- Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, Vietnam) and the six states with which include India, China, Australia, Japan, South Korea and New Zealand.
- In total, the grouping of 16 nations includes more than 3 billion people, has a combined GDP of about $17 trillion, and accounts for about 40 percent of world trade. If negotiated successfully, RCEP would create the world’s largest trading bloc and have major implications for Asian countries and the world economy.
- The 33rd edition of the ASEAN Summit concluded on November 15, 2018 at Suntec Singapore Convention Centre, Singapore.
- The Summit also saw the conclusion of other related summits like 13th East Asia Summit (EAS), 2nd Regional Comprehensive Economic Summit, (RCEP) and ASEAN plus summits. The Heads of participating countries of Regional Comprehensive Economic Partnership (RCEP) along with the ASEAN Members and ASEAN’s Free Trade Agreement (FTA) partners Australia, China, India, Japan, Korea, and New Zealand attended the 2nd RCEP Summit on November 14, 2018 in Singapore.
- RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia.
- It aims to cover goods, services, investments, economic and technical cooperation, competition and intellectual property rights under its ambit.
- RCEP is viewed as an alternative to the Trans-Pacific Partnership (TPP), a proposed trade agreement that includes several Asian and American nations but excludes China and India.
Importance of RCEP
- The RCEP member countries represent 49% of the world’s population and accounts for 30% of world GDP. It also makes up 29% of world trade and 26% of world FDI inflows.
- According to estimates if the RCEP is implemented it would bring large income gains to not only Asia but the world economy.
- RCEP will also reduce the overlapping between Asian FTAs.
- RCEP will reduce the trade barriers in Asia and the new rules will be consistent with WTO agreements.
- RCEP will promote easier FDI flows and technology transfers by multinational corporations
- RCEP and protectionism: With rise of protectionism, RCEP is important for promoting free trade in the region
Achievements on 2nd RCEP Summit 7th RCEP Inter-sessional Ministerial Meeting concluded in Singapore
- Reaffirmed our commitment made at the launch of the negotiations to achieve a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement establishing an open trade and investment environment in the region to facilitate the expansion of regional trade and investment and contribute to global economic growth and development.
- Undertook the collective commitment to deliver on the expeditious conclusion of the RCEP negotiations to foster an open, inclusive, and rules-based trading system, and demonstrate to the world that it is possible to make trade work for all.
- Leaders are determined to conclude a modern, comprehensive, high quality, and mutually beneficial RCEP in 2019.
- Reiterated the value of continued engagement with various stakeholders of the RCEP
- Huge economic disparities among the negotiating countries are likely to pose a challenge
- An inevitable source of trust deficit between China and the rest which has the potential to constrain regional economic cooperation is China’s aggressive postures on territorial disputes with Japan and India and with ASEAN member countries on the South China Sea disputes. This can pose as a hurdle in final negotiation of RCEP
- The existing 5 ASEAN+1 and 23 ratified bilateral FTAs, varying greatly in their terms, pose a significant hurdle to RCEP negotiations.
- The lack of commonality across FTAs and varying internal policies of countries would prove to be a difficult task to harmonize and consolidate under RCEP.
Disputes with India
- Skewed trade spectrum: NITI Aayog note said while trade agreements are a means to promote bilateral trade, with both parties benefiting as a result of trade complementarities, with China, India’s trade seems to be skewed and China’s capacity overhang in most sectors may lead to a surge of imports into India with very limited access for Indian exports to the Chinese market.
- In agriculture and allied products, the plantation sector is already reeling from the impact of the India-ASEAN FTA even with relatively high protection of agriculture and a tariff-coverage of 73-80 per cent. If tariff cuts cover 92-80 per cent of products, the impact will be huge. On the other hand, New Zealand’s export-oriented dairy products will decimate India’s growing dairy sector, which is still largely small-scale.
- Impact on Manufacturing: According to civil society representatives, reduction of import duties to promote global value chain will lead to mass layoffs, low wages and exploitation of labour.
- Japan and South Korea has asked India to eliminate export restrictions on minerals and raw materials. This may threaten domestic raw material availability for industrialisation and encourage over-mining. Indian experts opine that this would lead to a new form of neo-colonialism.
- E-commerce commitments: It will allow companies such as Alibaba from China to displace Indian manufacturing especially in the SME segment.
- Intellectual property rights: several members have been pushing provisions that go beyond TRIPS, with serious adverse consequences for access to generic medicines manufactured in India.
- Demand for labour movement: At RCEP negotiations, India has demanded for both Mode 3 (investments) and Mode 4 (movement of people) with a RCEP business visa for professionals.
- However, RCEP countries like Australia and Singapore have been unwilling to accommodate India’s demands to liberalise their services regime and allow freer mobility of Indian workers
- Before getting into any multilateral trade deal, India should review its existing FTAs in terms of benefits to various stakeholders like industry and consumers, trade complementarities and changing trade patterns in the past decade.
- Negotiating bilateral FTAs with countries where trade complementarities and margin of preference is high may benefit India in the long run.
- Well-balanced FTA deals addressing the concerns of all the stakeholders is the need of the hour.
Connectivity is to be the primary focus between India and ASEAN members. Even though India doesn’t have adequate resources like China, a collaborative efforts like Africa -Asia growth corridor could achieve tangible results. Further strengthening the FTYA between the two blocks will add new dimensions to the age old relationship. A relationship based on mutual trust and acceptance is only sustainable for long.