Trade In Shackles
Piyush Goyal, the Union Minister of Commerce and Industry, recently cancelled a trip to China as the Budget Session of the Lok Sabha got extended until August 7 instead of ending on July 26 as scheduled. Such cancellations happen all the time, but this one was different. Goyal was expected to represent India in a key ministerial meeting the 8th round of Regional Comprehensive Economic Partnership (RCEP) Ministerial in Beijing to stitch together a 16 nation free trade agreement (FTA) that covers 45 per cent of the world's population and 40 per cent of global trade. Although high level officials represented India, the absence of the political leadership only deepened the suspicion that India is reluctant to open up its economy to global free trade, but the country is not willing to admit it. RCEP has its pitfalls, though.
India already has an FTA with ASEAN, the 10 country bloc that remains the core of RCEP discussions. Besides, it has bilateral agreements with two others Japan and South Korea. Although these FTAs have helped India expand its export base, the trade balance has not been in our favour so far. Hence, the critics of RCEP (there are many within the government and outside) argue that it is, in effect, an FTA with the other three negotiating partners Australia, New Zealand and China. Given the ballooning trade deficit with China, the sceptics are wary of another surrogate FTA with the Asian giant in the form of RCEP. "We have not benefited from FTAs in the past, and now that we are negotiating RCEP, automobiles should be kept out of it to prevent China from getting a backdoor entry," says Vinnie Mehta, Director General of the Automotive Component Manufacturers Association (ACMA).
That the country should avoid non lucrative FTAs is a valid point. And no one could have questioned the minister's decision had India limited its export ambition to opportunities which are solely trade positive. Unfortunately, that is not the case. India is increasingly pushing its exports to drive overall growth. And a missed negotiation of this scale does not augur well as none of the tall targets of the Narendra Modi government can
