Context: India has reaffirmed her opposition to the regional grouping Regional Comprehensive Economic Partnership(RCEP), given the global concerns over China vis-a-vis COVID-19 pandemic.

More on the news:

  • India decided to quit the grouping, in November 2019, citing lack of protection for India’s agricultural and other sectors.
    • After pulling out of the grouping, India skipped at least two separate meetings it was invited to, including one in Bali in February, and a virtual RCEP meeting in April. 
    • At the RCEP-Trade Negotiating Committee (TNC) meeting in April, negotiators committed to signing the agreement by 2020.
  • RCEP’s TNC Chairperson made an offer to reconsider India’s objections to giving market access for a limited number of products, in case India would rejoin the talks.
    • A statement issued by RCEP stated that the RCEP will provide a more stable and predictable economic environment to support the much-needed recovery of trade and investment in the region, which has been adversely affected by the COVID-19 pandemic.
    • Against this backdrop, the 15 countries reaffirmed their commitment to continue working with India to address its outstanding issues and anticipated  India’s return to the RCEP negotiations.
    • The deadline for a response to a fresh proposal of India rejoining negotiations on the ASEAN-led RCEP grouping  got over this week.
  • However, In the wake of COVID-19 pandemic, the experience of countries that have been overly dependent on imports from China or one country have reinforced and revalidated India's decision to stay out of RCEP.

Objections raised by India 

  • India’s experience of trade pacts has not been favorable towards it.
    • The previous trade pacts had hollowed out manufacturing in the country.
    • Any other trade pact of similar nature would hamper the government’s renewed commitment to the Make in India policy. 
    • Given that the Make in India programme is moving from Level 1 to Level 2, and it has to go to Level 10, India;s decision to pull out of RCEP seems to be a good move.
    • Concerns for agriculture and dairy sectors:
      • Signing RCEP may worsen the condition of India’s agriculture and dairy sectors, which are not in positions to compete with Australia and New Zealand.
    • China’s dumping: India is reportedly expected to reduce or eliminate duties on more than 75% of goods imported from China under the proposed agreement.

Counter arguments to rejoin the negotiations

  • Australia and Japan have been at the forefront of efforts to convince India to rejoin the RCEP as a possible counterweight to China in the grouping.
    • Contrary to India’s apprehensions, Australia has cited the Make in India policy as the reason for India to join.
    • It is of the view that If India rejoins the RCEPnegotiations, it would send a signal to the world that India is an attractive place to invest.
    • It will also showcase India’s potential of being a global manufacturing hub as envisaged by the government’s Make in India policy.
    • Boost for MSMEs: RCEP will facilitate India’s Micro, Small and Medium Enterprises (MSMEs) to effectively integrate into the regional value and supply chains.
  • India could also use the RCEP to generate optimism amongst Indian companies, given the uncertainty over demand and consumption due to the COVID-19 pandemic.
    • Also given the ill will between the U.S. and China, the latter will also look much more to the Asian region for trade, and there will be opportunities for India as well.

India’s RCEP Exit

India has decided not to join the Regional Comprehensive Economic Partnership (RCEP) trade deal saying it did not get any “credible assurance for India on market access and non-tariff barriers.

Issues for India

  1. The e-commerce chapter & the issue of cross-border transfer of electronic information. 
    1. If implemented it would prevent India from implementing Data Localisation rules.
    2. Also ,Reserve Bank of India’s (RBI) in its April 2018 notification mandated all system providers to ensure that the entire data relating to payment systems operated by them are stored in a system only in India. 
  2. Hurt domestic industries: RCEP members want India to eliminate or significantly reduce customs duties on the maximum number of goods traded globally. 
  3. No Auto Trigger Mechanism 
    1. Auto trigger mechanism: To protect domestic industry against surge in imports, India suggested an auto trigger method that would automatically increase import levies once shipments cross a given threshold limit.
  4. Relaxing of  Services trade whereas India wants greater market access.
  5. Investor-state dispute settlement 
    1. It gives  exclusive right to bypass domestic legal systems 
  6. Rules of Origin (ROO) 
    1. These are the criteria used to define where a product was made. India wants strict Rules of origin to prevent Chinese Goods from flooding the country.
  7. Ratchet Obligations: India wants exemptions on ratchet obligations.
    1. It signifies that the governments have to freeze their current levels of market opening, and if they liberalise more they cannot go back.

Regional ComprehensiveEconomic Partnership

It is a grouping of the 10 countries of ASEAN with Australia, New Zealand, South Korea, India, China and Japan.

  • RCEP will constitute more than 40 per cent of the global population and almost half of the world's economy.
  • It consists of three of the six largest economies of the world, especially, the two  fastest growing large economies namely India and China.

Source: The AseanPost