Premature membership of RCEP would not serve Indian interests

Livemint     3rd December 2020     Save    
QEP Pocket Notes

Context: Recently, the Regional Comprehensive Economic Partnership (RCEP) deal has been signed by 15 nations from the Asia-Pacific region after India had last year decided to withdraw from the proposed grouping.

India and RCEP: An analysis

  • Reasons for India’ Withdrawal from the block:
  • Existing large trade deficit: with China (Risk of further cheap chines imports like electronics) and 10 other RCEP countries:
  • Non-acceptance of India’s demand for easier access to its services in member countries:
  • Denial of substantial concessions in areas like work visas for its information technology-enabled services.
  • Two of India’s proposals—an RCEP business travel card and an RCEP service supplier card—failed to find favour with a majority of the bloc’s members.
  • Disappointing performance of merchandised export during the Free Trade Agreement (FTA) era (2010-2019, growth rate only 2.5%) in comparison to pre-FTA era (2001-2011, growth rate 18%).
  • Even though India operationalized big trade agreements with the Association of South East Asian Nations (ASEAN), Japan, Korea, and separately with Malaysia from 2010 onwards.
  • Non-competitiveness of Indian industries in global market.
  • Opportunities for India, if joined the block:
  • Integration on Indian industries in regional and global value chains.
  • Access to the world’s largest trading block, even larger than the European Union (EU).
  • Way forward:
  • Addressing structural issues: That hampers domestic industries competitiveness.
  • Economic and trade policy reforms on the domestic front to ensure integration with regional value chains.
  • Promoting economies of scale: To ensure export competitiveness. For e.g. the Chinese manufacturing industry.

Conclusion: India needs to first address structural constraints on its industrial competitiveness before joining RCEP or any other trading block.

QEP Pocket Notes