Illustration: Xia Qing/GT

Negotiations over the Regional Comprehensive Economic Partnership (RCEP) are finally nearing the end as a major breakthrough has been reached in talks with the Indian side. 

The 28th and latest round of RCEP negotiations, which were held in Danang, Vietnam, saw India agree to cut or eliminate tariffs on 80 percent of Chinese imports under the 16-country free trade pact. According to its plan, India will immediately remove duties on 28 percent of Chinese goods, while tariffs on other Chinese imports will be cut or eliminated every five years over a period of 20 years.

The "concessions," as described by the Indian side, may be less compared to what it has agreed with other RCEP members. India plans to cut duties on 86 percent of imports from New Zealand and Australia, and 90 percent of products from Japan, South Korea and ASEAN countries.

Yet, the move remains highly commendable for accelerating the conclusion of a final RCEP deal, especially against the background of rising protectionism around the world.

Currently, the bleak growth outlook for the world economy has precipitated moves by the IMF, the World Bank and other global institutions to successively lower their expectations for world economic growth. In the face of downward pressure on the world economy, most RCEP member countries have also seen lackluster growth momentum, and the 16-country pact will likely be their chance to inject new vitality into their domestic economies. Aiming to create Asia's largest free trade zone that accounts for 45 percent of the world's population, 39 percent of the world's GDP and about one-third of the world's trade and investment, the RCEP will bring benefits to all member countries in terms of trade increments, and will create more opportunities for companies to expand their investment and market share in the region.

More importantly, it is paramount for RCEP member countries to establish new trade rules to uphold multilateralism and to promote regional economic integration, to the benefit of trade and investment liberalization and facilitation. This is particularly important in a time when Washington's unilateralism and protectionism is undermining WTO rules and the global trading system.

This may somehow explain why India's attitude has softened recently: it doesn't want to miss the historic opportunity and grand platform the RCEP may offer. RCEP negotiations began in November 2012 and have been moving forward slowly, due in large part to India's hesitation to join the pact.

In fact, India has been concerned about cheap Chinese products flooding into the country once the RCEP deal is signed. To a certain extent, such concern is justified considering the India-China bilateral trade situation. In 2018, China was India's largest trading partner, with their bilateral trade reaching a historic high of $95.54 billion, up 13.2 percent year-on-year, according to data from the Ministry of Commerce. Meanwhile, the two countries' trade deficit during the same year was $57.88 billion.

Needless to say, "concessions" by the Modi government are under a lot of pressure at home. Yet, although the Indian government wants to protect domestic industries and companies, it doesn't want to be actually excluded from the RCEP, one of the few chances for it to participate in the global value chain. Once the RCEP agreement is inked, India can access the most important Asia-Pacific market under the RCEP framework, and in particular the big Chinese market that has yet to sign any free trade agreement.

It should be noted that China has been making efforts to open its market to India and to lower the trade deficit with its South Asian neighbor in recent years. While their trade imbalance is generally considered the inevitable effect of imbalanced economic structure and trade capabilities, China is still expected to offer more preferential trade policies to Indian products in order to return its goodwill gesture and narrow the trade deficit.

Moreover, the two largest developing countries in the world can cooperate closely to explore each other's market potential and new areas of trade, and export their products with different comparative advantages. Take the tourism industry as an example. Statistics show that only 250,000 Chinese people visit India every year on average - about 2.7 percent of the total visitors it receives. Given China's 130 million outbound travelers, there is a lot to explore in this aspect. In this sense, the RCEP could offer a new platform for India to show its services strength in trade with China. Of course, in addition to the high-level official channel, both countries could also explore more civilian channels to promote China's better understanding of India's comparative advantages, so as to help the two countries match each other's demands more closely.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn