India set to join talks for world’s largest trade bloc.

NEW DELHI: India is set to join talks for creating the world's largest trade bloc, the Regional Comprehensive Economic Partnership or RCEP, comprising Asean members and three manufacturing giants — China , Japan and South Korea — after a committee headed by Prime Minister Manmohan Singh endorsed the move.

The 16 members who will launch talks in Phnom Penh later this month account for over a quarter of the world economy.

Last Friday's decision by the Trade & Economic Relations Committee (TERC) signals the government's intent to drive down import duties further in the coming years, a proposal that may not get too much support from the domestic industry, although it is being sold as an attempt to increase competitiveness of local players.

In return, the government is hoping to get a sweeter deal for Indian nurses, teachers and auditors who want to work in any of the 16 initial members of the proposed RCEP, which will also have Australia and New Zealand. Of course, this will come with the promise of allowing overseas companies easier access by giving them more flexibility in FDI rules.

The biggest concern, however , is the China factor as the Indian government has so far hesitated in entering into any sort of a trade arrangement with Beijing, fearing that the market would be flooded with cheap imports and make the trade deficit look even grimmer . But TERC is learnt to have taken the view that it would be imprudent to ignore RCEP as India was taking a 'Look East' view of the world.

Besides, it is seen as the trading region of the future, with trade expanding rapidly. The fear in government circles is that entering the bloc late would entail higher commitments , including a steeper reduction in import tariffs.

The industry, however, believes that the government needs to set its house in order before engaging in a negotiation like RCEP. "If we are looking to join these talks, it is very important that we accelerate our reform process and improve competitiveness and seriously look at seamless movement of goods and services within the country," Ficci president R V Kanoria said.

RCEP is seen as a counter to the Trans-Pacific Partnership, which had Asean members such as Singapore and Malaysia apart from New Zealand as a founding member, but the agenda is now largely driven by the US, backed by Canada and Mexico.

Although India is keen on entering the RCEP talks, it is likely to pursue a defensive agenda in order to buy time for the local industry to become more competitive, sources familiar with the thinking in the government said.


Source : economictimes.indiatimes.com