RCEP:-
- Negotiations on the Regional Comprehensive Economic Partnership (RCEP), among 16 Asian and Pacific Ocean countries, have entered a decisive phase.
- Most potential member-countries of the grouping, that comprises the 10 ASEAN members and their Free Trade Agreement partners, Australia, China, India, Japan, New Zealand and Republic of Korea, would like to see a “substantive agreement” on the trade deal by the end of this year.
- At a meeting in Singapore, which is driving the effort as the current ASEAN chair, countries which still have issues with the outline of the agreements reached so far may be told politely to step aside and allow a smaller group to go ahead with finalising the RCEP, with the option to join it at a later date.
India’s take on RCEP:
- India is among the countries that will have to take a call at this point.
- The government has decided to set up a group of four ministers to advise the Prime Minister on the path ahead. This indicates the seriousness of the situation.
India’s Concerns:
- India’s concerns with RCEP negotiations thus far are manifold, but some have been addressed.
- The first is the greater access Chinese goods will have to the Indian market, a problem given India’s massive trade deficit. To circumvent this, given that India is the one country that doesn’t have an FTA with China, the government has proposed a “differential market access” strategy for China, which others are inclined to accept. After the Wuhan summit, India and China have made progress on addressing the trade deficit, with China increasing access for Indian goods such as pharma and agricultural products.
- The second concern is about demands by other RCEP countries for lower customs duties on a number of products and greater access to the market than India has been willing to provide. On the other hand, the more developed RCEP countries such as Australia and Singapore have been unwilling to accommodate India’s demands to liberalise their services regime and allow freer mobility of Indian workers.
- None of this is made easier by the fact that some of the RCEP countries, including India, are headed for elections next year, a point where governments traditionally turn protectionist.
- Trying to drive home the point that FTAs in general have not paid off, is a product of both domestic and global circumstances.
Way forward:
- Despite these concerns, the Indian government must take into account the deeper strategic pitfalls of either slowing down India’s RCEP engagement or walking out of the talks at this stage.
- India must not take the easiest way out on the trade deal and walk out of talks. Walking out would cut India out of the rules-making process for the RCEP and give China further space in the regional trade and security architecture.
- At a time when the U.S. has broken from the global concord on multilateral trade agreements, an Indian walkout would endanger the united message that RCEP countries, which represent 40% of the global GDP, would wish to send out.
- The push for trade blocs has acquired a new urgency, with the Trump administration unleashing a trade war of sorts against China and even the EU
- It would also be a sharp departure from India’s “Act East” slogan and its extended outreach to ASEAN.
- If the RCEP countries are keen on a slice of India’s market, they must sweeten the deal.
Conclusion:
- India should carefully weigh the pros and cons of exiting the trade bloc. It should seriously consider the impact of any exit from RCEP on its links to global supply chains. The East Asian Tigers were, like India, remarkably protectionist economies, but they opened up at the right time, and at the right pace. India could still learn a few lessons, given its botched experience in industrial development. Multilateralism, fairness and WTO principles must be believed in but these must not hit the Indian Industries.