Connect with us

Economy

Regional Comprehensive Economic Partnership (RCEP) and India

Prof. Pankaj Jha

Published

on

Regional or bilateral free trade agreements between India and other countries/institutions have always faced local resistance because of intrinsic anxiety that low cost imported goods would stifle the growth of domestic industry. Commentators have justified this apprehension advocating that domestic industry in India is still unprepared for international competition, and there are no state subsidies that the government provides to the industry for reducing costs and facilitating unfair cost advantage with regard to exports. Within India, sector specific associations are powerful and a result of which many items such as tea, palm oil, coffee and pepper were enlisted as highly sensitive list items (very less reduction in tariffs) when India-ASEAN Free Trade Agreement was signed in 2009. India is witnessing a very high percentage of growth in services sector (contributes nearly two-thirds of India’s GDP)and therefore has always sought to offset the negative balance of merchandise trade with promotion of services sector and investment as an integral component of bilateral or multilateral trade talks.

RCEP is proposed to be one free trade area which will include 3.4 billion people across the East Asian and Oceania region, with a GDP of more than US $22 trillion and the intra RCEP trade would account for more than 30 percent of global trade, as it would integrate the three largest economies of Asia-China, Japan and India. For India, accession to this economic trading bloc would mean opening its large market of 1.25 billion people for the products from 15 countries including 10 ASEAN members and the five dialogue partner countries -China, Australia, New Zealand, Japan, and Korea. During the last few meetings of RCEP negotiations, India has made it very clear that it would not compromise on issues related to trade in services and also addressing concerns related to the small and medium enterprises in the negotiations.

As discussed, RCEP is expected to bring the ASEAN countries and its six dialogue partners under one large geographic and economic landmass which would be one of the largest economic blocs in the world. India has Free Trade agreements or Comprehensive Economic Cooperation/ Partnership Agreements (CECA/CEPA) with Thailand, Singapore, Malaysia, and Korea while it is negotiating terms of bilateral free trade along with services agreement with Australia, and New Zealand. India has proposed to include services sector into the larger negotiation process while many countries do not want to open their market for highly talented and qualified professionals from India. The bone of contention in this regard is Mode IV which ‘deals with movement of natural persons who are service providers or independent professionals’ to another WTO member country. India has pressed for the Mode IV negotiations while negotiating with Malaysia and Singapore. However, both the countries have only opened Mode IV for select individuals such as consultants, accountants, nurses and financial experts. The limited access to the emerging markets have annoyed Indian negotiators to such an extent that at one time India decided not to enter into any free trade negotiations without including services and investment in the negotiation blueprint.

India started economic liberalization process in early 1992, it is yet to integrate with the global economy given the intrinsic problems with regard to tariff structures, customs procedures and the inherent red tape which was a legacy of the license regime. However, putting onus on India for failed attempts with regard to free trade and better terms of trade with other countries across Asia would be unfair. India has not gained the promised advantage while trading with the price competitive economies of the Asian region. On the contrary, the low cost production centres, particularly China, which thrives on state subsidized production has easy access to the India market while it has not bestowed the same privileges to Indian exports. The tariff and non-tariff barriers in China are still not conducive to Indian exports leading to skewed balance of trade. Taking cue from China’s re-routing of its products through ASEAN nations, India has stressed on the stringently following the Rules of Origin (ROO) template with 35 percent of local value addition as a necessary prerequisite.

This year, in the post Wuhan summit bonhomie, Chinese government has opened its pharmaceutical market to select Indian drugs such as anti-cancer, and other lifesaving drugs which are relatively cheaper than Western imports. Overall China has removed import duties on 28 medicines imported from India. The trade frictions between India and China still exists as India has registered a number of anti-dumping and unfair trade practices case in WTO against China. Indian industry particularly Small and Medium Enterprises(SMEs) however accept the fact that cheap Chinese input material in sectors such as steel, pharma and other related industries have brought down the costs, and have also indirectly helped in real estate, automobile spares, and textile sectors. Nonetheless, larger industrial houses are not in favour of such opening up of market as they feel their future endeavors would be jeopardized if Chinese cheap products both in terms of raw materials and semi-finished products would curtail their market expansion plans through new products. These large industrial houses do control the Indian politics through their corporate funds given to various political parties to fight elections and have a sizeable influence among the country’s parliamentarians and legislators. SME sector in India is relatively unorganized, both in terms of associations and political clout.

In order to increase its trade with countries in East Asia and Oceania, India has been trying to adopt international production methods, and be a part of the Regional Value Chain(RVC). However, India’s incremental approach for market liberalization and other market facilitation efforts have not met with active engagement from the regional community. India has not yet been inducted into the Asia-Pacific Economic Cooperation (APEC) which could have prepared the country for business standardization and harmonization of tariffs as per the APEC provisions. This would have created the base for effective implementation of the RCEP trade provisions with necessary structural support. Indian economists have made it very clear that only market access to merchandise trade without any quid pro quo would not be acceptable to the Indian entrepreneurs. It might also create social problems given the fact that Chinese cheap products have already decimated electronics, mobile, toys and silk industry in India. The cascading effect has left very large number of both skilled and unskilled labour jobless. Given the fact that select sectors in India are still labour intensive, retrenchment of workers has a political cost. There are apprehensions projected by industry associations that cheap imports would adversely impact the steel, chemicals, textiles, copper, aluminum, and pharma industry. India is has a sizeable share of global trade in automotive parts, pharma and textile industry, and so negotiations would be a long drawn affair.  Further, strategic experts feel that India must not become an ancillary industry to Chinese production network as it would jeopardize India’s rise in future as a production and skill center in Asia. Also, it will put China as the benefactor of India’s industrial change which might not be palatable to the political class.

Indian negotiators still believe that until and unless the demands with regard to trade in services, investment and also concerns related to SMEs is addressed, the RCEP would be facing an invisible deadlock. Opening up services sector would help the Indian economy and partly offset the effect that would be felt from the cheap products from relatively cheaper production and export centres. Indian economy still faces stiff competition from China and as a result of this the negotiations with China, would be long drawn affairs. However, there is still a silver lining that RCEP would be concluded in 2019 but the deadline from the Indian side would be after the general elections in 2019 when the current Prime Minister Narendra Modi would be looking for a second term to bring about comprehensive set of economic and financial reforms. In case a coalition government comes into power, it would seriously jeopardize the RCEP negotiations because then the different associations and lobbies would be playing the political game to protect their economic interests.

Pankaj Jha is faculty with Jindal School of International Affairs, O P Jindal Global University, Sonepat. He can be reached at pankajstrategic[at]gmail.com

Continue Reading
Comments

Economy

Ambiguity in European economic leadership

Published

on

Europe’s economic situation remains uncertain! The European economic crisis and austerity policies remain in place. On the other hand, there is no sign that the EU is passing through the current situation. Two conservative /Social Democrats in Europe have not been able to effectively counteract the economic crisis over the last few years.

 This same issue has led to anger by European citizens from traditional European parties. Subsequently, the trend of European citizens to nationalist and extremist parties has increased in recent years.

The events that have taken place in France in recent months have led to disappointment with the eurozone leaders over the current deadlock.The most important point is that Macron was planned to assume the title of the Europe’s economic leader in the short term, and that was to be after succeeding in creating and sustaining economic reforms in France and the Eurozone.

 Meanwhile, European citizens expressed their satisfaction with the election of Macron as French President in 2017. They thought that the French president, while challenging austerity policies, would strengthen the components of economic growth in the European Union. Moreover, EU leaders also hoped that Macron’s success in pursuing economic reforms in France would be a solid step in pushing the entire Eurozone out of the economic crisis.

 In other words, in the midst of anti-Euro and extremist and far-right movements in Europe, Macron was the last hope of European authorities to “manage the economic crisis” which was raising inside the Eurozone: the hope that has soon faded away!

The main dilemma in France is quite clear!”Failing to persuade French citizens” on his economic reforms, and Macron’s miscalculations about the support of French citizens for himself, were among the important factors in shaping this process. Macron had to give concessions to protesters to prevent further tensions in France.

 After the country’s month-long demonstrations, Macron was forced to retreat from his decision on raising the fuel price. Besides, he had no way but to make promises to the French citizens on issues such as raising the minimum wages and reducing the income tax. This had but one meaning: Macron’s economic reforms came to an end. Right now, European authorities know well that Macron is incapable of regaining his initial power in France and the Eurozone by 2022 (the time for the France general elections).

 Therefore, Macron has to forget the dream of EU’s economic leadership until the last moments of his presence at the Elysees Palace. Of course, this is if the young French president isn’t forced to resign before 2022! The European authorities and the Eurozone leaders have no alternative for Macron and his economic reforms in Europe. That’s why they’re so worried about the emergence of anti-EU movements in countries such as France and Germany.

 For example, they are well aware that if Marin Le Pen can defeat Macron and come to power in France during the upcoming elections, then the whispers of the collapse of the Eurozone, and even the European Union, will be clearly heard, this time with a loud voice, all over the Europe.

First published in our partner Tehran Times

Continue Reading

Economy

Economic integration: Asia and the Pacific’s best response to protectionism

Armida Salsiah Alisjahbana

Published

on

Deepening economic integration in Asia and the Pacific is a longstanding regional objective. Not an end in itself but a means of supporting the trade, investment and growth necessary to achieve the 2030 Agenda for Sustainable Development. It is a priority for all member states of the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP). China has a valuable contribution to make so I am beginning 2019 with a visit to Beijing. One to discuss with Chinese leaders how we can strengthen our collaboration and accelerate progress.

The case for deeper integration in Asia and the Pacific is becoming increasingly apparent. Recent trade tensions highlight Asia and the Pacific’s vulnerability to protectionism from major export markets. UN ESCAP analysis shows how regional supply chains are being disrupted and investor confidence shaken. Export growth is expected to slow and foreign direct investment to continue its downward trend. Millions of jobs are forecast to be lost, others will be displaced. Unskilled workers, particularly women, are likely to suffer most. Increasing seamless regional connectivity – expanding the infrastructure which underpins cross border commercial exchanges and intraregional trade – must be part of our response.

We should build on the existing Asian transport infrastructure agreements UN ESCAP maintains to further reduce regulatory constraints, costs and delays. For instance, UN ESCAP members are working to improve the efficiency of railway border crossings along the Trans-Asian Railway network. There is great potential to improve electronic information exchange between railways, harmonise customs formalities and improve freight trains’ reliability. The recent international road transport agreement between the governments of China, Mongolia and the Russian Federation grants traffic rights for international road transport operations on the sections of the Asia Highway which connect their borders. We should expand it to other countries. There is also huge opportunity to develop our region’s dry ports, the terminals pivotal to the efficient shipment of sea cargo to inland destinations by road or rail. A regional strategy is in place to build a network of dry ports of major international significance. UN ESCAP is looking forward to working with China to implement it.

Sustainable energy, particularly cross-border power trade, is another key plank UN ESCAP member States’ connectivity agenda. Connecting electricity grids is not only important to meet demand, ensure energy access and security. It is also necessary to support the development of large-scale renewable energy power plants and the transition to cleaner energy across Asia and the Pacific. The fight against climate change in part depends on our ability to better link up our networks. ASEAN’s achievements in strengthening power grids across borders is a leading example of what political commitment and technical cooperation can deliver. At the regional level UN ESCAP has brought together our region’s experts to develop a regional roadmap on sustainable energy connectivity. China is currently chairing this group.

For maximum impact, transport and energy initiatives need to come in tandem with the soft infrastructure which facilitates the expansion of trade. UN ESCAP analysis ranks China among the top trade facilitation and logistics performers in our region. This expertise contributed to a major breakthrough in cross-border e-commerce development and ultimately led to a UN treaty on trade digitalisation. This has been adopted by UN ESCAP members to support the exchange of electronic trade data and documents and signed by China in 2017. Now, UN ESCAP is working to support the accession and ratification of twenty-five more countries who recognise the opportunity to minimise documentary requirements, promote transparency and increase the security of trade operations. Full implementation of cross-border paperless trade in Asia and the Pacific could reduce export costs by up to 30 percent. Regional export gains could be as has high as $250 billion.

As we look to the future and work to accelerate progress towards the 2030 Agenda’s Sustainable Development Goals, economic integration must remain a priority. A strong UN-China sustainable development partnership is essential to take this agenda forward and strengthen our resilience to international trade tensions and economic uncertainty. Working with all the countries in our region, we have a unique opportunity to place sustainability considerations at the heart of our efforts and build seamless regional connectivity. That is an opportunity, which in 2019, UN ESCAP is determined to seize.UNESCAP

Continue Reading

Economy

Closing the loop: Commission delivers on Circular Economy Action Plan

MD Staff

Published

on

All 54 actions under the plan launched in 2015 have now been delivered or are being implemented. This will contribute to boost Europe’s competitiveness, modernise its economy and industry to create jobs, protect the environment and generate sustainable growth.

The European Commission today published a comprehensive report on the implementation of the Circular Economy Action Plan it adopted in December 2015. The report presents the main results of implementing the action plan and sketches out open challenges to paving the way towards a climate-neutral, competitive circular economy where pressure on natural and freshwater resources as well as ecosystems is minimised. The findings of the report will be discussed during the annual Circular Economy Stakeholder Conference taking place in Brussels on 6 and 7 March.

First Vice-President Frans Timmermans, responsible for sustainable development, said: “Circular economy is key to putting our economy onto a sustainable path and delivering on the global Sustainable Development Goals. This report shows that Europe is leading the way as a trail blazer for the rest of the world. At the same time more remains to be done to ensure that we increase our prosperity within the limits of our planet and close the loop so that there is no waste of our precious resources.”

Vice-President Jyrki Katainen, responsible for jobs, growth, investment and competitiveness, said: “This report is very encouraging. It shows that Europe is on the right track in creating investment, jobs and new businesses. The future potential for sustainable growth is huge and Europe is indeed the best place for an environmentally-friendly industry to grow. This success is the result of European stakeholders and decision-makers acting together.”

Moving from a linear to a circular economy

Three years after adoption, the Circular Economy Action Plan can be considered fully completed. Its 54 actions have now been delivered or are being implemented. According to the findings of the report, implementing the Circular Economy Action Plan has accelerated the transition towards a circular economy in Europe, which in turn has helped putting the EU back on a path of job creation. In 2016, sectors relevant to the circular economy employed more than four million workers, a 6% increase compared to 2012.

Circularity has also opened up new business opportunities, given rise to new business models and developed new markets, domestically and outside the EU. In 2016, circular activities such as repair, reuse or recycling generated almost €147 billion in value added while accounting for around €17.5 billion worth of investments.

EU Strategy for Plastics

The EU Strategy for Plastics in a Circular Economy is the first EU-wide policy framework adopting a material-specific lifecycleapproach to integrate circular design, use, reuse and recycling activities into plastics value chains. The strategy sets out a clear vision with quantified objectives at EU level, so that inter alia by 2030 all plastic packaging placed on the EU market is reusable or recyclable.

To boost the market for recycled plastics, the Commission launched a voluntary pledging campaign on recycled plastics. 70 companies have already made pledges, which will increase the market for recycled plastics by at least 60% by 2025. However, there is still a gap between supply and demand for recycled plastics. To close this gap, the Commission launched the Circular Plastics Alliance of key industry stakeholders supplying and using recycled plastics.

The rules on Single-Use Plastics items and fishing gear, addressing the ten most found items on EU beaches place the EU at the forefront of the global fight against marine litter. The measures include a ban of certain single-use products made of plastic (such as straws and cutlery) when alternatives are available and of oxo-degradable plastic, and propose actions for others such as consumption reduction targets, product design requirements and Extended Producers Responsibility schemes.

Innovation and Investments

To accelerate the transition to a circular economy, it is essential to investin innovation and to provide support for adapting Europe’s industrial base. Over the period 2016-2020, the Commission has stepped up efforts in both directions totalling more than €10 billion in public funding to the transition.

To stimulate further investments, the Circular Economy Finance Support Platform has produced recommendations to improve the bankability of circular economy projects, coordinate funding activities and share good practices. The platform will work with the European Investment Bank on providing financial assistance and exploiting synergies with the action plan on financing sustainable growth.

Turning Waste into Resources

Sound and efficient waste management systems are an essential building block of a circular economy. To modernise waste management systems in the Union a revised waste legislative frameworkentered into force in July 2018. This includes, among others, new ambitious recycling rates, clarified legal status of recycled materials, strengthened waste prevention and waste management measures, including for marine litter, food waste, and products containing critical raw materials.

Circular Design and Production Processes

Smart design at the beginning of a product’s lifecycle is essential for ensuring circularity. With the implementation of the Ecodesign Working Plan 2016-2019, the Commission has further promoted the circular design of products, together with energy efficiency objectives. Ecodesign and Energy Labelling measures for several products now include rules on material efficiency requirements such as availability of spare parts, ease of repair, and facilitating end-of-life treatment. The Commission has also analysed, in a dedicated Staff Working Document, its policies for products, with the intention to support circular, sustainable products.

Empowering Consumers

The transition towards a more circular economy requires an active engagement of citizens in changing consumption patterns. The Product Environmental Footprint (PEF) and Organisation Environmental Footprint (OEF) methods developed by the Commission can enable companies to make environmental claims that are trustworthy and comparable and consumers to make informed choices.

Strong Stakeholder Engagement

Stakeholder engagement is vital for the transition. The systemic approach of the action plan has given public authorities, economic and social players and civil society a framework to replicate in order to foster partnerships across sectors and along value chains. The role of the Commission in speeding up the transition and leading international efforts for circularity was also recognised at the World Economic Forum 2019 where the Commission received the Circulars Award in the Public Sector Category.

Open Challenges

The circular economy is now an irreversible, global trend. Yet, much is still needed to scale up action at EU level and globally, fully close the loop and secure the competitive advantage it brings to EU businesses. Increased efforts will be needed to implement the revised waste legislation and develop markets for secondary raw materials. Also, the work started at EU level on some issues (like chemicals, the non-toxic environment, eco-labelling and eco-innovation, critical raw materials and fertilisers) needs to be accelerated if Europe wants to reap the full benefit of a transition to a circular economy.

Interaction with stakeholders suggests that some areas not yet covered by the action plan could be investigated to complete the circular agenda. Building on the example of the European Strategy for Plastics in a Circular Economy, many other sectors with high environmental impact and potential for circularity such as IT, electronics, mobility, the built environment, mining, furniture, food and drinks or textiles could benefit from a similar holistic approach to become more circular.

Background

In 2015, the Commission adopted an ambitious new Circular Economy Action Plan to stimulate Europe’s transition towards a circular economy, which would boost global competitiveness, foster sustainable economic growth and generate new jobs. It was foreseen that the proposed actions would contribute to “closing the loop” of product lifecycles through greater recycling and re-use, and bring benefits for both the environment and the economy. The plans would help extract the maximum value and use from all raw materials, products and waste, fostering energy savings and reducing greenhouse gas emissions and would be supported financially by ESIF funding, Horizon 2020, the EU structural funds and investments in the circular economy at national level.

Continue Reading

Latest

Travel & Leisure5 hours ago

Only on Langkawi: An Insider’s Guide to the Most Coveted Langkawi Pursuits

Whether in search of wanderlust, culture, or relaxation, Four Seasons Resort Langkawi showcases a bespoke collection of experiences that captures...

Urban Development7 hours ago

Smart cities hold the key to sustainable development

Asia and the Pacific’s phenomenal development has been a story of rapid urbanization. As centres of innovation, entrepreneurship and opportunity,...

Style9 hours ago

Time and Place

OMEGA celebrates three great cities and the Swiss brand’s home country with a collection of exclusive boutique watches for passionate...

Newsdesk11 hours ago

SDGs and Her Initiative Announces Winners of 2019 Global Competition

Today, the global SDGs and Her Competition announced the winners of the 2019 global competition. The contest– co-sponsored by the World Bank Group,...

Defense13 hours ago

India Acquiring Thermonuclear Weapons: Where Is The Global Outcry?

The atomic bomb revolutionized modern warfare not by enabling the mass slaughter of civilians but by vastly increasing its efficiency—the...

South Asia15 hours ago

China’s Diplomatic Tightrope Amidst Rising Indo-Pak Tensions

Since the dramatic rise in Indo-Pak tensions earlier this month, the entire South Asian region has once again been propelled...

Europe17 hours ago

Albanian question in the Balkans

The Greater Albania project, which dates back to the 19th century is an idea of the unification of all Albanians...

Trending

Copyright © 2019 Modern Diplomacy