Recently we came to know that at the 16th INDIA-ASEAN Summit in bankok India has opted out of RCEP agreement citing it’s negative impacts over its local trade market and economy.
What is RCEP?
Regional Comprehensive Economic Partnership (RCEP) is basically a free trade agreement which was being negotiated between 10 ASEAN group nations and 6 countries with which ASEAN has Free Trade Agreement:-India, Australia, China, South Korea, Japan and New Zealand.
What is Free Trade Agreement?
Free trade agreement is basically a pact between two nations or group of nations negotiated to reduce barriers to imports and exports among them. FTAs may be different depending on the nations which are involved and upto what level they reduces import or export duties. In simple terms FTA is not a universal agreement.
India’s concerns related to FTAs?
- TRADE DEFICIT:- Free trade pacts have mostly hurt India’s trade position. For example;- It registered a bilateral trade deficit with 11 of 15 RCEP participating countries in 2018-19.It was expected that these deficits would have increased if India joined RCEP.
- DUMPING:- India’s local market faces the most severe problem like market dumping. Since Chinese companies flooded Indian market with their comparatively cheap products by misusing FTAs.
- TRANSFER OF TECHNOLOGY:- The RCEP agreement would not have allowed India to mandate companies investing in India to transfer technology to its Indian partners. Technology sharing is a major area in which India can compete globally.
- MOVEMENT OF LABOUR:- India has long pushed other countries to allow greater movement of labour and services in return for opening up its market for other goods. This demand was also not accepted.
Way Forward?
In the era of Globalization World’s 5th largest economy cannot miss out on being a part of global supply chains and this can be achieved by some following possible ways:-
- India needs to forge bilateral trade deals that are more equitable. It can start from its neighbourhood by doing deals with Sri Lanka, Bangladesh and Indonesia.
- It also needs to speed up its FTA negotiations with European Union and most important thing is that China is not part of that.
- India lacks the scale and competitive strength internally to compete abroad in goods. This can be achieved by initiatives like lowering duties on raw materials and strengthening Micro Small and Medium Enterprises (MSMEs) to face competition from other players.
- Domestic manufacturing is another weapon to combat this problem and for that lowering costs of doing business, building the right infrastructure, insuring faster and more eficient trade facilitation at the borders, deeper economic reforms particularly in factor markets of land, labour and capital is needed.
REFERENCES:- Drishti Current Affairs Today And Study IQ
–MANOJ KUNWAR