India-China spat delays RCEP deal

A spat between India and China is holding up a pan-Asian trade agreement encompassing nearly a third of all global trade.

Trade ministers from 16 Asia-Pacific countries this week hailed a “critical milestone” after seven years of talks and vowed to wind them up before a regional summit in November. But officials involved in the process say major sticking points remain around market access and the ability of workers to find employment in other countries.

The main source of tension is between India and China over the amount of goods with preferential tariffs, according to a person familiar with the negotiations. The person said India was also unhappy with the position of Southeast Asian countries on the free movement of professionals, particularly in the IT sector, and is weighing whether to be part of the deal at all.

Covering nearly half of the globe’s population, the Regional Comprehensive Economic Partnership was proclaimed “the world’s biggest regional free trade deal” when talks started in 2012. Shortly after President Donald Trump took office in 2016 and pulled the US out of an Asia-Pacific trade deal, President Xi Jinping sought to accelerate talks on the Asia-wide pact to cement bolster China’s influence.

But negotiators have repeatedly blown through deadlines, mostly because Prime Minister Narendra Modi’s government is worried about exacerbating a trade deficit with China and the rest of Asia isn’t willing to accept large amounts of Indian workers in return for greater market access. The talks include the 10-member Association of Southeast Asian Nations, Japan, South Korea, Australia, New Zealand, India and China.

“I’m not too optimistic because of the differences among the member countries, especially towards how they see RCEP benefiting the economy versus the challenges it creates,” said Yeah Kim Leng, an economics professor at Sun-way University in Malaysia who is an external member of the Malaysian central bank’s monetary policy committee.

“The big question now is if they would like to proceed without India, which could cause some big push back from New Zealand and Australia,” he said. “Which would in turn make the process take a longer time.”

The next round of negotiations are expected to be held later this month in Danang, Vietnam.