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Regional Comprehensive Economic Partnership (RCEP) pact:

Regional Comprehensive Economic Partnership (RCEP) pact:

  • Without India, the RCEP entered into force in November 2020. Ten ASEAN countries – Singapore, Thailand, Vietnam, Cambodia, Indonesia, Malaysia, Brunei, Laos, Myanmar, and the Philippines – as well as five key partners have signed the agreement (China, Japan, South Korea, Australia and New Zealand).

 

RCEP’s Goals & Objectives:

  • To help emerging economies catch up with the rest of the world, tariffs should be reduced, services trade should be opened up, and investment should be encouraged.
  • Allowing enterprises to export a product anywhere within the bloc without having to meet separate regulations for each country will help them save money and time.
  • It also mentions intellectual property, but it excludes environmental and labour protections.

 

The Regional Comprehensive Economic Partnership (RCEP) is seen as a viable alternative to the Trans-Pacific Partnership, another key multinational agreement (TPP). China and India, two major Asian nations, are not included in the TPP pact.

 

The RCEP’s Potential

  • The RCEP member states have a combined population of 3.4 billion people and a collective GDP of $49.5 trillion.
  • If nations like China, India, and India continue to develop at their current rates, the overall GDP of the RCEP might reach $100 billion by 2050.
  • On January 23, 2017, US President Donald Trump issued a memorandum announcing the United States’ departure from the Trans-Pacific Partnership (TPP), a move that has shifted the world’s attention to the Regional Comprehensive Economic Partnership (RCEP).
  • The RCEP will address goods and services trade, investment, economic and technical cooperation, intellectual property, dispute resolution, and other topics.

 

What Does the RCEP Mean for Business?

  • Given that the 15 RCEP participating nations account for about half of the world’s population, 30% of global GDP, and over a quarter of worldwide exports, RCEP has the potential to provide considerable possibilities for enterprises in the East Asia region. The Regional Comprehensive Economic Partnership (RCEP) will establish a framework for decreasing trade barriers and ensuring enhanced market access for goods and services for enterprises in the region.

 

The RCEP’s Importance for India

  • The RCEP will promote India’s Act East policy and will have an impact on India’s economic standing among other South Asian countries.
  • Over the last decade, India’s trade with the RCEP group of countries has climbed as a share of its total trade.
  • As a result of the RCEP’s increased economic integration with Southeast Asian and East Asian countries, India will have access to these countries’ huge regional markets, which will benefit its economy.
  • In fields like ICT, IT-enabled services, healthcare, and education, India has a competitive advantage. The RCEP would aid in the expansion of these markets as well as the attraction of more FDI into these sectors.
  • It would also help India’s SMEs integrate more efficiently into regional value and supply chains.
  • The COVID-19 pandemic has had a significant impact on global economic situations. The RCEP can operate as a bulwark in containing the global economy’s free slide and re-energizing economic activity.

 

India’s primary concerns regarding RCEP:

  • India has a trade deficit with 11 of the RCEP members, and it is the only one not currently pursuing a bilateral or multilateral free trade agreement with China.
  • Country of Origin: India has made tagging “Country of Origin” on all products a subject of contention in the RCEP talks. India wants strong origin regulations to prevent Chinese goods from flooding the nation via member countries with lower or no tariffs.
  • Chinese clothes enter India duty-free through the South Asia Free Trade Pact’s duty-free route and the Duty-Free Quota-Free window from Bangladesh. Ensure that the RCEP countries open their markets to Indian workers (services).
  • India has expressed reservations about the RCEP talks including e-commerce.
  • The RCEP draught opposes data localisation, but India is concerned about the monopoly power of digital behemoths such as Tencent and Alibaba.
  • India has insisted that any deal on goods trade cannot be accepted without agreements on services and investments being adopted concurrently, and that any agreement on goods trade without simultaneous agreements on services trade and investment will only undermine India’s interests.
  • According to India, the most value addition using indigenous inputs must take place in the country from which a product is exported. The average percentage of domestic content required to earn originating status for a product is 40-60% globally.
  • Staying out of the RCEP could have an impact on India’s Act East policy.

 

The Reasons for India’s Withdrawal from the Regional Comprehensive Economic Partnership (RCEP)

  • The first reason was that, following the Free Trade Agreement with South Korea, ASEAN countries, and Japan, India’s imports soared while exports did not. With RCEP members, India had a bilateral trade deficit.
  • Following the signing of the RCEP, India would be required to maintain trading links with China, which would have resulted in China flooding Indian markets with cheaper Chinese goods. This would have resulted in India’s trade deficit with China being the biggest in the world.
  • India was concerned about a probable violation of origin restrictions.
  • India, unlike the other RCEP members, was advocating the Auto-trigger Mechanism. As a result, India may increase tariffs on products whose imports have exceeded a particular threshold.

Progress made

  • The ASEAN countries are eager to have India join the partnership, and have offered India a concessionary offer of just opening up around 83 percent of its market, as opposed to the 92 percent mandated in the RCEP pact.” And, in response to India’s concerns about further opening its market to China and thereby increasing the trade gap between the two countries, the RCEP allows bilateral agreements to be established, allowing India to open up to China gradually rather than all at once.”
  • Some of India’s other objectives, such as convincing the other RCEP nations to liberalise their services markets and allow for more free movement of service sector experts, have been met with some success.
  • At least 13 nations, including Australia, Japan, and New Zealand, have expressed opposition to India’s proposal for stringent criteria to determine a product’s source country (country of origin), on the basis of which tariff reductions or taxes are granted.

 

Way forward:

Giving up the opportunity to join RCEP would mean India would not only miss out on regional trade, but also on the power to shape the group’s regulations and investment requirements. Above all, at a time when the world is uncertain and multilateralism and the international economic system are under threat, a negative message on the RCEP would jeopardise India’s economic growth prospects. In future negotiations, India should move with caution so that we can maximise our gain from the group while posing the least threat to our own economy. The RCEP, the world’s largest regional trade pact, has said that India is welcome to participate.

 

MCQs for practice:

  1. Which of the following countries are members of ASEAN?
  2. Singapore, Thailand, Vietnam, Cambodia, Indonesia
  3. Singapore, Thailand, Japan, Cambodia, Indonesia,
  4. Singapore, India, Vietnam, Cambodia, Indonesia,
  5. Singapore, Thailand, China, Cambodia, Indonesia,

 

Correct answer: A

Ten ASEAN countries – Singapore, Thailand, Vietnam, Cambodia, Indonesia, Malaysia, Brunei, Laos, Myanmar, and the Philippines

 

  1. Consider the following statements regarding RCEP:
  2. It allows enterprises to export a product anywhere within the bloc without having to meet separate regulations for each country.
  3. It mentions intellectual property, environmental and labour protections.
  4. India has joined RCEP.

 

Select the incorrect option:

  1. 1 only
  2. 1&2 only
  3. 2&3 only
  4. All of the above

 

Correct answer: C

 

RCEP’s Goals & Objectives:

  • To help emerging economies catch up with the rest of the world, tariffs should be reduced, services trade should be opened up, and investment should be encouraged.
  • Allowing enterprises to export a product anywhere within the bloc without having to meet separate regulations for each country will help them save money and time.
  • It also mentions intellectual property, but it excludes environmental and labour protections.

India has not joined RCEP yet.

 

  1. What are the major concerns of India regarding RCEP?
  2. India has a trade deficit with 11 of the RCEP members.
  3. India is concerned about the monopoly power of digital behemoths.
  4. Staying out of the RCEP could have an impact on India’s Act East policy.

 

Select the correct option:

  1. 1 only
  2. 1&2 only
  3. 3 only
  4. All of the above

Correct answer: D

India’s primary concerns regarding RCEP:

  • India has a trade deficit with 11 of the RCEP members, and it is the only one not currently pursuing a bilateral or multilateral free trade agreement with China.
  • India has expressed reservations about the RCEP talks including e-commerce.
  • The RCEP draught opposes data localisation, but India is concerned about the monopoly power of digital behemoths such as Tencent and Alibaba.
  • India has insisted that any deal on goods trade cannot be accepted without agreements on services and investments being adopted concurrently, and that any agreement on goods trade without simultaneous agreements on services trade and investment will only undermine India’s interests.
  • According to India, the most value addition using indigenous inputs must take place in the country from which a product is exported. The average percentage of domestic content required to earn originating status for a product is 40-60% globally.
  • Staying out of the RCEP could have an impact on India’s Act East policy.