Challenges from the RCEP despite staying out of it

Note4Students

From UPSC perspective, the following things are important :

Prelims level : ASEAN and RCEP

Mains level : Paper 2-Implications of not signing RCEP for India

India’s challenges from RCEP didn’t end by staying out of it. Remaining out of the RCEP has several implications for India. This article discusses such challenges.

What RCEP mean for the region

  • The RCEP was finally signed by its 15 members on the sidelines of the Asean Summit last week without India.
  • This would make it a trade deal that includes the ten Asean economies, and all of Asean’s bilateral FTA partners, except India.
  • It would create new market access for China and Japan-the two largest economies of the group.
  • China, Japan and Korea were negotiating a trilateral trade pact, which now might become inconsequential following RCEP.
  • In this respect, RCEP would actually produce much greater market access outside of the Asean, among non-Asean members China, Japan and Korea.
  • Asean’s specific market access gains would be over and above those that are already available through various Asean+1 FTAs.
  • Additional market access gains would be more with respect to China, in terms of the additional tariff coverage and concessions that RCEP would provide.

Implications for China

  • Apart from the additional preferential access it obtains, it is also able to pull off strategic dividends.
  • As the RCEP proceeds, it would establish China’s decisive say in writing the rules of trade in the region through the RCEP.
  • And this is precisely what the US would be wary of.

Implications for the U.S.

  • President Obama had pitched the Trans-Pacific Partnership (TPP) as an obvious and essential alternative for counterbalancing Chinese strategic domination of the regional trade game.
  • The US was taken out of the TPP by President Trump.
  • The remaining members managed to salvage the deal, largely due to the spirited leadership provided by Japan and Australia.
  • While the TPP survives as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
  • But CPTPP is incapable of being a strategic counterweight to China, and the RCEP.
  • Nothing other than a CPTPP that includes the US would be able to counterbalance China in economic size and strategic clout.

Way forward

  • The Quad—a security partnership between the US, Japan, India and Australia—is looking to expand beyond defence and assume broader strategic proportions.
  • Geopolitics is contributing significantly to the construction of economic alliances, including the reorganisation of regional supply chains.
  • Due to these factros, search for an Indo-Pacific trade and economic compact is likely to hasten following the conclusion of RCEP.
  • Following RCEP, and the almost non-existent possibility of returning to its fold, India too, might find itself working actively on moving towards an Indo-Pacific trade deal.
  • The RCEP, which has a sizeable number of key Indo-Pacific economies like Japan, Australia, Korea, Vietnam and Indonesia, would need to stick to these countries to stick to the trade agreement after its ratification.

Conclusion

RCEP might actually force the U.S to look at returning to CPTPP much more proactively than it might have imagined. It would also, expectedly, look at India to join the bloc. That would be another challenge to navigate. India’s challenges from the RCEP might have increased in spite of staying out of it.

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