Regional Comprehensive Economic PARTNERSHIP (RCEP) and India
Fifteen countries have formed the world’s largest trading bloc, covering nearly a third of the global economy. The Regional Comprehensive Economic Partnership (RCEP) is made up of 10 Southeast Asian countries, as well as South Korea, China, Japan, Australia and New Zealand. The pact is seen as an extension of China’s influence in the region. The deal excludes the US, which withdrew from a rival Asia-Pacific trade pact in 2017.
The RCEP is expected to eliminate a range of tariffs on imports within 20 years. It also includes provisions on intellectual property, telecommunications, financial Services, E-Commerce and professional services.
Businesses with global supply chains might face tariffs even within an FTA because their products contain components that are made elsewhere. A product made in Indonesia that contains Australian parts, for example, might face tariffs elsewhere in the Asean free trade zone. Under RCEP, parts from any member nation would be treated equally, which might give companies in RCEP countries an incentive to look within the trade region for suppliers.
Significance of RCEP
The RCEP isn’t as comprehensive and doesn’t cut tariffs as deeply as the TPP’s successor. But many analysts think RCEP’s sheer size makes it more significant. “Its membership includes a larger group of nations, notably reflecting the membership of China, which considerably boosts the total Gross Domestic Product (GDP) of RCEP members.
Implications of the deal for Asia-pacific nations
The deal could increase global NATIONAL INCOME by $186bn annually by 2030 and add 0.2% to the economy of its member states. However, some analysts think the deal is likely to benefit China, Japan and South Korea more than other member states. The economic benefits of the deal might only be marginal for South East Asia, but there are some interesting trade and tariff dynamics to watch for North East Asia.
Economic Implications for India of opting out of RCEP
On November 4, 2019, India decided to exit discussions over “significant outstanding issues”. According to a government official, India had been “consistently” raising “fundamental issues” and concerns throughout the negotiations and was prompted to take this stand as they had not been resolved by the deadline to commit to signing the deal. Its decision was to safeguard the interests of industries like agriculture and Dairy and to give an advantage to the country’s services sector. According to officials, the current structure of RCEP still does not address these issues and concernsOn November 4, 2019, India decided to exit discussions over “significant outstanding issues”. According to a government official, India had been “consistently” raising “fundamental issues” and concerns throughout the negotiations and was prompted to take this stand as they had not been resolved by the deadline to commit to signing the deal. Its decision was to safeguard the interests of industries like agriculture and dairy and to give an advantage to the country’s services sector. According to officials, the current structure of RCEP still does not address these issues and concerns.
Escalating tensions with China are a major reason for India’s decision. While China’s participation in the deal had already been proving difficult for India due to various economic threats, the clash at Galwan Valley has soured relations between the two countries. The various measures India has taken to reduce its exposure to China would have sat uncomfortably with its commitments under RCEP.
Major issues that were unresolved during RCEP negotiations were related to the exposure that India would have to China. This included India’s fears that there were “inadequate” protections against surges in imports. It felt there could also be a possible circumvention of rules of origin— the criteria used to determine the national source of a product — in the absence of which some countries could dump their products by routing them through other countries that enjoyed lower tariffs.
India was unable to ensure countermeasures like an auto-trigger mechanism to raise tariffs on products when their imports crossed a certain threshold. It also wanted RCEP to exclude most-favoured nation (MFN) obligations from the Investment chapter, as it did not want to hand out, especially to countries with which it has border disputes, the benefits it was giving to strategic allies or for geopolitical reasons. India felt the agreement would force it to extend benefits given to other countries for sensitive sectors like defence to all RCEP members.
There are concerns that India’s decision would impact its bilateral trade ties with RCEP member nations, as they may be more inclined to focus on bolstering economic ties within the bloc. The move could potentially leave India with less scope to tap the large market that RCEP presents —the size of the deal is mammoth, as the countries involved account for over 2 billion of the world’s Population.
Given attempts by countries like Japan to get India back into the deal, there are also worries that India’s decision could impact the Australia-India-Japan Network in the Indo-Pacific. It could potentially put a spanner in the works on informal talks to promote a Supply Chain Resilience Initiative among the three.
However, India’s stance on the deal also comes as a result of learnings from unfavourable trade balances that it has with several RCEP members, with some of which it even has FTAs. An internal assessment by the government has revealed that the Growth in trade (CAGR) with partners over the last five financial years was a modest 7.1%. While “there has been growth rate in both imports from and exports to these FTA partners”, the “utilisation rate” of FTAs both for India and its partners has been “moderate” across sectors, according to this study, which covers pacts with Sri Lanka, Afghanistan, Thailand, Singapore, Japan, Bhutan, Nepal, Republic of Korea and Malaysia.,
The Regional Comprehensive Economic Partnership (RCEP) is a Free Trade Agreement (FTA) between 10 ASEAN member states and 6 other countries in the Asia-Pacific region. The agreement was signed on November 15, 2020, and is expected to come into effect in 2022.
RCEP is a comprehensive FTA that covers trade in goods, services, investment, and Intellectual Property Rights. It is the largest FTA in the world in terms of the number of participating countries and the combined GDP of the participating economies.
RCEP is important for India for several reasons. First, it will provide India with access to a large market of over 2.2 billion people. Second, it will help India to reduce its Trade Deficit with the ASEAN region. Third, it will help India to attract more foreign investment. Fourth, it will help India to improve its competitiveness in the global market.
The benefits of RCEP for India are manifold. First, it will provide India with access to a large market of over 2.2 billion people. This will help India to increase its exports and boost its economic growth. Second, it will help India to reduce its trade deficit with the ASEAN region. The ASEAN region is India’s largest trading partner, and the trade deficit between India and the ASEAN region has been increasing in recent years. RCEP will help India to reduce this trade deficit by providing it with better access to the ASEAN market. Third, it will help India to attract more foreign investment. The RCEP agreement will create a more attractive investment Environment for foreign investors in India. Fourth, it will help India to improve its competitiveness in the global market. RCEP will help India to reduce its tariffs and non-tariff barriers, which will make it easier for Indian businesses to compete in the global market.
However, there are also some challenges that India faces in implementing RCEP. First, India will have to reduce its tariffs on a number of goods, which could hurt some domestic industries. Second, India will have to open up its services sector to more competition from foreign companies. This could hurt some Indian service providers. Third, India will have to comply with a number of intellectual property rights (IPR) provisions in the RCEP agreement. This could be a challenge for some Indian companies that are not used to complying with IPR standards.
Despite these challenges, RCEP is a significant development for India. It will provide India with access to a large market, help it to reduce its trade deficit, attract more foreign investment, and improve its competitiveness in the global market. India will need to carefully manage these challenges in order to reap the full benefits of the agreement.
Here are some additional details about the benefits and challenges of RCEP for India:
- Benefits:
- Increased exports: RCEP will provide India with access to a large market of over 2.2 billion people. This will help India to increase its exports and boost its economic growth.
- Reduced trade deficit: The ASEAN region is India’s largest trading partner, and the trade deficit between India and the ASEAN region has been increasing in recent years. RCEP will help India to reduce this trade deficit by providing it with better access to the ASEAN market.
- Increased foreign investment: The RCEP agreement will create a more attractive investment environment for foreign investors in India. This will help India to attract more foreign investment, which will boost its economic growth.
- Improved competitiveness: RCEP will help India to reduce its tariffs and non-tariff barriers, which will make it easier for Indian businesses to compete in the global market. This will help India to improve its competitiveness in the global market and attract more foreign investment.
- Challenges:
- Reduced tariffs: India will have to reduce its tariffs on a number of goods, which could hurt some domestic industries.
- Open services sector: India will have to open up its services sector to more competition from foreign companies. This could hurt some Indian service providers.
- IPR compliance: India will have to comply with a number of intellectual property rights (IPR) provisions in the RCEP agreement. This could be a challenge for some Indian companies that are not used to complying with IPR standards.
Overall, RCEP is a significant development for India. It will provide India with access to a large market, help it to reduce its trade deficit, attract more foreign investment, and improve its competitiveness in the global market. India will need to carefully manage the challenges of implementing RCEP in order to reap the full benefits of the agreement.
What is RCEP?
RCEP is a free trade agreement between 10 ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and 5 other countries (Australia, China, Japan, New Zealand, and South Korea).
What are the benefits of RCEP?
RCEP is expected to boost trade and investment between the member countries, leading to economic growth and job creation. It is also expected to reduce tariffs and other trade barriers, making it easier for businesses to operate in the region.
What are the challenges of RCEP?
One challenge of RCEP is that it does not include the United States. This could lead to the US losing out on trade opportunities in the region. Another challenge is that RCEP does not address some of the key issues facing the global economy, such as Climate change and inequality.
What is India’s position on RCEP?
India has been reluctant to join RCEP, citing concerns about its impact on its domestic industries. However, India has recently softened its stance and is now in talks with the other RCEP members to try to reach an agreement that is acceptable to all sides.
What are the possible outcomes of RCEP?
The possible outcomes of RCEP include:
- A boost in trade and investment between the member countries, leading to economic growth and job creation.
- Reduced tariffs and other trade barriers, making it easier for businesses to operate in the region.
- The US losing out on trade opportunities in the region.
- RCEP not addressing some of the key issues facing the global economy, such as Climate Change and inequality.
- India joining RCEP or not joining RCEP.
What is the future of RCEP?
The future of RCEP is uncertain. The agreement is still under negotiation and it is not clear when it will be finalized. It is also not clear whether all of the member countries will be able to agree on the terms of the agreement.
The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement between 15 countries in the Asia-Pacific region. The agreement was signed in November 2020 and is expected to come into effect in 2022.
India is not a member of RCEP. However, the country has been negotiating with the other members of the agreement to join.
The following are some of the benefits that India could gain from joining RCEP:
- Increased trade: RCEP would eliminate tariffs on most goods traded between the member countries. This would give Indian businesses greater access to markets in the Asia-Pacific region.
- Reduced costs: RCEP would also reduce non-tariff barriers to trade, such as customs procedures and technical regulations. This would make it easier for Indian businesses to export to the region.
- Increased investment: RCEP would attract more investment from companies in the other member countries. This would help to create jobs and boost economic growth in India.
However, there are also some risks associated with India joining RCEP. These include:
- Increased competition: RCEP would expose Indian businesses to greater competition from companies in the other member countries. This could lead to job losses and lower profits for Indian businesses.
- Loss of Sovereignty: Some critics argue that RCEP would give too much power to the other member countries and could lead to a loss of sovereignty for India.
Overall, the benefits of joining RCEP for India outweigh the risks. However, the government will need to carefully manage the risks in order to ensure that the agreement is beneficial for the country.
Here are some MCQs on the topic of RCEP:
What is RCEP?
(A) A free trade agreement between 15 countries in the Asia-Pacific region
(B) A military alliance between 15 countries in the Asia-Pacific region
(C) A cultural exchange program between 15 countries in the Asia-Pacific region
(D) A tourism promotion program between 15 countries in the Asia-Pacific regionWhich of the following countries is not a member of RCEP?
(A) China
(B) Japan
(C) South Korea
(D) IndiaWhich of the following is a benefit that India could gain from joining RCEP?
(A) Increased trade
(B) Reduced costs
(C) Increased investment
(D) All of the aboveWhich of the following is a risk associated with India joining RCEP?
(A) Increased competition
(B) Loss of sovereignty
(C) Both (A) and (B)
(D) Neither (A) nor (B)Overall, the benefits of joining RCEP for India outweigh the risks.
(A) True
(B) False