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What’s RCEP & why India is moving with caution on the 16-nation free trade pact

As the 27th round of talks begins in Beijing today, a look at India's concerns that make it sceptical on Regional Comprehensive Economic Partnership.

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New Delhi: A round of marathon talks to hammer out one of the most ambitious trade pacts — Regional Comprehensive Economic Partnership — will take place between 16 countries on 2-3 August in Beijing, China. The pact, once implemented, will become the largest trading bloc — even bigger than the European Union (EU).

Before Beijing, 26 rounds of negotiations have taken place so far on RCEP since 2012.

The RCEP is a proposed mega free trade agreement (FTA) that is presently being negotiated between 10 ASEAN (Association of Southeast Asian Nations) members — Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam — and their six trading partners India, China, Australia, New Zealand, Japan and South Korea.

After a meeting of 16 finance ministers from all the member-countries who endorsed the ‘Guiding Principles and Objectives for Negotiating the RCEP Regional Comprehensive Economic Partnership’ in August 2012, the negotiations on the mega trade deal were officially launched in November 2012 at the 21st ASEAN Summit in Phnom Penh, Cambodia.

The RCEP negotiations include trade in goods and services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce, small and medium enterprises (SMEs) and other issues.

The 16 members of the RCEP account for a total gross domestic product (GDP) of about $50 trillion with a share of 28 per cent of global trade. Together, these countries boast of 50 per cent of the world’s population. Thus, once implemented, it will be bigger than the European Union as a trading bloc.

Also read: RCEP trade pact in India’s interest as it gives access to Chinese market, Australia says

Why RCEP was conceived

The RCEP was conceived by ASEAN and China as an answer to the US-led Trans-Pacific Partnership (TPP), which was later renamed as Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) after America’s exit from the deal in 2017. The TPP was formally signed in 2016.

The TPP was conceived during the era of former US President George Bush, but it was concluded by Barack Obama’s administration. In 2015-16, the US and EU also started negotiating the Transatlantic Trade and Investment Partnership (TTIP), which is now shelved.

With the US pulling out of it, the TPP currently has 11 members — Japan, Australia, Peru, Malaysia, Vietnam, New Zealand, Chile, Singapore, Canada, Mexico and Brunei Darussalam.

Under the TPP, Obama aimed at introducing global trading rules that would be over and above the norms set by the Geneva-headquartered World Trade Organisation (WTO) or ‘gold standards’ for doing multilateral trade. The TPP also addresses sustainable development issues related to labour laws, environmental standards, climate change concerns and inequality.

US President Donald Trump had pulled out of the TPP saying it’s a “potential disaster for our country” and harmful for US manufacturing.

The RCEP was also conceived as mega trade pacts among western nations were proving to be a threat to the relevance of the WTO.

Some of the countries that are part of the TPP are, however, also members of the RCEP such as Australia, Japan, Vietnam, Malaysia, Brunei, Singapore and New Zealand.

Meanwhile, with change of governments in most RCEP countries, the mandate and demand of each country also underwent a change.

However, on 14 November 2017, during an RCEP Summit in Manila, Philippines, leaders of the member-countries affirmed that they were able to maintain growth in their GDP because of the “valuable contribution of trade openness and regional economic integration which cushion the region from the more volatile global macroeconomic environment.”

And, the next year in 2018, leaders of all 16 countries decided to conclude RCEP talks by December 2019.

However, according to The Economist Intelligence Unit, RCEP negotiators will miss this year’s deadline and the accord is unlikely to come into force before 2020.

India’s concerns

India was never invited to join the TPP by the US, but New Delhi was keen on joining the RCEP. Hence, in 2013, mostly at the behest of Japan, India joined the bandwagon.

However, rising concerns over gradual tariff reduction on goods from all member-countries, especially China, have made Indian industries and farming community jittery.

Rise in India’s trade deficit with East and Southeast Asian economies has also proved to be a major setback for New Delhi in moving ahead with the RCEP talks.

Apart from concerns over Chinese and other Southeast Asian goods flooding Indian markets with cheap imports, New Delhi is particularly irked that it has not been able to garner anything beneficial for its domestic constituency as far as trade in services is concerned.

Trade liberalisation of the RCEP partners with respect to services has been a thorny issue from the Indian perspective. In the context of the RCEP, this again raises concern. Whether promoting services at the cost of manufacturing in the trade deal acts as a boon or as a lost opportunity needs a more deliberate cost-benefit analysis, wrote Nilanjan Ghosh, Director at Observer Research Foundation (ORF), Kolkata.

According to The Economist Intelligence Unit, “Disagreements over India’s negotiating position have emerged as particularly challenging, owing to lingering scepticism in that country over the benefits of trade liberalisation.”

“This is due in part to perceptions tied to past trade agreements: India has witnessed persistently widening trade deficits with Japan, ASEAN and South Korea, despite the conclusion of trade frameworks with those markets,” it said.

If India doesn’t negotiate RCEP, it may prove costly

While India remains committed to the trade pact, the Narendra Modi government is now expected to walk the tightrope by maintaining a critical balance between safeguarding the interests of Indian industries as well as farmers, and also not come across as a spoilsport in multilateral trading system.

Thus, concluding the deal by the year-end might be a difficult task for Minister of Commerce and Industry Piyush Goyal and his ministry.

On the other hand, not negotiating the RCEP may prove to be costly for India in terms of its foreign policy endeavours. This is because almost all member-countries of the deal continue to play a pivotal role in India’s ‘Act East’ policy.

Piyush Goyal is not attending the ministerial meeting in Beijing. On his behalf, Commerce Secretary Anup Wadhawan is to represent India.

Also read: PM Modi to visit Bhutan on 17-18 August, with an eye on checking Chinese influence


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  1. The crux of the problem is that India has historically viewed international trade with ambivalence. The country has not achieved much success in improving its trade competitiveness, which is necessary to benefit from agreements like RCEP. Most of the other countries involved have jumped ahead of India in their economic development and competitive position. As such India is quite disadvantaged. However….unless India signs on to RCEP it will indeed be isolated in the world’s most economically dynamic region.

    PS Please let’s not compare RCEP to the EU. The European Union is a much, much tighter knit bloc, and is much more than a free trade agreement. Perhaps this is why Britain, which has always had one foot out of the EU, wants out.

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