The negotiations between Asean and its six partners in the Regional Comprehensive Economic Partnership (RCEP) seem to be going nowhere. The outlook has become so dim that experts fear that unless national leaders call for an end to some forms of protectionism to salvage the agreement, the final document may not yield substantive benefits or may end up leaving out a large market such as India.
Biswajit Dhar, a professor of economics and a trade specialist at Jawaharlal Nehru University (JNU), does not see anything happening "unless countries other than India move from their entrenched positions" and agree to compensate New Delhi with gains in services for any losses it experiences from trade in goods.
Dr Dhar said he found it strange that Asean, which already has an FTA on services with India, should oppose negotiations on the subject in the RCEP. In any case, he told Asia Focus, India would not be "terribly impacted" if the other 15 countries left it out.
"India should not give up its market easily," he told Asia Focus. "It has every right to seek compensation with gains in services for whatever losses it will suffer on goods. Even if it is left out it does not lose much. After all, we either already have FTAs with all other members except China or are considering them."
The RCEP involves the 10 Asean states plus China, Japan, South Korea, India, Australia and New Zealand. The 16 countries cover 3.5 billion people and have a combined gross domestic product (GDP) of US$22.5 trillion.
The RCEP talks were originally expected to be completed by the end of 2015 but have faltered because of entrenched positions. Some countries blame India for wanting too much access from other countries for its services, and area in which it is very strong, and for not offering enough access in terms of tariff cuts on trade in goods.
Dr Dhar blames the stalemate on Asean and other partners, saying they were not prepared to consider India's sensitivities.
Beijing has blamed New Delhi for the deadlock, accusing it of foot-dragging on extending free trade benefits on goods, while the latter has accused Asean and the other partners of not yielding on services and free movement of IT workers and businesspeople. Asean, meanwhile, has insisted on parallel negotiations on goods and services.
New Delhi has been pitching for more time to bring down its import duties. Through this, it wants to ensure that its market does not get flooded with Chinese goods. It wishes to use the longer grace period to make its own manufacturing sector more competitive.
There is no bilateral free trade agreement between India and China and the latter runs a $52-billion trade surplus with the former.
India has offered a formula to the RCEP under which it would offer deeper tariff cuts on goods to nations other than China. Under the formula, New Delhi would extend the highest tariff concessions to Asean members. This is not acceptable to China, nor to Australia and New Zealand, which are seeking elimination of duties on 90% of goods.
Highly placed officials in the Indian government justified the Indian demand for more time to reduce or eliminate duties on imported goods from China. They believe they are well within their right to play safe. "Isn't China doing the same to Japan and South Korea?" one official asked rhetorically, asking not to be named.
As it stands, the negotiations for the RCEP are unlikely to conclude by the end of this year, the latest deadline agreed by all parties after earlier end-2015 and end-2016 deadlines slid by without anything to show. Indian Commerce and Industries Minister Nirmala Sitharaman believes the negotiations might extend to the first half of next year.
Ram Upendra Das, a professor and head of the Centre for Regional Trade at the Indian Institute of Foreign Trade (IIFT), is of the view that it is wrong to blame India for no agreement on trade in goods. "All 16 member countries are at different stages of development. Each has its own sensitivities. Why blame only India? Are others not less enthusiastic on services?" Mr Das told Asia Focus.
Ms Sitharaman has insisted on simultaneous negotiations on goods, services, investments, economic and technical cooperation, competition and intellectual property rights. She has expressed regret that negotiations on services, a key area of interest for India, have not picked up momentum.
During the last round of negotiations at Hanoi on May 21 and 22, the Indian minister urged her colleagues to hold parallel negotiations on goods and services. She claimed a selective approach to the detriment of services would not be in the best interest of RCEP members and would fail "to acknowledge, promote and protect the strength and mutually beneficial nature of the current relationship".
Mr Das concurred with Ms Sitharaman and asserted that the RCEP partners were bound to negotiate goods and services as a single undertaking.
During the Hanoi round, Ms Sitharaman also emphasised free movement of professionals in Mode 4 in line with the RCEP Guiding Principles and sought the issuance of business visas for unrestricted movement of businesspeople within the region.
The business visa could be a limited version of the Schengen-type visa that allows free movement of visitors and tourists within 26 countries (22 members of the European Union and four members of the European Free Trade Association (Efta).
Officials in the Indian government called the proposal for business visas an extension of the Apec (Asia-Pacific Economic Cooperation) card. They pointed out that out of the 16 RCEP members, 12 were already part of Apec and were offering such documents. "Only Myanmar, Cambodia, Laos and India are outside Apec. This means the card will have to be extended to only four countries" one official explained.
At least two members of Asean -- Singapore and Malaysia -- have objected to the business visa card proposal on the grounds that people might abuse the card for immigration. The Indian officials called these fears "unfounded", adding that the cards would be issued only after establishing the credentials of the businesspeople. India has offered IT support for the process.
Indian government officials insisted that the business visa was very feasible and might be taken up for further discussions during the 19th round of RCEP negotiations in Hyderabad scheduled to take place in July this year. The next milestone for the negotiations will be when Asean leaders and their dialogue partners gather later this year in the Philippines, which is chairing the 10-country bloc this year.
The Indian officials said that only Prime Minister Narendra Modi was empowered to take a final decision on whether India could offer more concessions on import tariffs on goods. "This will be a political, economic and strategic call," one said.
Indian officials involved in the RCEP negotiations conceded there would be difficulties in concluding the agreement. They, however, noted that the Trans-Pacific Partnership (TPP) took more than seven years to conclude. That 12-country deal is now in jeopardy because the United States under President Donald Trump has pulled out, though Japan is determined to keep the TPP alive.
"The RCEP has only entered its fifth year. We are constructively engaged for a dynamic and comprehensive FTA that will build on Asean," one official said.