Membership of the Regional Comprehensive Economic Partnership would allow India to overcome its stunted trading relationship with its neighbours, writes Sourish Mohan Mitra
Every country requires economic partnerships to grow its businesses and economy. India has a fairly balanced portfolio of partnerships with individual countries, and associations of countries, via bilateral trade agreements and free trade agreements (FTAs). What eludes us is being part of strong and effective country-level associations. While India is a member of the South Asian Association for Regional Co-operation (SAARC) and South Asian Free Trade Area (SAFTA), trade relations have not materialized significantly in these forums due to a lack of trust and transparency in the region.
However, another regional forum has been on the horizon for the past several years. The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement in the Asia-Pacific region between the 10 member states of the Association of Southeast Asian Nations (ASEAN), namely, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, and their five FTA partners, Australia, China, Japan, New Zealand and South Korea. Until recently, India, also an FTA partner of ASEAN, was part of negotiations to consummate its association.
But even though the negotiations by India were ongoing since 2012, they could not be concluded successfully. Consequently, on 4 November 2019, Prime Minister Narendra Modi announced during an RCEP summit in Bangkok that the present form of the RCEP agreement does not fully reflect the basic spirt and the agreed guiding principles of the RCEP. Since it also did not address satisfactorily India’s outstanding issues and concerns, it was not possible for India to join.
Soon after, Japan, Thailand, Australia and China also raised concerns and expressed interest in keeping the channel open for India to come back to the negotiating table. The ASEAN secretariat invited India to a recent meeting of the RCEP in Bali in the first week of February – which it skipped. External Affairs Minister S Jaishankar mentioned that India had not closed its doors to the RCEP and would carry out a cost-benefit analysis to evaluate its merit.
The RCEP is a forum which, when formed, will be a large trading organization consisting of Asia-Pacific nations. The forum is keen to have India join it and has been quite vocal about its desires, and this is not the time for India to behave haughtily with prospective suitors relentlessly pursuing it.
The RCEP is touted to be a powerful organization as it potentially includes more than three billion people, or 45% of the world’s population, and a combined GDP of about US$21.3 trillion, accounting for about 40% of world trade. India’s decision not to join the RCEP has reduced its impact in the region significantly.
Playing hard to get
What could have been so compelling for India to withdraw from the RCEP negotiations? Commerce and Industry Minister Piyush Goyal had subsequently informed the parliament that India decided to stay out of the trade agreement as its concerns and outstanding issues were not being fully addressed in the pact.
He told the Rajya Sabha, India’s upper house of parliament, that the RCEP did not “adequately” address India’s concerns over issues like non-tariff barriers to trade, and opaqueness in subsidy regimes in some countries, and that these forced the country to back out from the trade deal.