Context: India’s opting out of RCEP appears more debatable in terms of its economic rationale.
- The Regional Comprehensive Economic Partnership (RCEP) was signed on 15.11.2020 by 15 countries led by China, Japan, South Korea, Australia, New Zealand and the 10-state ASEAN grouping.
- It created one of the world’s largest trading blocs.
- India after seven years of protracted negotiations decided last November to exit the grouping.
Why India opted out of RCEP?
- India had justified its decision on following grounds:
- High trade deficit: Protecting its economy from burgeoning trade deficits with a majority of the 15 RCEP members.
- Lack of safeguards: It had cited the grouping’s refusal to accede to its requests on safeguards as a deal breaker.
What are the significances of RCEP?
- RCEP members now account for about 30% of the global GDP and a third of the world’s population.
- The timing of the accord presents a unique opportunity to support economic recovery, inclusive development and job creation.
- It will help in strengthening regional supply chains.
Why India should have joined the RCEP?
- Impact of the pandemic: Global trade and the economy are falling due to the COVID-19 pandemic.
- Lack of markets: New infections in Europe and the U.S. might prompt fresh restrictions leading to shrinkage of export markets for India.
- Uncertain Global order: There is heightened tariff uncertainty generated by the deadlocked Brexit negotiations between Britain and the E.U. which will also impact India’s trade.
- But, RCEP economies are re-energising economic activity: The east Asian and Pacific countries including China, South Korea, Vietnam, Australia and New Zealand having contained the pandemic successfully and have restarted their economies. This would have provided an alternative market for India if joined.
What is the way forward?
- Bury the geopolitical differences with China and prioritise what is collectively seen as a mutually beneficial trading compact.
- For example, among the ASEAN signatories Vietnam and the Philippines, which not only continue to have their share of disputes with Beijing but also suffer significant trade imbalances with Asia’s largest economy.
- Acknowledging India’s value as a market the RCEP members have left the door open.India should reconsider its stance as RCEP members have also waived a key 18-month cooling period for interested applicants.
- India needs to dispassionately review its position and embrace openness rather than protectionism.