Not for the first time, trade ministers from the 16 Asia-Pacific countries negotiating the world’s biggest trade pact indicated this weekend they were within reach of a deal, but analysts and people with knowledge of negotiations predicted the final leg of talks will be particularly fraught. Insiders told This Week in Asia the main hurdle for finalising the Regional Comprehensive Economic Partnership (RCEP) will be the negotiation position of India – which has been holding out for concessions the other 15 countries consider untenable. Even as China and India – the proposed trading bloc’s largest economies – on Saturday signalled their readiness to thrash out their differences over the deal, domestic pressure on Prime Minister Narendra Modi’s government could scuttle his country’s involvement. Explained: the difference between the RCEP and the CPTPP Key allies of Modi’s ruling Bharatiya Janata Party (BJP) have mounted a nationwide protest against the RCEP, claiming the deal is lopsided and will be ruinous to local industries. The RCEP – in the works since 2014 – involves the 10 countries of the Association of Southeast Asian Nations (Asean), and the six major economies to have formed free trade pacts with the bloc: China, India, New Zealand, Australia, South Korea and Japan. Following two days of talks in Bangkok that ended on Saturday, the trade ministers sounded an optimistic note. The talks were scheduled to have been the last major meeting of RCEP trade ministers before the leaders of the 16 countries meet in November during the Asean summit. The expectation beforehand was for negotiators to reach a provisional agreement, allowing the leaders to announce a firm signing date during the summit. However, chapters on trade remedy measures, trade competition, trade in service, rules of origin, investment and e-commerce have yet to be concluded. The officials said negotiating teams will now continue through next week before ministers convene again on November 1. The additional talks were necessary to “ensure the trade pact will be finalised before the RCEP leader meeting”, Thai Commerce Minister Jurin Laksanawisit said. People with knowledge of Saturday’s talks said they were more heated than usual, and confirmed India’s position was on the minds of most delegates. We encourage competition but the micro, small and medium enterprises should not be killed off artificially Deepak Sharma, Swadeshi Jagran Manch Informal talks stretched on for hours longer than scheduled before the formal intersessional ministerial meeting began in the late afternoon. Negotiators from some countries, including Malaysia, were reportedly dissatisfied with the perceived eagerness of other countries to accede to India’s demands to bring the talks to a conclusion. In contrast, it is understood Malaysia’s requests for some concessions were not entertained. Asean countries negotiate as a bloc but Thailand, Singapore and Indonesia have formed a “troika” to tackle outstanding issues on behalf of the 10-nation grouping. This Week in Asia understands India has eight key requests that are outstanding. Among them are the reopening of language used in the proposed pact about how a mechanism for investor-state dispute settlement is to be implemented, and “carve-outs”, or exemptions, on ratchet obligations. Russia courts Southeast Asia with trade and arms, but it’s no match for China In trade parlance, a ratchet mechanism prevents a country that has adopted trade liberalisation measures from implementing measures that are more restrictive. Another contentious issue was New Delhi’s negotiators pressing for “data localisation” provisions in the e-commerce chapter of the trade pact. Such a provision would allow a member country to mandate that data of national residents and citizens be stored within its borders, and approve whether such data can be copied and stored abroad. E-commerce proponents claim this is antithetical to the way the digital economy works, and could result in governments misusing commercial data. The data issue was just one of India’s several concerns regarding the RCEP. In the last financial year, India recorded trade deficits with 11 of the other 15 countries in the proposed bloc – and critics have increasingly questioned why the Modi administration has persisted with a deal viewed as a gateway for China and other manufacturing nations to “flood” local markets with imports. India is believed to have secured assurances for an auto-trigger mechanism that would guard against such a surge, but the pact’s domestic opponents want the government to withdraw altogether. Trump says ‘substantial phase-one deal’ reached in China trade talks The Swadeshi Jagran Manch (SJM), the economic wing of the nationalist Rashtriya Swayamsevak Sangh (RSS), last week kick-started an 11-day nationwide protest against the RCEP. The development has raised eyebrows, as the RSS is widely viewed as the ideological fountainhead of Prime Minister Modi’s BJP. Deepak Sharma, the national spokesman for the SJM, told This Week in Asia his organisation was merely seeking a “level playing field”. US-China trade war leads to fierce battle for skilled labour in Vietnam “We are people – poor, environment- and village-centric … we encourage competition but the micro, small and medium enterprises should not be killed off artificially. But that is what will happen because of the RCEP,” he said. Sharma said was the impact the pact would have on the likes of the dairy sector – the country’s top agricultural produce – was of particular concern. India enjoys a trade surplus in dairy because of high tariffs it imposes on goods such as milk powder and butter. The fear is that local farmers dependent on the protected sector would suffer if tariffs are liberalised under the RCEP, allowing more imports from the likes of Australia and Japan. Trade analysts concede Modi’s government faces an uphill task navigating such concerns. Within his cabinet, some ministers have positioned themselves against the pact even though the government’s official position – put forth by Commerce Minister Piyush Goyal this week – is that the country cannot afford to stand “outside the room”. At the informal weekend summit between Modi and Chinese President Xi Jinping, the Indian leader reportedly raised the issue of the trade pact, emphasising that New Delhi wanted an equitable deal not only in terms of trade in goods, but also in investment and services. Hopefully Modi will be wise and brave enough to see the larger picture and overcome specific points of resistance Deborah Elms, Asian Trade Centre India’s foreign secretary Vijay Gokhale said Xi “noted” these concerns. Deborah Elms, executive director of the Singapore-based Asian Trade Centre, said ultimately Modi’s judgment would determine whether his country joins the RCEP. “India has always been in a pickle. There is very limited domestic support for RCEP, especially when broken down by specific agencies or ministries. Each largely fears change,” Elms said. “Hopefully Modi will be wise and brave enough to see the larger picture and overcome specific points of resistance.”