RCEP and India

Why in news?

RCEP was expected to be signed before the end of 2019. However, India has recently pulled out of the RCEP negotiations. The prime minister has said that “Neither the talisman of Gandhi Ji nor my own conscience permits me to join RCEP.” Without India, RCEP is not as huge as it was with India. Though the finance minister has given the signs that the country might sign the RCEP if Indian concerns are addressed but there seems no immediate solution to the situation. 

With the current set of events, now the RCEP is expected to be signed in 2020. While India has declined to sign the RCEP for now, it will not stop talks on the proposed FTA. It is a bleak possibility that India might join the RCEP in 2020 if concessions are warranted as demanded by India. 

What is RCEP?

RCEP (Regional Comprehensive Economic Partnership) is a proposed FTA (Free Trade Agreement) between 16 countries of the world. These countries include 10 members of the ASEAN (Brunei, Cambodia, Indonesia, Laos, Myanmar, Philippines, Singapore, and Thailand), India, China, Japan, South Korea, Australia, and New Zealand. It is in the final phase of being signed. Recently, Indian PM has refused to sign the RCEP owing to the impact of the said deal on the Indian domestic market. 

Combined together, the RCEP members account for 45% of the global population and 40% of world trade. These countries are also important because it involves India and China, the future aspirants of being a superpower. Hence, it will have the two largest countries (with respect to the population) of the world and will grow at a multiplied pace. RCEP (with India as a member) is expected to surpass 50% of global trade by 2050.

History of the RCEP?

The RCEP negotiations began in 2011, with the introduction of the RCEP to the ASEAN summit. The sixth rounds of these negotiations were held at New Delhi, where the Japanese counterparts demanded a workshop on e-commerce. It was estimated that the RCEP might be signed by the end of November 2019. However, in a shocking move, India has decided to pull out from the RCEP. This has further shifted the expected date to 2020.

Why is it important for India?

RCEP had various roles to play for India. The primary roles were economic, but the strategic roles were equally important. India could have gained from the RCEP in the following ways:

• India’s regional integration with the east would have improved. 
• Indian goods and services can get better access to these unexplored markets. 
• India’s services sector has a competitive advantage vis-a-vis other members. Thus, the Indian service sector will benefit immensely. 
• Almost all the trade of RCEP would have a positive impact on the Northeastern region of the country. 
• Having better trade relations with China can lead to a unique strategic symmetry between the two nations. 
• It can boost both, incoming and outgoing, foreign direct investments in India. 
• Creating a regional value chain would boost India’s MSME sector. 
• It will complement India’s free trade agreements with the ASEAN. 
• It will further improve the ease of doing business in India by easing up the movement of goods across the border. 

How is it going to hamper Indian interests?

Despite a hundred advantages that it aims to provide, India has decided to withdraw. Some of the bones of contention for India were:

• High trade deficit of India with the members of the proposed RCEP. Especially concerning was the trade gap between India-Japan, and India–South Korea. 
• Some of the goods where India had a competitive advantage are protected by the member states by the means of the sensitive lists. Sensitive lists carry the names of the products on which the RCEP members are allowed to put very high tariffs. Some of the products are rice, honey, dairy products, etc. 
• India has been demanding that the services too should be a part of the deal. However, ASEAN members are not agreeing up to allowing Indian professionals and workers a free movement. 
• Trade imperialism in China keeps coming to haunt the Indian industries. Almost every sector is worried about Chinese goods flooding the Indian markets after the deal is signed. The case of the toy industry’s death due to Chinese exports is still a fresh memory for the industries. 
• China already has a > $ 70 billion trade deficit with India. It is only estimated to increase when the RCEP is signed. 
• Agriculture (especially the dairy sector) will lose from the RCEP. Almost half the country is dependent on the sector for their livelihood. Hence it is not wise to sign a deal that will hamper half the country’s interests. 
• The economic slowdown has already been a big issue for the Indian market. At such a juncture, RCEP will only further concern the investors. 
• Political issues raised by the opposition parties and pressure groups have given a final blow to the Indian efforts. 

What is its impact on India’s “Act East” and also to the “Indo-Pacific” vision?

The withdrawal is obviously going to have a detrimental effect on both these visions of India. However, the costs of signing the RCEP far outweigh what India is set to lose by not signing the RCEP. One of the major issues is, however, the integration of the north-eastern parts of the country. RCEP would have significantly improved the life and livelihood for the North-eastern states of the country. 

Additionally, India’s strategic gains from RCEP would have been a big boon. Those are lost for now, but they can be re-achieved through bilateral and multilateral negotiations. For example, India’s active engagement in the ASEAN summits, East Asian summit, QUAD, and other similar groups can compensate for the withdrawal from the RCEP. 

Way forward:

India has to take four-fold action in order to deal with the current situation. 

1. India needs to reform its trade policies in order to make exports more competitive. This has to be done despite the fact whether any trade deal is signed or not. Chinese goods always have an added advantage due to the government’s support to the industries. 
2. Diplomatically, India must not close its eyes towards RCEP. The withdrawal must only be temporary and consistent negotiations must be followed. India must try to get its concerns addressed and then join the RCEP. India is set to gain big from joining the RCEP in the long run. 
3. Strategic engagements through various other platforms like the ASEAN summit, SCO summit, QUAD, and EAS, etc. must be actively followed. This will ensure that India’s interests are preserved in the Indo-Pacific domain. 
4. An active policy for the development of the North-Eastern India must be followed. The region has been ignored for decades after independence, and this historical mistake needs to be corrected promptly. 

RCEP might seem like an opportunity too big to lose; however, India must not sign a deal just because there is a deadline. The interests of the country must come second to none and that shall be the sole motive of the foreign policy of the nation.