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Jakarta Post

RCEP enters final phase, to be signed without India: Trade Ministry

  • Dzulfiqar Fathur Rahman

    The Jakarta Post

Jakarta   /   Tue, August 18, 2020   /   04:44 pm
RCEP enters final phase, to be signed without India: Trade Ministry A man walks in a conference room used for meetings between military commanders of China and India, at the Indian side of the Indo-China border at Bumla, in the northeastern Indian state of Arunachal Pradesh. The Regional Comprehensive Economic Partnership (RCEP) has entered the legal scrubbing phase and is expected to be signed soon without India following its spat with China. (Reuters/Adnan Abidi)

The Regional Comprehensive Economic Partnership (RCEP) has entered the legal scrubbing phase and is expected to be signed soon without India, the Trade Ministry has said.

The participating countries now comprise the ASEAN member states, China, Japan, South Korea, Australia and New Zealand.

“The participating countries will keep the door open for India in case it decides to rejoin the trade deal in the future, because its participation will be important on political, economic and Asian solidarity fronts,” Deputy Trade Minister Jerry Sambuaga said in a statement on Thursday.

India withdrew from RCEP negotiations in November last year because of concerns about its growing trade deficit with China. The situation worsened after the Indian army said at least 20 of its soldiers had been killed in clashes with Chinese troops at a disputed border site between the two countries in June.

India is Indonesia's fifth-largest export market. Indonesia’s top export to its South Asian peer is coal, with value reaching US$4.81 billion in 2019, according to data from the United Nations International Trade Statistics Database (UN Comtrade). Its next biggest exports to the country are palm oil, stainless steel and rubber. This makes India the second-largest buyer of Indonesian coal and palm oil.

India is also an important import partner as it accounted for 35 percent of Indonesia’s total beef imports in 2019.

Read also: RI looks to sign RCEP this year to support economic recovery

Without India’s participation, Indonesia might not be able to enjoy cheaper Indian beef and lower tariffs for its palm oil exports, said Andry Satrio Nugroho, the head of the center of industry, trade and investment at the Institute for Development of Economics and Finance (Indef).

Andry said missing the opportunity to lower Indian beef prices was less costly because Australian beef imports, which accounted for the majority of Indonesia’s beef imports, might fill the supply with the implementation of the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).

“With regard to palm oil, there are not that many buyers out there. In Asia, the largest buyers are China and India,” Andry told The Jakarta Post in a phone interview on Friday. “If India joins the RCEP, we may enjoy lower tariffs for our palm oil, perhaps at zero percent.”

Yose Rizal Damuri, the head of the department of economics at the Jakarta-based Centre for Strategic and International Studies (CSIS), said on Thursday that the RCEP might not lead to significant changes in Indonesia’s exports and imports. However, the trade deal would prepare the participating countries for any future trend in global trade that had been accelerated by the pandemic, including digital trade.

“This increases the importance of the RCEP as it will create regulations on, or at least has started talking about, the future of digital trade,” Yose said in a phone interview.

The coronavirus outbreak has hit international trade amid movement restrictions as the World Trade Organization (WTO) projects global trade volumes will contract by between 13 percent at best and 32 percent at worst this year.

Indonesia booked $76.41 billion in exports, a decrease of 5.49 percent, in this year’s first half while imports amounted to $70.9 billion, a 14.28 percent yoy decrease. It recorded a trade surplus of $5.5 billion over the first half of the year, compared to a deficit of $1.87 billion in the same period last year.

RCEP participating countries have expressed hope that the trade deal can help with their recovery from the economic slump caused by the COVID-19 pandemic.

“With the conclusion of [...] RCEP negotiations, we have a bigger market access and support to enhance Indonesia’s competitiveness,” Jerry said. “However, this access must be complemented with improvements in product quality, branding, logistics system and payment system, among other things, so that our locally made products can successfully enter the global market.”

The government expects to sign the trade deal in November, around eight years after it was introduced at the ASEAN Summit in Cambodia, after the completion of the legal scrubbing, which consists of a legal review of the text agreement.

“The government will ensure this phase [legal scrubbing] will not change the substance of Indonesia’s interest,” Jerry stressed.