Regional Comprehensive Economic Partnership (RCEP)

Premature membership of RCEP would not serve Indian interests

Note4Students

From UPSC perspective, the following things are important :

Prelims level : RCEP countries

Mains level : Paper 3- India's decision to not join RCEP

The article analyses government’s decision to stay out of RCEP and factors responsible for it.

What India chose not to join RCEP

  • By joining RCEP, India would have further risked a flood of cheap Chinese imports in sectors like electronics.
  • India had tried and failed to win substantial concessions in areas like work visas for its information technology-enabled services.
  • Two of India’s proposals—an RCEP business travel card and an RCEP service supplier card—failed to find favour with a majority of the bloc’s members.

Arguments in favour of India joining the RCEP

  •  First argument made is RCEP would have provided an excellent opportunity for Indian firms to get integrated with regional value chains.
  • However, merely joining a trade bloc does not automatically result in integration with global value chains.
  • The complex nature of global production networks requires a lot of economic and trade policy reforms on the domestic front.
  • Second important argument made is that India would lose an opportunity to access RCEP’s common market.
  • But this argument too doesn’t hold much water if Indian producers are not competitive.
  • Competitiveness is driven by factors both within and beyond the control of domestic industry.
  • So it would be an over-simplification to assume that Indian industry does not have the capability or appetite to be competitive.
  • Often, global competitiveness inside factory gates gets diluted by costs borne outside those gates.

What past data suggests

  • India’s merchandise exports grew at an annual rate of more than 18% between 2000-01 and 2010-11, which was largely a pre-FTA period.
  • In this period, India activated only two FTAs—with Sri Lanka and Singapore.
  • India joined the FTAs in a big way from 2010 onwards.
  • It operationalized big trade agreements with the 10-nation Association of South East Asian Nations (ASEAN), Japan, Korea, and separately with Malaysia.
  • However, despite these deals, India could realize annual merchandise export growth of only 2.5% between 2010-11 and 2019-20.
  • This disappointing performance shows that FTAs are not conducive for exports.

Conclusion

While RCEP may theoretically offer India new opportunities for exports and integration with pan-Asian production networks, we have a lot of work to do internally before we are in a position to make the most of free-trade deals.

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