India will enter negotiations to further liberalise trade in goods, services and investment in Asia in the Cambodian capital Phnom Penh in the next two days that are expected to bring in significant economic benefits to the country.
Two competing visions of regional economic integration would animate conversation at the ASEAN and East Asia summits which are taking place amid a faltering world economy, regional tension and great power manoeuvrings.
ASEAN leaders have pledged to create the Regional Comprehensive Economic Partnership (RCEP) comprising their 10 member-nations and six partner countries: China, India, Japan, South Korea, Australia and New Zealand.
It aims to lower trade barriers across the region to create the biggest free-trade market on the globe and a production base that would ensure the free movement of goods, services, investments and skilled labour in the region by 2015.
China, which has just emerged from once-in-a-decade leadership transition, is a strong votary of the RCEP to offset the US-led Trans-Pacific Partnership (TPP) that excludes Beijing.
President Barack Obama is advocating the TPP as part of his administration’s “rebalancing strategy” towards Asia. The TPP also aims to bring down trade barriers between the US and a group of Asian countries and venture into new areas of cooperation.
“We’re organising trade relations with countries other than China so that China starts feeling more pressure about meeting basic international standards,” Obama, who won a second term in office earlier this month, said during one of the presidential debates with Mitt Romney.
The Trade and Economic Relations Committee (TERC) headed by Prime Minister Manmohan Singh decided earlier this month to join the ASEAN plus Six talks keeping in view its 20-year-old “Look East” policy and the deadlocked Doha Round.
Sources said the government has some concern about the possible impact of the RCEP on certain products but decided to go in to reinforce India’s determination to be a “constructive” partner in the negotiations that are expected to remove the kinks in the architecture of economic partnership.
India and ASEAN have a free trade agreement in goods and are negotiating to include services and investment, widening the agreement to a Comprehensive Economic Cooperation Agreement (CECA).
India-ASEAN trade currently stands at $79 billion, surpassing the $70 billion target set for 2012.
ASEAN Secretary-General Surin Pitsuwan told the Asia-Europe Business Forum in the Laotian capital Vientiane earlier this month that the grouping needed support from its dialogue partners.
“I talked about the five FTAs that we have with the six (dialogue partner) countries. We are now putting the five together into one agreement,” said Surin.
The prime minister is leading the Indian delegation to the 10th ASEAN-India summit and 7th East Asia Summit ending Nov 20.
RCEP has grown out of a plan to launch trilateral trade talks among China, Japan and South Korea and billed to be worth worth $17 trillion.
There is however still a fair degree of scepticism about the success of the talks as protection for sensitive goods and geopolitical sensitivities could disrupt the negotiations.
Experts say countries might ask for special treatment for their agricultural produce. For example, talks between Seoul and Tokyo have been on hold since 2004 over Japan’s reluctance to lower tariffs on agricultural goods.
And South Korea is said to be separately negotiating a free trade agreement with China, which would enable some 25,000 South Korean firms operating in China to supply to the domestic market rather than exporting their Chinese-produced goods as they are obliged to do now.
Also, ASEAN Deputy Secretary General Lim Hong Hin told a business forum in Makati city in the Philippines that 28 percent of ASEAN Economic Community measures due to be implemented for 2008-2011 are still pending as of end-August 2012.
Experts point to poor infrastructure, lack of human resources, good governance and low participation from the private sector as the possible main hurdles in achieving the establishment of a single market.
There are also concerns that the South China Sea territorial disputes between China and Vietnam and the Philippines over the Spratly and Parcel islands may muddy the negotiations and delay the launch of the pact.