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Scope of discussion

• What is RCEP and how did it come into being? – Prelims & Mains
• Why is RCEP Vital for India? – Mains & Interview
• With TPP Advancing, India Pins Hopes On RCEP Trade Bloc

What is RCEP?

If you have been following our series on International Organisations, we talked about East Asia Summit (EAS) where we briefly touched upon RCEP.

Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between –

• The 10 members of ASEAN
• Additional members of ASEAN +3 = China, Japan, South Korea
• Members with which ASEAN countries have FTA = India, Australia, New Zealand

RCEP includes more than 3 billion people, has a combined GDP of about $17 trillion, and accounts for about 40 percent of world trade. By any means, this is a huge community in making.

What is the significance of RCEP for India?

From India’s point of view, the RCEP presents a decisive platform which could influence its strategic and economic status in the Asia-Pacific region and bring to fruition its “Act East Policy.” It is expected to be an ambitious agreement bringing the 5 biggest economies of the region – Australia, China, India, Japan and South Korea – into a regional trading arrangement.

There are three immediate benefits that its trade policymakers should note-

#1. The RCEP agreement would complement India’s existing free trade agreements with the ASEAN and some of its member countries.

This consolidation can address challenges emanating from implementation concerns vis-à-vis overlapping agreements, which is creating a “noodle bowl” situation obstructing effective utilization of these FTAs.

It will also help achieve its goal of greater economic integration with countries East and South East of India through better access to a vast regional market ranging from Japan to Australia.

NOTE: India is not a party to two important regional economic blocs: the Asia-Pacific Economic Cooperation and the Trans-Pacific Partnership. The RCEP would enable India to strengthen its trade ties with Australia, China, Japan and South Korea, and should reduce the potential negative impacts of TPP and TTIP on the Indian economy.

#2. Gets India closer to ASEAN

• Clubbing with the ASEAN has been a principal policy priority for both China and India.
• At present, while China has clubbed with the ASEAN+1, ASEAN+3 and ASEAN+6,
• India is clubbed only under the ASEAN+6 framework

#3. India can leverage its capabilities in IT, Healthcare, Education and services

• The RCEP will create opportunities for Indian companies to access new markets
• India is well placed to contribute to other countries in RCEP through its expertise in services

Countering TPP with RCEP

New Delhi fears the TPP, although years away from reality, could mean losing some textile and drugs exports to countries like Vietnam, which has embraced both the TPP and the RCEP.

TPP is set to change the landscape of global trade. For India, it is most likely to affect sectors like leather goods, plastics, chemicals, textiles and clothing. 

We will discuss more about TPP in a later discussion but suffice to say that RCEP’s realisation is important for India.

Questions for you

1. What’s the history behind ASEAN+1, ASEAN+3, ASEAN+6 and how is ASEAN+6 related to RCEP?
2. Apart from RCEP, TPP – there is another arrangement called as Trans-Atlantic Trade and Investment Partnership (TTIP). What do you know about it?
3. With China not clamping down on its excess steel production, how do you think these FTA arrangement will pan out? Or will they not? What is USA’s stance on this?
4. It would be worthwhile to investigate the loyalties of the ASEAN nations wrt. China OR India. What are the major countries in ASEAN and who are they friends with. Why would you say so?

Sources: Ref1 | Ref2 | Ref3

The Gulf Cooperation Council (GCC) is a regional political organisation comprising the energy rich Gulf monarchies – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

When and why was it founded?

• Establishment in Abu Dhabi in 1981 | HQ in Riyadh
• The founding charter focused more on issues of social and cultural cohesion, environmental and scientific coordination and economic cooperation
• Recently, Morocco and Jordan have applied for the GCC membership which is currently being studied by the GCC Expert Committee

India and GCC: Contours of cooperation

• The Gulf constitutes the “immediate” neighborhood of India separated only by the Arabian Sea
• The Gulf, as the principal source of India’s energy requirements, is central to our energy security interests: it meets 75% of our oil needs at present; as our demand increases in coming years, India’s dependence will go up to 90% by 2035.
• GCC is India’s largest trading partner as an economic grouping, with two-way trade being more than our ties with the European Union, ASEAN and North America
• Four GCC countries figure in India’s top 10 trade partners.
• We also have an eight-million strong community in the GCC that remits annually $35 billion to the national exchequer
• The India-GCC Free Trade Agreement which is in under negotiation could usher in a new era of trade

Although India and the GCC countries share a strong economic relationship, there is much progress to be achieved on the political front. Let’s have a close look at some of the important dimensions –

#1. Defence Diplomacy

India’s defence diplomacy with countries of the GCC is well reputed.

• India has signed a military protocol with Oman which has facilitated joint military exercises
• India has also signed a defence cooperation agreement with the UAE
• Our new naval diplomacy document increases our focus on west asian countries. Click to read more about it here.

#2. Counter Terrorism

The meteoric rise of the Islamic State of Iraq and the Levant (ISIS) in neighbouring countries like Iraq and Syria pose a huge threat to the peace and stability of the GCC countries.

#3. Maritime Security

Primary maritime security threats include piracy at sea, smuggling of narcotics and arms and the imminent threat of maritime terrorism.

• These threats pose major challenges to the Sea Lines of Communication (SLOCs) that India depends heavily on to carry out trade by sea
• India’s international trade by sea amounts to about 90% of the foreign trade, and it takes place through 13 major ports and several minor ports
• In recent times the term “Indo Pacific era” has gained currency. You would do well to read this post on – Indian maritime challenges and its diplomatic dimensions

#4. Culture & Diaspora

• We have an eight-million strong community in the GCC that remits annually $35 billion to the national exchequer
• Minor concerns – If you remember, in 2013 Saudi Arabia issues a Nitaqat Law – The ‘Nitaqat’ law makes it mandatory for local companies to hire one Saudi national for every 10 migrant workers
• There had been widespread perception that the new policy will lead to denial of job opportunities for a large number of Indians working there.
• India had back then proactively conveyed concerns to the Saudi government

Want to read more?

• GCC Trade and Investment Flows – Economist article covering GCC’s overlaps with other nations