After negotiations that dragged on for seven years, Prime Minister Narendra Modi on Monday said that India has decided to not join the the Regional Comprehensive Economic Partnership (RCEP).
Leaders of countries involved in the RCEP said that they had resolved differences but India was not in agreement. China, according to Reuters, said 15 members had agreed to move ahead, while leaving the door open for India to join.
The bloc includes 10 ASEAN members — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam — plus China, South Korea, Japan, India, Australia and New Zealand.
During his speech at the RCEP Summit in Bangkok, Modi said, “The present form of the RCEP agreement does not fully reflect the basic spirt and the agreed guiding principles of the RCEP. It also does not address satisfactorily India’s outstanding issues and concerns. In such a situation, it is not possible for India to join RCEP Agreement.”
What is RCEP?
The RCEP aims to create an integrated market, making it easier for products and services of member countries to be available across this region.
RCEP originally would have included about 3.6 billion people and encompassed about a third of world trade and global GDP, according to The Associated Press.
“RCEP will significantly boost the region’s future growth prospects and contribute positively to the global economy,” a statement issued after the leaders involved in RCEP met said.
The negotiations were launched by ASEAN leaders and six other countries during the 21st ASEAN Summit in Phnom Penh in November 2012.
What are India’s concerns?
There was domestic opposition in India, including from the Congress and RSS. Congress leader Rahul Gandhi had, in a tweet, said that “make in India” has become “buy from China”.
“RCEP will flood India with cheap goods, resulting in millions of job losses and crippling Indian economy.”
Even the RSS had called for a nationwide campaign against the deal. “RCEP shackles the hands of the government to take the required policy measures to strengthen manufacturing and agriculture,” RSS economic leader Ashwani Mahajan was quoted as saying by Reuters.
- India has expressed concerns that the agreement, which requires the gradual elimination of tariffs, would open its markets to a flood of cheap Chinese goods and agricultural produce from Australia and New Zealand that would harm local producers.
The RCEP, according to Moneycontrol, could force India to cut duties on about 90% of the goods that are currently imported to India over the next 15 years.
- The main advantage, Jayshree Sengupta pointed out in an article for The Tribune, would have been that India would be able to purchase its raw material and intermediate goods at concessional prices from other members under the mega FTA.
- However, there have also been concerns about India’s trade deficit with RCEP countries. India registered a trade deficit with as many as 11 RCEP member nations in 2018-19, with China topping the list, according to Business Standard.
In an interview with Bangkok Post on 2 November, Modi had said, “We believe that for this, addressing our concerns over unsustainable trade deficits is important. It needs to be recognised that opening the vast Indian market must be matched by openings in some areas where our businesses can also benefit.”
- India, according to The Times of India, also had an issue with using 2014 as the base year for tariff reduction. The new tariff regime, the report added, will see duties go back to 2014 levels. India wants to change the base year to 2019.
- India also wanted an auto-trigger mechanism which would have allowed it to check sudden import surges for a period of six months when imports from an RCEP member exceeded a particular threshold, The Economic Times said in a report.
(With inputs from agencies)