The Regional Comprehensive Economic Partnership aims to strengthen the ties between the emerging and developed economies. The mega trade block will constitute 30% of the global population and also constitute 30% of global GDP. If India would have joined RCEP this data goes by 50%. It is evident that if India would have joined RCEP it would have covered 50% of the global population.
Introduction of RCEP (Regional Comprehensive Economic Partnership) was done in November 2011 however negotiation started in November 2012 during the ASEAN summit in Cambodia. 16 countries started the negotiations for the creation of an integrated market. The aim of this negotiation was to give access to products and services across the region like easy access to products and services among the nations. A few agreements which were covered in the RCEP include
1. Mutual beneficial economic relations
2. Trade in goods.
3. Sanitary and phytosanitary measures
4. Trade remedies and Trade in services
5. Custom procedures and trade facilitation.
The TPP12 (USA+11nations) which was the US led excluded China, however in 2017 USA, under Trump withdraw itself from CPTPP making this TPP11 also known as CPTPP11. It was estimated that the US in CPTPP was a real profit for the USA and china’s economy might have suffered a loss of $40bn annually. It was also estimated that CPTPP with the USA included would have generated a global economic benefit of $492bn. However, without the USA it was just $192 bn. China started then considering RCEP as a major block to counter US efforts.
India was obviously the country that had a huge role to play in RCEP. ASEN+5(Australia, China, Japan, South Korea, New Zealand) was in a hope that India will join RCEP to make this trade bloc one of the largest trade blocs of the entire world. India was also keen to join the RCEP. However, India preferred opting out of RCEP and the reason was predominantly the flooding of cheap Chinese goods in the Indian market which might make the local industry suffer. Few other reasons include the cheap imports may further ruin our dairy and agriculture industry. There were other reasons cited by experts that India has an FTA (Free trade agreement) with 12 countries out of 15 countries that is in the trade bloc. If we dive further, we will realize that the said reason was one of the primary reasons for Why India should have joined RCEP? India already has FTA; it will further enhance the trade relations with these economies and it will benefit India. It is now a different angle whether RCEP would benefit India or harm India, the matter of debate is now why India has opted out? If it is the dairy sector are, we doing any reform to make our dairy industry globally competitive. Why we are going in a direction of having protectionist measures. There are high chances the other member might get upset with the fact that India has not joined RCEP. Exclude china and we can see a broader picture. Other member wants India to join this mega trade block so that China doesn’t lead the show.
Now if India outside RCEP makes china the supreme power in the RCEP, it will be an entire china show which the world will witness. Even they are aware that if India is part of this mega trade bloc their views/opinions might get considered which is highly unlikely without India. Countries like Japan, New Zealand are in a win-win situation as they are now part of both the major trade bloc i.e., RCEP AND CPTPP. As per the report of PWC India will overtake the USA as the 2nd largest economy by 2050 basis GDP and PPP. Joining RCEP would have further strengthened the position of the Indian economy.
While there were several reasons cited by analysts regarding not joining RCEP, it will be interesting to see now how RCEP will progress. Beijing definitely has an upper hand because this agreement continues to dominate this mega trade bloc. India has FTA with ASEAN, however, RCEP should have to increase India’s competitiveness in the global market. India is considered to be the 2nd largest economy by 2050 bypassing the USA but if India is not a member of these mega blocs then there are high chances that this forecast may not come true. India definitely has the potential to negotiate the terms but having a clear thought of joining RCEP and then backing out doesn’t seem to be going in India’s Favor. It will be interesting to see how other RCEP members are considering India now. It seems that they want India as a member. But we have to wait and see how this is going to happen? What would be India’s next step? What would India do to make our industry more competitive? And does India has moved towards more protectionism? These questions still have the weightage but this is not the right time for the analysis and we have to see what India is up to.