Regional Comprehensive Economic Partnership

In News

RCEP has been signed by 15 countries.

In-Detail

  • Without India, 15 countries signed their participation in the RCEP.
  • India opted to stay out but the new trading block will remain open to India to return for negotiations.

What is RCEP?

  • RCEP is a Regional Comprehensive Economic Partnership.
  • At present, it is the largest regional trading agreement.
  • RCEP has been negotiated between 16 countries which includes ASEAN members and countries with which they have free trade agreements (FTAs).
  • The free trade agreement countries are China, Korea, Australia, Japan, New-Zealand and India.
  • The main motive of this agreement is to make it easier for the products and services of these countries and to be available across this region.
  • Since 2013, negotiations were made to chart out this deal and India was expected to be the main member.

Why Did India Walk Out?

  • On November 4, 2019 India decided to exit the discussions on significant outstanding issues.
  • The reason behind this, India has been consistently raising fundamental issues and concerns throughout the negotiations.
  • They had not resolved by the deadline to commit to signing the deal.
  • India decided to safeguard the industries like agriculture, dairy and the service sectors.
  • The current structures of RCEP do not resolve these issues and concerns.
  • One more reason is the presence of China.
  • India was uncomfortable with its commitments under RCEP, as it has taken various measures to reduce its exposure to China.
  • The unresolved issues during the RCEP were related to the exposure that India would have to China.
  • There were inadequate protections against surges in imports.
  • India will be unable to establish countermeasures to raise tariffs on products when their imports extended a certain threshold if it had joined the RCEP.
  • India also wanted RCEP to exclude Most Favoured Nation (MFN) obligations from the investment and also extend benefits to the member countries for sensitive sectors like defence.
  • RCEP lacked clear assurance on market access issues in countries like China and non-tariff barriers on Indian Companies.

Impact on India

  • India’s decision would impact its bilateral ties with RCEP member nations.
  • This will leave India with less scope to tap the large market that RCEP represents.
  • The member countries may incline to focus on bolstering economic ties with the blocks.
  • India’s decision could also impact the Australia-India-Japan network in the Indo-Pacific.
  • It may halt the talks to promote a Supply Chain Resilience Initiative among the three countries.
  • According to an assessment, the growth in trade, CAGR with the members for the past five financial years was only 7.1%.
  • But there has been a growth rate in both imports and exports to these FTA partners.
  • The utilization rate of FTAs with India was moderated with partners like Bhutan, Thailand, Afghanistan, Singapore, Sri Lanka, Japan, Nepal, Republic of Korea and Malaysia.
  • With 11 of the 15 RCEP countries, India has trade deficits.

India’s Option

  • India has the option of joining the agreement without having to wait 18 months as stipulated for new members.
  • The possible alternative may be exploring its existing bilateral FTAs with RCEP members.
  • India has agreements with ASEAN bloc, South Korea and Japan.
  • India is negotiating with members like New Zealand and Australia.
  • Some other agreements are the India-Singapore CECA, the India-Bhutan Agreement on Trade Commerce and Transit, the India-Nepal Treaty of Trade.
  • India is negotiating bilateral agreements with the US and the EU. 
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