Published by: ANUSHKA SHARMA

The Regional Comprehensive Economic Partnership was introduced during the 19th ASEAN meet held in 2011 November. The RCEP negotiations were started during 21st ASEAN Summit in Cambodia in 2012 November.

RCEP is a proposed Free Trade Agreement (FTA) between 10 member states of the Association of Southeast Asian Nations (Brunei), Burma (Myanmar), Cambodia, Indonesia , Laos, Malaysia, the Philippines, Singapore, Thailand and the 6 states with which include India, China, Australia, Japan, South Korea & New Zealand.

In total the grouping of 16 member nations include more than 3 billion people.

Objective of RCEP :

RCEP aims to create an integrated market with 16 countries, making it easier for products & services of each of these countries to be available across this region.

The negotiations are focused on the following :

Ø Trade in goods & services

Ø Investment

Ø Intellectual Property

Ø Dispute Settlement

Ø E – commerce

Ø Small & Medium Enterprises.

The 16 countries negotiating the world gross domestic product (GDP) & almost half’s the world population.

Key features of the RCEP :

A. Scope of Negotiations :

· RCEP will cover Trade in goods, trade in services, investments, economic and technical co-operation, intellectual property, competition, dispute settlement and other issues.

· ASEAN will be on the multilateral trade arrangement and has been repeatedly endorsed by India.

· “ASEAN Centrality” was also reiterated in the emerging regional economic architecture in the joint statement issued in the first round of negotiations.

B. Commitment levels :

The RCEP will have significant improvements in the existing ASEAN + 1 FTA’s, while recognizing the individual and diverse circumstances of the participating countries.

C. Negotiations for trade in goods :

Negotiations aim to achieve the high level of tariff liberalization, through building upon the existing liberalization levels between participating countries.

D. Negotiations for trade in services :

The RCEP seeks to achieve a modern and comprehensive trade agreement among members. The partnership is powerful vehicle to support the spread of global production networks and reduce the inefficiencies of multiple Asian trade agreements.

(E) Negotiations for investment

Negotiations will cover the 4 pillars of promotion, protection, facilitation and liberalization.

(F) Participating countries

Participants will be ASEAN members and FTA Partners. After the completion of the negotiations, countries other than the 16 states may join.

Significance of RCEP for India

India is not a party to two important regional economic blocs: The Asia-Pacific Economic Cooperation and the Trans-Pacific Partnership. New Delhi fears the TPP, although years away from reality, could mean losing some textile and drugs exports to countries like Vietnam, which has embraced both the TPP and the RCEP.

TPP is set to change the landscape of global trade.

For India, it is most likely to affect sectors like leather goods, plastics, chemicals, textiles and clothing.

The RCEP would enable India to strengthen its trade ties with Australia, China, Japan and South Korea, and should reduce the potential negative impacts of TPP and TTIP on the Indian economy.

The RCEP agreement would complement India’s existing free trade agreements with the Association of SouthEast Asian Nations and some of its member countries, as it would deals with Japan and South Korea.

It would be the world’s largest trading bloc covering a broad spectrum of issues such as trade in goods, services, investment, competition, intellectual property rights, and other areas of economic and technical cooperation.

From India’s point of view, the RCEP presents a decisive platform which could influence its strategic and economic status in the Asia-Pacific region and bring to fruition its act east policy.

RCEP will facilitate India’s integration into sophisticated “regional production networks” that make Asia the world’s factory. The RCEP is expected to harmonize trade-related rules, investment and competition regimes of India with those of other countries of the group. Through domestic policy reforms on these areas, this harmonization of rules and regulations would help Indian companies plug into regional and global value chains and would

unlock the true potential of the Indian economy. There would be a boost to inward and outward foreign direct investment, particularly export-oriented FDI.

India enjoys a comparative advantage in areas such as information and communication technology, IT-enabled services, professional services, healthcare, and education services. In addition to facilitating foreign direct investment, the RCEP will create opportunities for Indian companies to access new markets. This is because the structure of manufacturing in many of these countries is becoming more and more sophisticated, resulting in a “servicification” of manufacturing.

India and the U.S.

Negotiations for RCEP began in 2013 and initially included India, whose presence was seen by some members as a counterweight to China. But New Delhi last year declined to join RCEP, stating that some of its "issues of core interest" remained unresolved. Iswaran told CNBC the door remains open for New Delhi to rejoin the agreement when it wants to."India has been involved in a lot of the negotiations and would understand the nuances and I think all the member countries remain open to the prospect of India joining at an appropriate time," he said.

The United States under President Barack Obama was part of a rival regional trade pact called the Trans-Pacific Partnership, which excluded China.

The TPP never went into effect as the U.S. left the agreement under President Donald Trump and a new version of that pact emerged, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The CPTPP was signed by all of the TPP signatories except the U.S. Iswaran said Singapore as well as other Asian partners value U.S. engagement in the region. "I think the key point is we want to deepen the engagement of the U.S. economy with this part of the world," he said, adding that could either be through RCEP or CPTPP or some other agreement.

What would RCEP mean for the United States?

If the 16 prospective RCEP members do ink some sort of preliminary deal on Monday, it will deal another blow to the United States and its position in the Asia-Pacific, which already took a hit when the rest of the TPP members ratified the trade pact without Washington. Even as the Trump administration tries to decouple the U.S. and Chinese economies and force global manufacturing firms to move out of China, RCEP would further promote intra-Asian economic integration, insulating the region more from the United States both economically and strategically.

Under Trump, the United States has struggled to reach even modest new trade agreements with Mexico, Canada, South Korea, and Japan. Meanwhile, many of those countries have already forged ahead in the slimmed-down TPP and could open up more regional trade opportunities with RCEP. That would mean fewer markets for U.S. goods and even stronger Asian supply chains that could compete against U.S. manufacturers.

But there’s a strategic component to RCEP, too—much like the original vision behind the Obama administration’s embrace of the TPP. RCEP, if completed, would amount to a free trade agreement between China and some of America’s closest allies, such as Japan, South Korea, and Australia, not to mention Vietnam, Singapore, Indonesia—and India.

“Their closer economic interdependence with China could give Beijing strategic leverage over these U.S. allies,” the National Bureau of Asian Research concluded in a study.

India's concerns

“…The gift type of the RCEP Agreement doesn't absolutely replicate the fundamental spirit and therefore the in agreement guiding principles of RCEP. It additionally doesn't address satisfactorily India’s outstanding problems and considerations. In such a scenario, it's out of the question for India to affix RCEP Agreement," PM Modi had same at the national capital summit last year saying India's call to drag out of the written agreement discussions.

One of the key problems India had was a possible threat to native producers because it believed that elimination of tariffs below RCEP would open its markets to a flood of imports. national capital was significantly involved regarding the threat of evasion of rules of origin thanks to tariff differential, inclusion of honest agreement to deal with the problems of trade deficits and gap of services.

The concern is palpable because the existing trade agreements and tariff alleviation policies have light-emitting diode to low cost imports with widened additional of cheaper product. the rise in import demand over the last fifteen years shows that India's domestic business has not been able to vie with the imports. As a result, the domestic market has seen associate degree invasion of foreign product, particularly within the sectors of edible oil process, vehicles, natural philosophy, medium and white merchandise.

For instance, specialists warned that India’s massive dairy farm business would be compact thanks to the RCEP as Australian and New Zealand producers might flood Indian markets and exterminate chiefly unorganised and inefficient small-scale Indian producers.

Had the Indian business been competitive enough, a mega-trade agreement just like the RCEP would have offered a barrier-free regional marketplace for their product and would are contributive for “Make-in-India”. The deal would have brought down import duties on eighty per cent to ninety per cent of the products, along side easier service and investment rules. Sadly, Indian makers haven't created the simplest out of the imports by creating final merchandise at reduced costs.

As Nilanjan Ghosh wrote in ORFOnline in Gregorian calendar month this year, "it may be a unhappy reflection on the Indian producing that once nearly 3 decades of economic reforms, Indian producing is nonetheless to mature to be competitive enough to face international competition during a level enjoying field."

Hence, a written agreement just like the RCEP can any hurt India's burgeoning deficit with the taking part countries. India’s history of linguistic communication a bunch of trade agreements (FTAs) and comprehensive economic cooperation agreements (CECAs) with the South-east Asian nations has additionally not omen well for the country. The FTAs and CECAs were followed by its burgeoning trade deficits. India includes a huge deficit with Australia and New Zealand moreover.

The Modi government had additionally raised the problem of inaccessibility of MFN (Most Favoured Nation) obligations, wherever it might be forced to convey similar advantages to RCEP countries that it gave to others. India additionally saw red flags over the move to use 2014 because the base year for tariff reduction.

Reasons for India's Withdrawal

Unfavourable Balance of Trade: Though trade has increased the post-Free Trade Agreement with South Korea, ASEAN countries and Japan, imports have risen faster than exports from India.

According to a paper published by NITI Aayog, India has a bilateral trade deficit with most of the member countries of RCEP.

Chinese Angle: India has already signed FTA with all the countries of RCEP except China. Trade data suggests that India’s deficit with China, with which it does not have a trade pact, is higher than that of the remaining RCEP constituents put together. This trade deficit is the primary concern

for India, as after signing RCEP cheaper products from China would have flooded the Indian market. Further, from a geopolitical perspective, RCEP is China-led or is intended to expand China's influence in Asia.

Non-acceptance of Auto-trigger Mechanism: To deal with the imminent rise in imports, India had been seeking an auto-trigger mechanism.

Auto-trigger Mechanism would have allowed India to raise tariffs on products in instances where imports cross a certain threshold.

However, other countries in the RCEP were against this proposal.

Ÿ Global Economic Stagnation due to Covid-19: With global trade and the economy facing a steep decline due to Covid-19 pandemic, RCEP can serve as a bulwark in containing the free fall of the global economy and re-energising economic activity.

Ÿ Further, the RCEP presents a unique opportunity to support India’s economic recovery, inclusive development and job creation even as it helps strengthen regional supply chains.

Ÿ Need For Economic Realism: India should deter seeing RCEP only from the Chinese perspective.

Ÿ India should acknowledge that the trade bloc represents 30% of the global economy and world population, touching over 2.2 billion people, and staying out of RCEP may result in suboptimal economic growth without leveraging Asia-Pacific demand.

Ÿ In this regard, India can draw inspiration from Japan & Australia, as they chose to bury their geopolitical differences with China to prioritise what they collectively see as a mutually beneficial trading compact.

Ÿ Strategic Need: It is not just because gains from trade are significant, but the RCEP’s membership is a prerequisite to having a say in shaping RCEP’s rules.

Ÿ This is necessary to safeguard India’s interests and the interests of several countries that are too small to stand up to the largest member, China.

Ÿ Moreover, staying out of RCEP may also affect India's Act East policy.

Implication on Indian Economy

Results recommend that there's a positive overall welfare impact thanks to RCEP on the Indian economy, and balance of trade improves. However, the vehicles Associate in Nursingd auto-parts trade in India can specifically witness an adverse impact, unless Associate in Nursing annual productivity growth of a minimum of two.5% is achieved. The paper thus suggests that from the attitude of India, it's vitally vital to specialize in up domestic productivity within the producing sector, whereas considering any future RTAs, together with RCEP, that negotiates a phased tariff liberalisation.

Critical Analysis of India's decision to refrain (Pros and Cons)


Discuss the execs of change of integrity RCEP. e.g a lot of access to association markets, additionally to facilitating foreign direct investment, the RCEP can produce opportunities for Indian corporations to access new markets. this is often as a result of the structure of producing in several of those countries is turning into a lot of and a lot of subtle, leading to a “servicification” of producing, it might complement India’s existing trade agreements with the association and a few of its member countries. It will address challenges emanating from implementation issues vis-à-vis overlapping agreements, that is making a “noodle bowl” scenario obstructing effective utilization of those FTAs; would facilitate Bharat contour the principles and laws of doing trade, {which can|which can|which is able to} scale back trade costs; RCEP will facilitate India’s integration into subtle “regional production networks”.


Discuss the cons. E.g a lot of access to China particularly can hurt domestic trade and create in Bharat programme, correct standards and processes don't seem to be in situ in Bharat limiting India’s capability to stop imports of inferior quality; India’s exports to RCEP account for concerning V-day of its total exports and imports from RCEP comprise thirty fifth of total imports. India’s deficit with RCEP has up from $9 billion in FY05 to $83 billion in FY17, of that China alone accounts for over hr of the deficit; a lot of developed RCEP countries like Australia and Singapore are unwilling to accommodate India’s demands to liberalise their services regime and permit freer quality of Indian employees etc.


Acknowledging India’s economic heft and value as a market, the RCEP members have left the door open for India for inviting it to be an observer member and also waived a critical 18-month cooling period for interested applicants.

Given the global economic scenario in present times and the near future, it would be in India’s interest to dispassionately review its position on RCEP and carry out structural reforms that will help India to mitigate some of the repercussions arising from the RCEP.