AMN / NEW DELHI
In a meeting convened by Ministry of Commerce today to discuss RECP on Steel sector, the Confederation of All India Traders (CAIT) while submitting a memorandum called for India not to sign the RECP as it will adversely affect steel trade & Industry in the Country. Commerce Minister Piyush Goyal attended the meeting.
CAIT in its memorandum said that the proposed Regional Comprehensive Economic Partnership (RCEP) agreement will run against the interests of domestic manufacturing and trade and will also hit the economy to an extent. It will damage India’s export competitiveness since the trade balance in the Country is already skewed to a greater extent. Therefore, we are of the considered view that India should not enter into any RCEP agreement on Steel and other allied products.
CAIT Secretary General Mr Praveen Khandelwal said that RCEP, which is a larger free trade agreement would enable the RCEP Countries especially South Korea and China to flood their goods in the Indian market with relatively little advantage on the export front and due therefore a cautious approach is required in dealing with RCEP agreement.. For India, issues of tariff rate (import duty) are as important as other areas under negotiations, mainly because India does not have trade agreements into effect with all countries involved in RCEP. It is most likely that RCEP could have a negative impact on sectors like steel, pharmaceuticals, e-commerce, food processing and several other sectors.
It is to be noted that India has registered trade deficit in 2018-19 with as many as 11 RCEP member countries – including China, South Korea and Australia – out of 16 nations that are negotiating the mega trade pact since November 2012.
RCEP will lead to a zero-customs duty zone in geography that contributes 34% of global gross domestic product (GDP) and 40% of world trade comprising almost half of the world’s population. Once the pact is enforced, India will give more market access to China, South Korea and other RCEP Countries and our trade deficit will increase further.
India’s trade deficit is very significant and a cause of major concern. In 2017-18, India exported goods worth $13.1 billion to China and imported goods worth $73.3 billion -creating a trade deficit of $63.1 billion. India has trade deficits with other RCEP nations, too, such as South Korea ($11.9 billion) and Australia ($10.2 billion) which is an alarming bell for the economy.
Mr Khandelwal also said that It is further to be noted that India has already suffered a lot by giving tariff concessions to South Korea and Japan, given that after FTAs with them steel imports have substantially increased without a commensurate increase in investments in India from these countries. “It’s not about being proponents of free trade or not. China has completely distorted the global steel market as they have 50% of the world capacity. Hence, it will be naive to open up the sector under RCEP.
The critical thing for traders is that if the domestic industry is adversely impacted, the future of domestic traders is uncertain. We have to take a bigger, future-oriented comprehensive look at the picture. It is quite likely that along with foreign (mainly chinese) manufacturers, Chinese traders will also be making inroads into the Indian market. So more of these imports will be traded by foreign players and not Indian ones. There has recently been huge increase in FDI in wholesale and multi-brand retail in India. And many foreign trading companies particularly Chinese (for example those companies in India who are helping import of chinese e-commerce sites like shein.com and clubfactory.com), are already establishing themselves in India, but they are operative not only in e-commerce but also in physical trading. Therefore the future of traders will become more and more uncertain and trading operation more controlled by foreign players as the imports increase as the foreign manufacturers are more comfortable with their own trading companies (and China operates a lot through its own traders).
It is imperative that pursuant to signing of the RCEP, the trade deficit will further widen. Therefore, CAIT strongly oppose inclusion of steel in the RCEP agreement. The move will open flood gates RCEP Countries imports into India through zero duty access making operations for domestic producers non-viable which may adversely affect the growth of the steel sector in the Country