As negotiations on the proposed regional comprehensive economic partnership (RCEP) gathers steam again, Indian steel ministry has urged its commerce counterpart to keep steel on the negative list fearing indiscriminate imports from surplus nations such as China, Korea, and Japan.
The steel ministry apprehends that the removal of tariff barriers will be highly profitable to steel surplus nations and will lead to huge consequential losses to the domestic industry.
The apprehensions stem from the fact that there has been an unprecedented rise in imports of steel from both Korea and Japan since India signed a comprehensive economic partnership agreement with these two surplus nations in 2010 and 2011 respectively.
Official data showed imports of both alloy steel and carbon steel rose drastically from these two countries.
While imports of alloy steel from Japan rose from 54,000 tonnes in 2009-10 to 185,000 tonnes in 2016-17. Imports for the same from Korea grew to 425,000 tonnes in 2016-17 from 152,000 tonnes in 2009-10. Import of carbon steel also rose to 958,000 tonnes from Japan in 2016-17 from 589,000 tonnes in 2009-10.
Korean export of carbon steel to India rose from 1,033,000 tonnes in 2009-10 to 1,747,000 tonnes in 2016-17.
Exports from India, on the other hand, could not keep pace. The 16-country trade block, RCEP, offers a positive alternative in the face of growing protectionism across the world. The steel ministry feels that if China, the world’s largest producer and consumer of steel, is given access, it will be a definite threat to the Indian steel industry. It also feels that opening up of any tariff lines will prove to be counter-productive and mitigate the impact of the protectionist measures imposed on both HR and CR products. According to sources China is keen on securing higher tariff liberalization and seeks to eliminate duties on as many as 90% of traded products including steel.
India has already been hit by Chinese excess capacity in many sectors other than steel such as
chemicals, textiles, telecommunications, etc. Imports from China have been significantly higher
than that of India’s exports. This has created a trade deficit going from just USD 1.1 billion in 2003-04 to a staggering USD 52.7 billion in 2015-16. Besides, the opening of the tariff lines for imports from China or any other ASEAN countries will jeopardize the ongoing expansion plans of the domestic firms.
“India’s majority imports under chapter 72 are under tariff heading 72044900 which includes all types of re-melting scrap and waste. This particular tariff line has the capacity to allow any other steel products to be disguised as defective or waste and be imported into the country,” the steel ministry said.
WHAT IS RCEP?
Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten-member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has existing free trade agreements (Australia, China, India, Japan, South Korea and New Zealand).
RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia. The agreement is scheduled to be finalized by the end of 2017. RCEP is viewed as an alternative to the Trans-Pacific Partnership (TPP).
In 2017, prospective RCEP member states accounted for a population of 3.4 billion people with a total Gross Domestic Product (GDP, PPP) of $49.5 trillion, approximately 39 percent of the world’s GDP, with the combined GDPs of China and India making up more than half that amount.