The Economist - USA (2019-11-09)

TheEconomistNovember 9th 2019 31

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tuff toomany sheaves of paper into a

stapler and it will struggle to fasten

them together, however thin each page

may be. The same is true of the Regional

Comprehensive Economic Partnership

(rcep), a long-delayed trade deal involving

16 Asian countries. rcepwas intended to

bind together all of the existing trade agree-

ments between the Association of South-

East Asian Nations (asean) and the re-

gion’s other big economies, including Chi-

na, Japan, South Korea, Australia, New

Zealand and India. But adding India to the

pile has caused the mechanism to jam.

At a summit this week in Bangkok, the

region’s leaders announced that 15 of the 16

participants had concluded their talks and

would be ready to sign a deal in February,

after the text was given a good “legal scrub-

bing”. But India was not yet ready to join

them. “Neither the talisman of Gandhiji

nor my own conscience permit me to join,”

said Narendra Modi, India’s prime minis-

ter, invoking Mohandas Gandhi (pictured),

who preached self-reliance and relished

the frugality it requires.

Although India and China have free-

trade pacts with asean, they do not have an

agreement with one another. Many in India

fear that lowering tariffs on Chinese goods

will only increase its yawning trade deficit

with the country (see chart on next page).

They also worry that India’s poor farmers

will be flooded out of the market by Austra-

lian grains and milk from New Zealand.

These concerns seem overblown. The

agreement (which has not yet been pub-

lished) is unlikely to have liberalised agri-

culture much, if at all. And it reportedly al-

lows its poorer members to proceed

cautiously and gradually in lowering tariffs

on manufactured goods. Indian and Chi-

nese officials had been discussing adjust-

ment periods of up to 25 years for some

items. To assuage Indian concerns, its ne-

gotiating partners were also apparently

willing to let it impose some sort of “safe-

guard” tariffs if imports surged too sharply.

None of that was enough to overcome

vitriolic domestic opposition to the deal.

Trade negotiations tend to click only when

the fear of foreign competition is offset by

the temptations of foreign markets. For In-

dia, however, the temptations and fears are

wildly mismatched. It is eager to open up

new markets for its competitive itfirms.

But services such as ittend to be neglected

by traditional trade deals. Only ambitious,

forward-looking agreements venture

deeply into these areas, and those deals

usually entail a degree of openness to for-

eign manufacturers that would terrify In-

dia’s industrialists. Thus India typically

falls between two stools, approaching

trade in industrial and agricultural goods

like a poor country and trade in services

like a rich one.

Even without India, rcepencompasses

almost 30% of the world economy and the

same proportion of its population. Its

members also span every level of develop-

ment. The income per person of its most

prosperous member (Singapore) is 50

times higher than its poorest (Myanmar).

As well as the traditional focus on cutting

tariffs on goods, it includes some helpful

Trade deals

Haunted by Gandhi

HONG KONG

Asia’s trade negotiators decide they can no longer wait for a protectionist India

Asia

32 Pakistan’srevivingopposition

34 CyclerickshawsinBangladesh

34 Thaisfeedmonkstoomuch

35 Over-reactingtoFukushima

36 Banyan:PoliticsinthePacific

Also in this section

35 China courts Taiwanese businesses