Should India Join RCEP – Free PDF Download

RCEP is a proposed Free Trade Agreement (FTA)

BACKGROUND

• The concept of the RCEP was promoted by ASEAN countries in 2011.
• But an RCEP declaration came at the ASEAN summit in Cambodia in 2012, and negotiators met for the first time in 2013.
• Six years later, the main stumbling blocks for the RCEP are the India-China trade relationship, as well as some concerns from Australia and New Zealand.
• In May 2019, China proposed a plan to conclude the negotiations without the naysayers, i.e. take the ASEAN+3 (China, Japan and South Korea).
• While leaving space for India, Australia and New Zealand to join later.
• But given the size of India’s market, the move was opposed by most in the grouping.

INTRODUCTION

• Broadly, views on RCEP are divided between two schools of thought.
• The first believes that the RCEP is vital for India as it accounts for 25% of global GDP, 30% of global trade, 26% of FDI flows, and 45% of the total population.
• The second states that India’s experience with FTAs has not been good and its trade deficit with major FTA partners has increased significantly.

HOW IT WILL BENEFIT INDIA?

• It will give India first mover’s advantage.
• India would give up the chance to frame the grouping’s rules and investment standards if it fails to join the RCEP at this stage.
• It will give boost to India’s Act east policy through reduction in trade cost.
• India enjoys a comparative advantage in the services sector such as information and communication technology, healthcare, and education services etc.
• Thus, RCEP will create opportunities for Indian companies to access new markets.
• It could enhance strategic and economic status in the Asia-Pacific region.

WHAT COULD BE NEGATIVE CONSEQUENCES OF RCEP?

• The biggest concern in the whole deal is China.
• China wants zero tariffs for over 90% tariff lines.
• However, this could see low-cost “Made in China” goods kill locally manufactured goods.
• The worst hit manufactures through RCEP could be- steel and aluminum, copper, pharmaceuticals and textile.
• It could threaten farm livelihoods, autonomy over seeds and also endangers the country’s self–sufficient dairy sector.
• India could experience a disproportionate loss of customs revenue.
• India’s experience with FTAs has not been encouraging, except for the FTA with Sri Lanka.

STRATEGY INDIA COULD ADOPT?

• First, India should continue to maintain its position of proposed dual tariff structure in the RCEP.
• Second, it must emphasise on a special and differential treatment based on stages of economic development.
• Third, India should try to evolve a framework to negotiate dumping of goods.

WAY FORWARD

• Given the costs and benefits in RCEP, it is important for India to strike a balance between domestic and external interests to minimise the adverse effects of RCEP.
•  At the same time, it is equally important to grasp the possible opportunities.

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