The Regional Comprehensive Economic Partnership (RCEP) has ignited major debates in India. Farmers believe that the reduction of import tariffs will lead to a flooding of dairy products, spices and plantation crops. Micro, small and medium industrial producers believe that cheap Chinese goods would flow freely into India, pushing them out of the domestic market. Trade unions believe that shutting down of industrial units would lead to a major loss of employment. According to reports from Bangkok, where ASEAN leaders are meeting , most market access negotiations have been completed and a few outstanding bilateral issues are to be resolved by February 2020.
RCEP is a free trade pact being negotiated between the ten-member ASEAN and six countries that have a distinct free trade relationship with the ASEAN (India, China, Australia, New Zealand, South Korea and Japan). If it fructifies, RCEP would cover a very large part of the world economy: about 47 per cent of the world population, about 30 per cent of the world GDP, about 33 per cent of the world exports, eight of the 10 busiest ports of the world and about 30 per cent of the world maritime trade.
At this point, it may be worthwhile to pause and examine India’s experience with the already signed free trade treaties with ASEAN (in 2010), South Korea (in 2010) and Japan (in 2011). Between 2011and 2018, India’s trade deficit with these groups/countries rose sharply. India’s trade deficit with ASEAN rose from $5 billion to $22 billion; with Japan from $4 billion to $8 billion; with South Korea from $8 billion to $12 billion. In sum, recent treaties have led to a net rise in imports into India and no major export gains. Even without any free trade treaty, India’s trade deficit with China rose from just $4 billion in 2004 to $50 billion in 2018.
In any democratic country, trade pacts that are likely to affect the livelihoods of people are usually widely discussed in the public domain. However, in the case of RCEP, we do not have an official document stating what India is planning to concede. Secrecy has been maintained at all stages. All we have are leaked drafts of discussion texts from countries like Japan and South Korea. These drafts show that the RCEP covers a wide range of issues and that the concessions demanded by the agreement are of great concern.
To begin with, the agreement demands that India should reduce the import tariffs on more than 90 per cent of commodity lines to zero. Currently, as per WTO regulations, India charges a level of tariff on imports called the “applied tariff”, which is lower than a maximum level called “bound tariff”. All these would disappear with the RCEP, when we would have to reduce all tariffs to zero.
The second aspect covered by RCEP regards intellectual property rights. India had fought a historic battle during the WTO negotiations to preserve its right to socially regulate drug patents of multinational companies. Today, India is a leading global supplier of cheap generic drugs to poor patients. However, RCEP undoes all of India’s gains in the field. It allows companies to extend the length of their patents beyond 20 years. It also allows them to widen the scope of patents through “data exclusivity”. Clinical trial data of the patented drugs would not be in the public domain until the patent validity is over. If generic drug-makers have to apply for an approval in the interim, they cannot make use of the earlier clinical trial data; they will have to present new data, which would only delay their release as well as raise their price.
Thirdly, the RCEP has a set of provisions under the Investor-State Dispute Settlement mechanism (ISDS). Under ISDS, foreign investors in each county have “rights” for business-friendly economic environments. Governments in each host country have an obligation to fulfill these rights. If they do not oblige, the investors can sue the governments under international arbitration rules. While the RCEP secretariat has promised a softer ISDS regime in the final agreement, the agreement per se would slow down India’s efforts to renegotiate a number of bilateral investment agreements it has already signed over the last decade.
Finally, RCEP asks all governments to privatise major public services viz., education, health, power, water and waste management. It has two sets of provisions: “standstill” provisions and “ratchet” provisions. Standstill provisions imply that governments will have to consider their current levels of market liberalisation as the floor. Ratchet provisions imply that once any further liberalisation has been introduced, the governments cannot roll back these measures at a later date below what was at the floor level. In essence, the RCEP asks governments to freeze their market openings at their current level. Even if the private providers of services move away from their social obligations, governments would not be able to regulate them.
In sum, the RCEP has provisions that would alter the basis of our democratic system. It usurps the role of governments and passes it over to foreign investors. It opens up India’s markets for the free flow of goods. It would push the lives of millions into acute crises. It is most advisable that India keeps out of the treaty.
R Ramakumar is a professor at the Tata Institute of Social Sciences, Mumbai