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Thursday, 16 February 2017
Asia Trade Pact on Tricky Ground Over Free Migration
Asia Trade Pact on Tricky Ground Over Free Migration
India and China to battle over service reforms, tariff cuts
RCEP talks next scheduled for Japan in late February
An Asian trade pact in focus after President Donald Trump
pulled out of a rival deal has struck trouble over an issue that’s
tripped up politicians from Europe to the U.S. -- borders.
free movement of people, something India wants for highly-skilled
information technology workers, remains a major sticking point for the
16-party deal, even as China pushes for an accelerated time line to
finalize the agreement. It’s set to come up again at the next round of
talks in Japan in late February.
Having seen how migration has
become a political grenade elsewhere -- from Brexit in the U.K. to
Trump’s election win in the U.S. -- Asian nations are wary
about the liberalization of services. The Association of Southeast
Asian Nations, in moving toward economic integration, has carefully
avoided decisions on allowing the free movement of people.
“In Asia, the issue of migrants has always been about
control, especially in Asean,” said Bhubhindar Singh, an associate
professor at the S. Rajaratnam School of International Studies in
Singapore. “It’s not simply an issue of looking at the economic impact
Some countries have significant domestic obstacles to a more relaxed policy, Singh added.
dispute is expected to dominate talks on the Regional Comprehensive
Economic Partnership in Kobe from Feb. 27, as China continues to champion free trade and pushes member states for across-the-board tariff cuts.
is arguing for the liberalization of services, a sector that
contributes over 50 percent to its gross domestic product, while
resisting broad tariff cuts, according to two officials. It has agreed
to provide similar tariff reductions to all RCEP members, but wants a
built-in safeguard regarding China that will involve a different
structure for duty cuts, they said.
India is also seeking multiple entry visas and a single-visa
card to facilitate entry to member economies, the officials said, asking
not to be identified because the discussions are private. And it wants
an easing of restrictions on services such as call centers and the
establishment of foreign company subsidiaries providing services in
other countries, like banks opening branches overseas.
is under no pressure for an early conclusion of the deal and will
protect its interests in the talks, India’s Commerce Minister Nirmala
Sitharaman told Bloomberg on Feb. 9. “We are clear that our commitments
in goods will be as deep as their commitment on services,” she said.
TPP Versus RCEP
meeting in Kobe follows Trump’s move to withdraw the U.S. from the
12-nation Trans-Pacific Partnership, turning the spotlight onto the
RCEP, which would account for almost 30 percent of global GDP and over a
quarter of world exports. It involves the 10 members of Asean plus its
six free trade agreement partners -- China, India, Australia, New
Zealand, South Korea and Japan.
China is expected to lead the
talks and exert direct pressure on India to wrap up the deal as soon as
possible, said Rajeev Kher, a former India commerce secretary.
“since the U.S. has withdrawn from the TPP, the lateral pressure which
was building on the RCEP is now gone," Kher said. "The discussions can
now be based on their regional needs and not under the looming tension
Neither India nor China are
interested in agreeing to actions that could diminish their domestic
interests, said Razeen Sally, an associate professor at the National
University of Singapore. For example, China is not going to open up
sectors now dominated by its state-owned enterprises such as oil and
gas, Sally said.
"It’s good to amalgamate the hodge-podge of FTAs
in the region," Sally said. "It’s just difficult to believe that China
is going to be a champion of global trade given what’s happening
domestically”with Xi tightening political control.
Added to that, India is "particularly defensive vis-a-vis China because India is flooded with Chinese imports.” Its trade deficit with China widened to $52.68 billion in 2015-16 from $48.48 billion in 2014-15, according to government data.
will cover trade, investment, economic and technical cooperation,
intellectual property, competition and dispute-settlement mechanisms.
Unlike the TPP, it won’t include issues like labor rights or
environmental protections. The RCEP negotiations started in late 2012.
Dhar, an economics professor at Jawaharlal Nehru University in New
Delhi, said the meeting in Kobe comes at a "very interesting juncture".
going to be more aggression to bring in services," Dhar said. "There
will be problems -- I don’t think Asean members are really prepared to
go that way. There is a clear sense that they want to clear goods first
and then move onto services.”
China and India are the most
important elements for RCEP in terms of market access. Kher said with
China set to be a major beneficiary in goods, "India should identify
products which come from that region and are used as raw materials, and
insist on cutting down tariffs on these inputs."
"There should be
an understanding that China will not create tariff or non-tariff
barriers for these items," Kher said. "We can have special annexures
with China on these issues."