REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP (RCEP):
Context: RCEP is a proposed free trade agreement between the 10 member states of the ASEAN and its six FTA partners.
In the two day Bangkok ministerial on 11-12 October trade ministers of 15 other countries failed to issue a joint statement as issues raised by India did not find enough support among other members.
- RCEP negotiations were formally launched in November 2012 at the ASEAN summit in Cambodia.
- RCEP will be the world’s largest economic bloc covering nearly half of the global economy.
- The purpose of RCEP is to create an integrated market spanning all 16 countries, making it easier for products and services of each of these countries to be available across this region.
- The negotiations are focused on areas like trade in goods and services, investments, economical and technical cooperation, intellectual property, competition, dispute settlement, e commerce, and small and medium enterprises.
SIGNIFICANCE OF RCEP
Significance of RCEP lies in the fact that it will be the world’s largest economic bloc, accounting for almost half of world’s population , contributing over a quarter of worlds exports , make up around 30% of global GDP.
- Being part of RCEP would allow India to tap into a huge market, if the domestic industry becomes competitive.
- India enjoys a comparative advantage in the services sector such as ICT, healthcare and education services etc. which will create an opportunity for Indian companies to access new markets.
- Pharmaceuticals and cotton yarn are also confident of gains.
- Membership of RCEP would prove a way for India to enhance its strategic and economic status in the Asia-pacific region.
CONCERNS REGARDING RCEP
- Under RCEP India would be required to eliminate tariffs on 74% of goods from china, Australia and Newzealand and 90% goods from Japan, South Korea and ASEAN.
- In the midst of an economic slowdown India faces risk of becoming a dumping ground for cheap Chinese goods.
- Given the poor track record of extracting benefits from FTAs with these countries there are fears that India’s trade gap with these countries may widen further if it signs RCEP deal.
- Industries like dairy and steel have demanded protection.
- The textile industry has raised concerns about growing competition from neighboring countries with cheaper and more efficient processes.
- There are also demands from the central Arecanut and cocoa marketing and processing cooperative (CAMPCO) limited to exclude pepper and Arecanut from the scope of RCEP.
- Under the chapter of e-commerce India has asked for data localization.
- RCEP grouping has said that India’s demand for auto trigger should also be settled bilaterally.
While RCEP will lead to a modern, comprehensive, high quality and mutually beneficial economic partnership agreement among the ASEAN member states and ASEAN’s FTA partners, there are several sections of domestic industry that fear the deal may harm their interests.
Hence India needs to reform the domestic market policies and address the structural issues in the domestic market before signing the deal, so that Indian companies can take the maximum advantage of the opportunity that the RCEP deal provides.
QUESTION: Bring out the reasons behind India’s decision to not join RCEP. (15marks)