Monday, March 20, 2023
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Modi rightly didn’t join RCEP a year ago. SE Asian states are unlikely to benefit much

Joining a China-led trade arrangement because the US is unwilling to provide an alternative is a strategic equivalent of cutting your nose to spite your face.

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India was right to walk out of the RCEP — Regional Comprehensive Economic Partnership — negotiations last year and it is right to stay out of it today. The treaty, which was finally signed by 15 countries on Sunday, will most likely tie the Asia-Pacific region’s economies even more closely to China’s than they already are. This is foolish. Greater dependence on China will only bring with it greater vulnerability before a malevolent and powerful neighbour.

The problem is that many of the people criticising the Narendra Modi government’s decision are looking at the RCEP from largely an economic perspective.  Indeed, former foreign secretary Shyam Saran argues that the “economic pillar is equally, if not more, important than the security pillar.” This is simply wrong. Security consideration will always be, and indeed should always be, more important. Economic considerations can only come into play if it does not contradict security interests. The RCEP, if it works as designed, will make the countries of the region even more vulnerable to China’s economic and political coercion.

Also read: Welcome to the might-is-right global trade era

Pick security over economic interest 

China’s exploitation of trade to make economic and political demands hardly requires any elaboration. Beijing has gone after countries all over the world, wielding its trade advantage as a cudgel to push countries to toe its line. Over the last few months, Australia has been facing the brunt of this, with Beijing interfering with Australian exports to China. Just this week, China ‘unofficially’ released an extraordinary letter that can only be characterised as akin to an ultimatum, demanding that Canberra take specific steps to meet Beijing’s demands, with the implicit threat of additional measures if Australia refused.

Indeed, it is China’s constant use of trade as a political weapon, and its unfair trading practices, that has led many countries to begin discussions about supply chain resilience. It is difficult to understand why countries such as Australia and Japan are doing both: discussing protection against China’s trade practices, while also adding more arrows to its trade quiver. The consequences are easy to predict: China will only push harder, and the rules of the RCEP will provide no protection.

Part of the argument appears to be that the RCEP is a reflection of the US abdicating its responsibility of engaging with and providing leadership to the region. This is odd because the choice between the US and China is not an equal one: China represents a direct security threat to most of the countries in the region, while the US does not. That is one reason why Japan and Australia are understandably deepening their security engagement, why the Quad grouping has strengthened, and why India welcomed Australia to the Malabar naval exercise. Joining a China-led trade arrangement because the US is currently unwilling to provide an alternative would appear to be a strategic equivalent of cutting your nose to spite your face, especially considering that a Joe Biden presidency might be more forthcoming on this front.

Unfortunately, those who have opposed the RCEP have also looked at this from the perspective of economic and trade policy. Indeed, even External Affairs Minister S. Jaishankar pointed to the negative domestic economic consequences of trade, arguing that “(I)n the name of openness, we have allowed subsidized products and unfair production advantages from abroad to prevail.” The problem is that the difficulties with the RCEP are not primarily its economic consequences, but rather the political ones.   

Also read: There is an asymmetry at the heart of India’s complex engagement with the world

Illusion India didn’t fall for

The refusal to recognise the primacy of security is a long-standing problem, one that refuses to die despite logic and experience. Security is primary because it is impossible to pursue either economic well-being or any other value in its absence. Ignoring this comes at a cost.

Recent experience with China itself should have been a warning. The entire American and East Asian regional expectation in enmeshing their economies deeply with China was the assumption that economic realities and mutual benefits will push China towards cooperative behaviour, to become “a responsible stakeholder”, as US Deputy Secretary of State Robert Zoellick wanted China to become, citing the differences between China and the Soviet Union.

Beijing did not play to that script because it was based on a fundamentally misguided view of international politics in which conflicts were unfortunate mistakes rather than an endemic feature of international life and the mutual benefits of cooperation would be obvious to all. China did what any country would as it suddenly became rich and powerful: it decided that others must listen to it.  There is no mystery here.

But China was not the first to subject economic relations to political needs. Sample the Continental system, when Napoleon tried to strangle Britain. That it didn’t succeed is not the lesson to be drawn, because China hasn’t so far succeeded in its efforts to use its economic might as an effective political weapon either. What is important is to recognise that trade will become a political weapon, especially when we are enmeshed in a new Cold War. As Adam Tooze pointed out in a recent essay, “T()he scale of China’s growth, combined with the determination of its political leadership, has undone the notional separation of economics and security policy entirely.”

Thus, almost a century after it was written, it is The Great Illusion all over again, though the passage of time has done little to improve the fortunes of the thesis. Thankfully, India has not been mesmerised by this particular illusion.

The author is a professor in International Politics at Jawaharlal Nehru University (JNU), New Delhi. Views are personal.

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  1. With priority given to security ideas, we may end up being a country trying our best to defend and retain our borders while our people lag economically with poor living standards.

    Time will come when money spent on both defence and social welfare schemes and subsidies it will be really hard to meet the expenditure. Eventually raise taxes, raise tariffs, increase corruption so that our flawed democracy can continue it’s existence just like in the 70’s and 80’s.

    Even without RCEP, we don’t have the innate ability to have high economic growth because our political parties are not able to bite the bullet. They are like a mafia that wants to stay on power at all costs and enjoy the trappings of power. Ideology dominates, whether leftist or rightist , not pragmatism.

    It is doubtful with our democratic system whether we will get a leader in India like Deng Xiaoping. I am not condoning the political system and abuse of freedom by the CCP, but Deng’s economic vision has lifted the Chinese economically, never before in history have so many millions been lifted out of poverty in just 30 years. With the money they have today they can influence countries across Asia and Africa more than India does.

    • Well, the ideology of the BJP wants to raise the standard of living of the cow. Madhya Pradesh plans to build a cow sanctuary for tourists. It wants to put a tax for cow welfare. India has its own standards and priorities.

  2. Power comes, it has to be arrested, for it to ‘stay’.

    The RSS is practising what you preach. Power has come their way, and they want to makes sure it stays with them and no one else.

  3. I saw your discussion with Prof Ila Patnaik also the other day on this very topic justifying our stance. In this she has clearly pointed out how it is a political decision keeping in mind security issues where especially we Indians are directly affected. She has also of course pointed out the paucity of infrastructure due to which we are presently not in a position to challenge China. Hence the decision to stay away from RCEP for the time being I feel is very prudent and justified. Let us first improve our infrastructure and then get into this sphere.

  4. India lacks innovation, productivity, efficiency to compete with other nation that is the main issue… countries which are confident of competing don’t hesitate to open their markets ..even Japan and Australia have tense political relations with China but they are part of this agreement ..
    India under fascist Hindutva regime will lack even more to compete at global level

    • Everyone is just talking of “Fascist India”. Aren’t you aware that this very so called “fascist” government is trying its best to improve our infrastructure. Yes, actually I cannot blame you though. Chetan Bhagat in yesterday’s Sunday Times has rightly pointed out that the Hard Right somehow comes up with something news catchy whenever the government announces something good which then gets overshadowed. But still, don’t you know about how it is improving freight services facility through the DFCIL and so many like minded projects on the anvil?

      • ‘Chetan Bhagat in yesterday’s Sunday Times has rightly pointed out that the Hard Right somehow comes up with something news catchy whenever the government announces something good which then gets overshadowed. But still, don’t you know about how it is improving freight services facility through the DFCIL and so many like minded projects on the anvil?’

        I was told I would receive 15 lakhs. It did not come. Then I was told demonetisation would end corruption and the Supreme Leader would pluck out the eyes of the corrupt. But the corrupt exchanged their money and Amit Shah’s banks and son made a lot of money. I see failed Anil Ambani is getting public money to start a new business whereas the farmer is committing suicide. I do not know where the bullet train is. The Patel statue was supposed to generate tourist income. When it comes to ordering a riot, they excel.

    • Looks like you are naive. India has to follow Chinese model in opening up economy for investment not allowing unlimited Chinese consumer goods flooding the market. Indian made goods bit more expensive is acceptable.

      India should follow Chinese model in dealing with human rights, labor laws and minorities.

  5. RCEP claims will help reduce or remove tariffs on industrial and agricultural products. In short dumping imports into India without benefitting or creating jobs here. It is one-sided relationship that will benefit only export oriented amongst 15 participants. Others on RCEP don’t have big enough market and are happy with minimal promises of jobs & investment promised by rich of 15 nations. For India in net as imports/dumping will far outweigh investments if any. If they can freely dump their goods why would they invest in India

    Delhi’s list of concerns includes the possibility of opening up its markets to cheap, China-made goods, with which it already has a huge bilateral trade deficit.

    RCEP does not provide any guarantees on ‘rules of origin’ provision, which would determine the national source of a product. China can simply route it’s exports through Cambodia/Laos/Myanmar with no value addition and escape/hide trade surplus. Also our proposal for auto-trigger once imports reach a certain threshold or including services & movement of personnel in its ambit was not heeded to.

    In short it is a treaty that will mainly benefit China and then Japan, South Korea, Australia & New Zealand. India will not benefit as some if these rich nations have restricted market access through non-tariff barriers

    • ‘In short it is a treaty that will mainly benefit China and then Japan, South Korea, Australia & New Zealand. India will not benefit as some if these rich nations have restricted market access through non-tariff barriers.

      What is the alternative India has ? Self reliance is nothing new, it was alright in earlier times when India was emerging from colonialism. What self reliance has India shown in social media ? Indians are addicted and controlled by Facebook, Whats App ?

      India is confused because it wants to be a power, but is emmeshed in primitive ‘Hindu nationalism’.

  6. After 5yrs, we will see entire Asia progress into new level of prosperity under RCEP & BRI, ursher in the golden Asia Century by 2030.

    China, SK & Asean have taken up free trade competition to make themselves globally competitive for swift progress. Hence all of them have develop fast with great success, esp China & Spore. Vietnam is coming new performer.

    Even Cambodia, Laos, Brunei, Indonesia, Vietnam, Myanmar are very backward & poor, they bravely embraced the first Asian lead trade block on fair term for their future.

    Jp been a notorious protectionist like India, has long showing sign of stagnation and aging. They have no zest, with innovation dead in last 10yrs falling quickly behind China and SK. RCEP might be only hope to help revitalize their ailing economy.

    Whereas India will find itself isolated globally, neither in Asia nor West trade block. It will be the worst performing onr among entire Asia after all other Asia countries join RCEP.

    This year Bangladesh already surpass India in GDP per cap. Bhutan, Maldives and Sri Lanka have long well surpass India. When CPEC take off, Pakistan & Nepal will also leapfrog India quickly, leaving India behind as the poorest in South Asia.

    Btw, India agriculture and diary productivity are the lowest among the world.

  7. This is too “Indian” an article, trying to defend the indefensible. India knew all along what RCEP stood for ever since it started working with other nations in the grouping beginning 2012. Having spent nearly a decade on the exercise, it then has the change of mind in the last minute and decides not to join it. This U-turn in the last minute is comparable to what American under hotheaded Trump did to the Trans-Pacific Partnership conceived and given shape to by Obama administration. While in TPEP’s case, there was change of guard in the most important party to the proposed grouping, in India’s RCEP case it was mostly the same Modi regime that continued to participate in it. Thus, if nothing else, it must at least be greatly embarrassing for India to pull out at the last minute, betraying the utter lack of planning and maturity in its decision making despite the mammoth size of the country. While there is very little by way of its security or political advantage in this withdrawal, what India lost is a massive opportunity to modernize its economy, mainly its international competitiveness, and promote the much needed manufacturing sector in the country. The whole thing amounts to India recoiling back to its cocoon. For someone like me from India’s close neighbor, Nepal, this is one more déjà vu.

  8. Is it an article or some kind of partisan drivel by the author ? Maybe his life is comfortable. By joining RECP, people from the poorer communities i.e. consumers from poorer communities in India get goods cheaply and their lives be happy. Isolationist India will never prosper. Trade with other countries is not today’s phenomenon. It is centuries old.

  9. Just read the Oxford Economics report that India will sag to 4.5% growth upto 2025. A time for people of intellect – that includes Dr Arvind Panagariya and the Institution he headed for some time – to start speaking truth to power. One does not require an IQ of 140 to understand what this will do to India’s place in the world.

  10. We should realize that Australia and Japan , both of QUAD had joined RCEP. India was talking about look east and act east , but not joining RCEP has certainly isolated it from the East ( ASEAN , Australia and Japan). Chances are that after 18 months other countries surrounding India may join ( Bangladesh, Nepal , Central Asia etc.) and which will further isolate India. Strategic interests are not isolated from economic interests. Even in colonial days, it was the flag which followed the trade and not the vice versa. It is particularly true for stronger nations like Australia and Japan who decided to join RCEP. Expecting them to follow strategic polices against China , just in support of India, is chimerical. One can understand reservation on some economical issues but to make China a pariah does not serve. Lastly even in BRICS and SCO India and China both exist together.

  11. Excellent perspective. Security concern must certainly prevail over all the other consideration in shaping relationship with any other nation or group of nations. Besides, invasion of Indian market by Chinese goods, there was also concern that import of dairy products from New Zeland would have adverse effect on the domestic dairy industry. It is good that India has stayed out of Border & Roat Initiative and RCEP. Keep china away like plague.

  12. Its strange that the former foreign secretary equates economic security with political security, or even considers them on par with each other…..has he never studied history? When the Mughal Empire handed over the security its coastline to other powers, that first resulted in Arab interference in domestic affairs, and later it was the Portuguese and the Dutch, culminating in the Brits with the East India Company…….and we know what happened after that…

    Political security is paramount, and any sort of external interest in domestic affairs, better be to our advantage, at ALL times.

    Money comes., money goes but when Power comes, it has to be arrested, for it to ‘stay’.

    That’s just the way things work.

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