult for our farmers to compete in the market. This will perish their livelihood which was strengthened after the White revolution. The objective of Int’l relations should be to enable domestic transformation by accelerating growth, preserving autonomy &protecting our people’s interests. Unfortunately, under Narendra Modi, it is collusion with cronies, submit to foreigners & kill common man”, said Siddaramaiah. 

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He also said that he thanks Sonia Gandhi for deciding to join the fight against RCEP and raise the issue in the parliament.

The RCEP is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) ( Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its six FTA partners (China, Japan, India, South Korea, Australia and New Zealand).

RCEP is the world’s largest economic bloc, covering nearly half of the global economy and is estimated that by 2050 the GDP of RCEP member states is likely to amount to nearly 250 trillion USD with the combined GDPs of India and China making up more than 75 per cent of the amount.

The previous FTA agreements and the cost to India

It was in 2009 that India had signed a multilateral FTA with the ASEAN bloc under the Congress government. The current negotiations for RCEP were necessitated after the revenue department of the government found that India’s trade deficits owing to its various FTAs were far greater than the trade it brought in.

It was found, that India’s major FTAs constituted only 11 per cent of the total trade and up to 23 per cent of trade deficit.

A September report in the Business Standard says:

Officials have pointed out that India’s trade balance is turning more unfavourable for most FTAs. It has doubled since 2011 to Rs 12.86 trillion in 2018-19.

Among the current FTAs with significant trade deficits for India, five are with countries from the 10-nation Association of the Southeast Asian Nations (ASEAN) bloc. In 2009, India had signed a multilateral FTA with the ASEAN bloc itself, which has seen imports go up at a much faster clip than exports. Exports to the 10 economies stood at $37.4 billion in 2018-19, up by 9 per cent year on year. On the other hand, imports were higher at $59.31 billion, up by 25 per cent from the previous year’s $47.13 billion.

Earlier this month, India and the ASEAN agreed to review the pact amid criticism from the domestic industry.

According to the report, due to its FTAs, India has had to let go of revenue that has more than doubled to nearly Rs 26,000 crore in 2018-19.

Also Read- Foreign trips and MoUs signed: Read how 5 years of Modi trumps 10 years of Manmohan Singh

As per the agreement signed by India with the ASEAN bloc, it was agreed to open respective markets by progressively reducing and eliminating import duties on 76.4 per cent of all goods.

As seen below, India’s concessions to countries such as Vietnam and Indonesia are disproportionate under the Asean FTA, which is against the principle of equity. While India agreed to eliminate more than 74% of tariff lines, Indonesia agreed to about 50% and Vietnam 70%. Such tilts are the main cause of concern for the Indian industry.

Tariff during Congress rule

Current RCEP

The current RCEP talk has been in the offing since 2012 when the Congress government was in power, but as policy paralysis struck, there was not much progression in the discussions.

During a meeting earlier in October, India had negotiated a 10% advantage over China for tariff removal. This advantage for India will mean that its exporters can access 10% more Chinese product lines without facing tariff barriers.

At that time, officials had said, “India will not repeat the mistakes of the past. The Asean FTA has been tilted in favour of countries like Vietnam and Thailand. India’s trade deficit with Asean has soared since the FTA has become operative in 2010”.

Domestic Interests

Minister Piyush Goyal had just two days ago on 21st October 2019 assured that the interests of the domestic industry will be given priority while negotiating the RCEP. “Every interest of domestic industry and the people of India has to be protected before we execute any free-trade agreement”, he had told reporters.

Government sources have reiterated the same. They said that the previous deals that Congress struck had hurt India and that the current negotiations are going to ensure that domestic farmers don’t lose out. The sources also said that India had lost substantial revenue to the previous agreements with ASEAN bloc and the aim is to get a better deal for India.

Discussion with stakeholders

The government has also held varied discussions with hundreds of stakeholders from the industry with regards to the RCEP negotiations.

A PIB notification from the Government of India read:

Department of Commerce also entrusted three autonomous think tanks viz. Indian Council for Research on International Economic Relations (ICRIER), IIM Bangalore and Centre for Regional Trade (CRT), New Delhi for making independent studies on RCEP with exhaustive consultations with stakeholders across the country. Stakeholders’ inputs have been received in person from the Industry Associations/individual industries or industry clusters, by post and email.

Piyush Goyal himself tweeted that before entering into any trade agreement, the Modi government will ensure that domestic interests are protected.

Government sources have thus said that the RCEP agreement will be far better placed to protect domestic interests than the previous deals signed by the Congress government with ASEAN bloc and that any decision is only being taken after wide consultations with stakeholders from the industry.

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Amit Kelkar
a Pune based IT professional with keen interest in politics
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