Regional Comprehensive Economic Partnership (RCEP)

Nov, 13, 2018

How RCEP negotiations hinge on a single phrase

Note4Students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: RCEP, TPP etc.

Mains level: How India will gain from being a part of RCEP


News

Meet for a “Substantial Conclusion”

  1. The Union Minister for Commerce & Industry is leading the delegation for the meeting for trade Ministers of RCEP member countries which is taking place in Singapore.
  2. The ministerial meeting will be followed by the 2nd RCEP Leaders Summit.

Fine-tuning the negotiations

  1. As the East Asia Summit nears this week, negotiations for the RCEP (Regional Comprehensive Economic Partnership) are going down to the wire.
  2. India is expected to take the final decision negotiating its stance more deeply.
  3. In the previous round of discussions in September, the countries had reached a “substantial conclusion” before reaching a final agreement by 2019.

India’s stance

  1. This “substantial conclusion” undermines the principle of “single undertaking”, which means nothing is done until it is completely done.
  2. In addition, only five of the 18 chapters in the RCEP are actually done, leaving the rest with many debating points.
  3. Many countries want India to be part of this deal as a way of balancing China’s outsized presence.
  4. India is having a hard time battling perceptions that it is the only laggard on RCEP negotiations.
  5. From a position of being fearful of letting the RCEP become a back door for Chinese entry into India, India has evolved its position considerably believing it has a lot to gain from the agreement.

Back2Basics

Regional Comprehensive Economic Partnership

  1. The RCEP is a pact that aims to cover goods, services, investments, economic and technical cooperation, competition and intellectual property rights.
  2. The RCEP members include 10 ASEAN members – Brunei Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam and their 6 free trade agreement partners – India, China, Japan, South Korea, Australia and New Zealand.
  3. The chief negotiators had recently concluded the 24th round of meeting in Auckland, New Zealand, last month.
  4. India already has a free trade agreement with Association of Southeast Asian Nations (ASEAN), Japan and South Korea and it is negotiating similar pacts with Australia and New Zealand.
  5. India is pushing for liberalizing norms to promote services trade as the sector accounts for about 55 % of India’s GDP.
Nov, 08, 2018

ASEAN member countries of RCEP offer India concession

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: RCEP, TPP etc.

Mains level: How India will gain from being a part of RCEP


News

Encouraging India for RCEP

  1. Several Asian member countries of the proposed RCEP have offered India a significant concession on the extent to which it needs to open up its markets.
  2. India can open up 83% of its market against the earlier 92%.

Quick Recap of RCEP

  1. The RCEP is a proposed trade agreement between the 10 Association of Southeast Asian Nations (ASEAN) countries and their six free trade agreement partners, namely Australia, China, India, Japan, Korea, and New Zealand.
  2. The grouping would comprise 25% of global GDP, 30% of global trade, 26% of FDI flows, and 45% of the population.

Scope for bilateral agreements with China

  1. India is concerned about further opening its market to China and skewing the trade deficit between them further.
  2. However the RCEP allows for bilateral agreements also to be made so India can perhaps open up to China gradually and not in one go.

India’s successful negotiations so far

  1. India has achieved some success regarding some of its other concerns, such as getting the other RCEP countries to liberalize their services markets and allow for a more free movement of service sector professionals.
  2. India stands to gain a lot from joining RCEP at a time when so much trade is being diverted from China because of the ongoing trade tensions with the U.S.

Hurdled by Elections

  1. India along with Indonesia and Australia are also due to go to elections in 2019.
  2. It is unlikely that these countries would make a decision before the general elections in 2019, even though the RCEP countries have set a December 2018 internal deadline for the “substantial outcomes”.
  3. India and a few other countries want only a statement on substantial progress to be made during the summit, and for negotiations to be pushed till next year.
  4. This adds to the urgency of concluding the RCEP negotiations as it makes it harder for governments to give any concessions on tariffs and subsidies closer to polls, given political compulsions.
Sep, 19, 2018

[op-ed snap] The economics of RCEP and potential outcomes for India

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: RCEP

Mains level: How India will gain from being a part of RCEP


Context

RCEP negotiations & what’s at stake for India

  1. The Regional Comprehensive Economic Partnership (RCEP) agreement is under negotiation and has remained a much-contested subject in recent times
  2. If India is out of the RCEP, it would make its exports price uncompetitive vis-à-vis other RCEP members’ exports in each RCEP market
  3. The ensuing export-losses contributing to foreign exchange shortages and the subsequent extent of depreciation of the rupee can only be left to imagination

RCEP a comprehensive agreement

  1. This is because it helps to tap the economic complementarities that get generated due to the interlinkages among various segments of trade
  2. These inter-linkages are particularly important when India endeavours to integrate with a region, which has been the most successful region of the world in terms of thriving regional value chains (RVCs)
  3. These RVCs necessitate freer movement of professionals across countries in the region

Reaping benefits for the demographic dividend

  1. The vector of India’s demographic dividend is concomitant to the vector of the “ageing” population in most RCEP countries
  2. This skill-matching needs to be focused in the realm of RCEP negotiations by signing an RCEP Agreement on Movement of Natural Persons Harnessing Regional Skill-Complementarities

India’s efforts in ensuring private sector exports

  1. India’s policymakers are trying to balance the objectives of efficiency-yielding calibrated import liberalization, without sacrificing on the domestic sensitivities
  2. It has to be matched with ensuring reciprocal market access for the Indian private sector’s exports in the markets of RCEP

Gains for India

  1. There are enormous export gains that could accrue to India from RCEP under varying scenarios
  2. This assumes even greater importance since our focus has been on products with favourable terms of trade for India
  3. Thus per-unit foreign exchange realization from these products will be greater than per-unit foreign exchange expenditure on imports of similar products within intra-industry trade pattern
  4. Some of the sectors that have been identified as potential sources of India’s export growth impulses under RCEP to the tune of approximately $200 billion

Way Forward

  1. There are more compelling trade and economic reasons for RCEP to become India-led in future
  2. India must play its due role to get its due place in the regional economic configurations
Sep, 05, 2018

India wins key concession on services at RCEP Singapore Ministerial

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: RCEP

Mains level: Impact of joining RCEP on Indian economy as well as foreign policy


News

Big success for India

  1. Members of the proposed RCEP trade deal have conceded to India’s demand to liberalize their services market and allow movement of skilled professionals.
  2. This may help India, which had so far been a reluctant participant, to conclude RCEP negotiations by the year-end.
  3. There has been inevitable linkage between services and goods negotiations, because RCEP is not a goods agreement alone, and services must be an integral part of the agreement.
  4. RCEP countries will open up opportunities for India’s burgeoning skilled professionals seeking gainful employment.

Space for bilateral negotiations

  1. Members also agreed that countries, which do not have trade agreements, can negotiate bilaterally to decide more ambitious tariff liberalization within a certain range.
  2. India is also likely to phase out tariffs on certain sensitive items with China beyond 20 years.
  3. This will allow India to allay concerns of domestic industries such as steel and textiles, which fear that China will start dumping goods once RCEP takes effect.

Back2Basics

Regional Comprehensive Economic Partnership (RCEP)

  1. It is a proposed free trade agreement (FTA) between ASEAN and six Asia-Pacific states.
  2. Members: ASEAN Members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and the six Asia-Pacific states (Australia, China, India, Japan, South Korea and New Zealand).
  3. RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia.
  4. The FTA is scheduled and expected to be signed in November 2018 during the ASEAN Summit and Related Summit in Singapore, after the first RCEP summit was held on 14 November 2017 in Manila, Philippines.
  5. RCEP is viewed as an alternative to the Trans-Pacific Partnership (TPP), a proposed trade agreement which includes several Asian and American nations but excludes China and India.
  6. Importance of RCEP:
  • In 2017, prospective RCEP member states accounted for a population of 3.4 billion people with a total Gross Domestic Product (GDP, PPP) of $49.5 trillion
  • It is approximately 39 percent of the world’s GDP with the combined GDPs of China and Japan making up more than half that amount.
  • RCEP is the world’s largest economic bloc, covering nearly half of the global economy.
  • RCEP’s share of the global economy could account for half of the estimated $0.5 quadrillion global GDP (PPP) by 2050.
Aug, 21, 2018

[op-ed snap] Stay with RCEP

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: RCEP, ASEAN

Mains level: Impact of joining RCEP on Indian economy as well as foreign policy


Context

Final negotiations of RCEP

  1. The negotiations on the Regional Comprehensive Economic Partnership, among 16 Asian and Pacific Ocean countries, have entered a decisive phase
  2. Most potential member-countries of the grouping would like to see a “substantive agreement” on the trade deal by the end of this year
  3. At a meeting in Singapore countries which still have issues with the outline of the agreements reached so far may be told politely to step aside and allow a smaller group to go ahead with finalising the RCEP

Future for India

  1. India is among the countries that will have to take a call at this point
  2. India’s concerns with RCEP negotiations thus far are manifold, but some have been addressed

India’s concerns

  1. The first is the greater access Chinese goods will have to the Indian market, a problem given India’s massive trade deficit
  2. The second concern is about demands by other RCEP countries for lower customs duties on a number of products and greater access to the market than India has been willing to provide
  3. The more developed RCEP countries such as Australia and Singapore have been unwilling to accommodate India’s demands to liberalise their services regime and allow freer mobility of Indian workers

Way forward

  1. Despite these concerns, the government must take into account the deeper strategic pitfalls of either slowing down India’s RCEP engagement or walking out of the talks at this stage
  2. Doing so would cut India out of the rule-making process for the RCEP and give China further space in the regional trade and security architecture
  3. It would also be a sharp departure from India’s “Act East” slogan and its extended outreach to ASEAN
Aug, 17, 2018

[op-ed snap] Can regional trade agreements boost India’s exports?

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: RCEP, WTO

Mains level: The problem with multilateral agreements and what India needs to do to gain most from them


Context

Demand for India to join multilateral agreements

  1. As the World Trade Organization (WTO) comes under mounting attack from the Trump-led US administration, there is a clamour in India to negotiate regional trade agreements with peer countries
  2. It is perceived that this will boost exports and insulate India’s trade from the uncertainties of the global trading system

Are multilateral agreements really beneficial for India?

  1. An analysis of trade agreements suggests that India has often failed to gain from such agreements
  2. This could explain why Indian policymakers have become cautious about pursuing new trade agreements in recent years

History of trade agreements

  1. The rise of regional trade agreements (RTAs) globally coincided with the end of the Uruguay round of WTO talks in the mid-1990s
  2. Their growth has often been explained as a result of slow progress in multilateral negotiations
  3. RTAs include both preferential trade agreements and free trade agreements (FTAs)

Criticism of RTAs

  1. RTAs face criticism for being detrimental to the spirit of multilateral free trade
  2. This is because countries that are not part of a regional agreement find themselves at a disadvantage
  3. This is especially true in an era of rising protectionism and uncertainty

Solution: Trade blocs

  1. It is possible to address such issues to some extent by creating mega-trading blocs
  2. One such bloc being negotiated is the Regional Comprehensive Economic Partnership (RCEP), consisting of China, India, Japan, south-east Asian nations, Australia and New Zealand

Scope for India

  1. There might be scope for India to increase its trade with the Asia-Pacific region, given that its level of integration with the region is relatively low
  2. But India has remained ambivalent about the RCEP, with officials expressing concern that it might actually harm India

The reason behind India’s concerns

  1. India’s existing agreements with South Korea, Japan and the Association of South East Asian Nations (ASEAN) are often deemed to have benefited the partner countries at India’s expense
  2. India has not been able to sufficiently leverage these agreements to increase its presence in the markets of its partners
  3. The import-export ratio with these countries deteriorated in the years following the implementation of the trade agreements
  4. Even as partner countries have benefited, Indian exports to these regions have remained lacklustre

The actual reason for fewer gains from RTAs

  1. India’s inability to gain market share in these regions may be partly explained by its lack of competitiveness in exports
  2. India has various structural bottlenecks hurting its exports

Way Forward

  1. The focus needs to be on where India can promote its exports
  2. India needs to be careful in weighing each trade deal on its own merit
Aug, 09, 2018

India faces a stern test of its commitment to RCEP

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: RCEP, ASEAN

Mains level: Dangers of easing tariff to India in spirit to maintain regional cooperation.


News

Context

  1. The government has set up a four-member group of ministers (GoM) headed by trade minister to advise PM on whether to continue with or withdraw from the 16-member Regional Comprehensive Economic Partnership (RCEP) negotiations.
  2. The GoM will find a way forward from the current deadlock.

India’s concerns

  1. ASEAN’s aggressive push to dismantle tariffs on about 90-92 per cent items and reduce tariffs to below 5 per cent on an additional 7 per cent of items is worrying for India.
  2. It would expose sensitive items, including farm and dairy goods, automobiles and steel products, to tariff cuts.
  3. For investment too, there are contentious areas such as liberalizing based on a negative list (wherein all items are to be included except those specifically mentioned in a list) and the inclusion of an Investor State Dispute Settlement mechanism.
  4. This could lead to India getting involved in costly legal suits filed against it by corporates.

Trade deficit

  1. There is concern across ministries that joining the accord could severely dent local manufacturing and jobs.
  2. China’s $60-billion trade surplus with India will swell even further as it floods the market with cheap goods at zero tariffs.
  3. India has a trade deficit with as many as 10 RCEP countries, including China, South Korea and Australia, among others.

Way Forward

  1. It has so far maintained that a speedy and successful conclusion of the agreement would be possible only with the inclusion of a higher level of services and investment in the India-Asean trade basket.
  2. India is not part of any major trade group and wouldn’t want to get left out of this one, especially when the future of WTO is under a cloud due to global trade wars.

Back2Basics

Regional Comprehensive Economic Partnership (RCEP)

  1. It is a proposed free trade agreement (FTA) between ASEAN and six Asia-Pacific states.
  2. Members: ASEAN Members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and the six Asia-Pacific states (Australia, China, India, Japan, South Korea and New Zealand).
  3. RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia.
  4. The FTA is scheduled and expected to be signed in November 2018 during the ASEAN Summit and Related Summit in Singapore, after the first RCEP summit was held on 14 November 2017 in Manila, Philippines.
  5. RCEP is viewed as an alternative to the Trans-Pacific Partnership (TPP), a proposed trade agreement which includes several Asian and American nations but excludes China and India.
  6. Importance of RCEP:
  • In 2017, prospective RCEP member states accounted for a population of 3.4 billion people with a total Gross Domestic Product (GDP, PPP) of $49.5 trillion
  • It is approximately 39 percent of the world’s GDP with the combined GDPs of China and Japan making up more than half that amount.
  • RCEP is the world’s largest economic bloc, covering nearly half of the global economy.
  • RCEP’s share of the global economy could account for half of the estimated $0.5 quadrillion global GDP (PPP) by 2050.
Jan, 23, 2018

India pushes for concluding balanced RCEP deal that includes services pact

Image source

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: RCEP, ASEAN

Mains level: Rising services trade and India’s position in it


News

Balanced RCEP agreement

  1. India has insisted on concluding a “balanced and collectively satisfactory” Regional Comprehensive Economic Partnership (RCEP) agreement
  2. India wants a services pact to be included in the agreement

Act east policy being strengthened

  1. India has invited leaders of all 10 ASEAN countries to New Delhi for a commemorative summit on 25 January to mark 25 years of dialogue partnership
  2. On 26 January, all 10 Asean leaders will be chief guests at India’s 69th Republic Day celebrations
  3. This is unprecedented as India usually invites the head of government of a single country as the Republic Day chief guest each year

Why India wants services pact in RCEP?

  1. Services are becoming a dominant driver of growth in both developed and developing countries
  2. Services contribute almost two-thirds of India’s GDP
  3. Surplus in services trade finances almost half of India’s trade deficit
  4. India is pushing for greater liberalization in services sectors for easier movement of its professionals to RCEP member countries

ASEAN-India services and investment agreement

  1. Eight out of ten countries have already ratified the Asean-India services and investment agreement
  2. It came into force in July 2015
Nov, 02, 2016

RCEP: Members worried about giving more market access to Chinese goods

  1. Event: Forthcoming ministerial meeting on the Regional Comprehensive Economic Partnership (RCEP)
  2. Issue: Concerns of the members including India, over agreeing to give greater market access to Chinese goods without gaining similarly in return
  3. Sources said the meeting is likely to see an agreement on explicitly incorporating the principle of ‘Single Undertaking’
  4. The means that each aspect of the negotiation, including on goods, services and investment, “is part of a whole and indivisible package and cannot be agreed separately”
  5. This principle is important for India
  6. Reason: There are apprehensions that negotiation on opening up services is progressing at a much slower rate than talks on liberalising goods trade
Aug, 16, 2016

Call to remove IP clauses from trade pact

  1. Context: The Regional Comprehensive Economic Partnership (RCEP) trade talks round in Vietnam (August 15-19)
  2. News: Humanitarian aid organisation Médecins Sans Frontières (MSF) has called for the removal of intellectual property provisions (known as the TRIPS-plus provisions) from the agreement
  3. Why? The TRIPS-plus provisions like patent term extensions and data exclusivity could hinder access to affordable drugs
  4. Data exclusivity: These provisions could delay the entry of generic medicines
  5. Significance of generics: Nearly two-thirds of all the drugs MSF purchases to treat HIV, TB and malaria across the world are generic medicines from India
Jul, 25, 2016

RCEP faces services logjam

  1. Context: India has little to gain in getting market access in goods in other countries due to its poor infrastructure and weak manufacturing base, but it thinks it has an upper hand in services negotiations
  2. The 16-member Regional Comprehensive Economic Partnership (RCEP) trade talks have hit a hurdle because other countries are not receptive to this idea
  3. India hopes to acquire market access for its growing skilled professionals and easier visa regimes in the RCEP member countries
  4. RCEP comprises ASEAN nations (10) + 6 of its FTA partners (Australia, China, India, Japan, New Zealand and South Korea)
Jun, 15, 2016

Issues in RCEP negotiations- Patent Term Extensions

  1. Patent term extensions: These are given to compensate the company for delays in processing patent applications
  2. A company gets a 20-year patent monopoly on a drug from the date that the application is filed; but sometimes processing these applications takes time and the companies get only 13 years instead of 20
  3. A patent term extension will give another five-year monopoly to the innovator company, again delaying the entry of generic drugs in the market
Jun, 15, 2016

Issues in RCEP negotiations- Data Exclusivity

  1. Two of the most worrying are the demands for ‘Data Exclusivity’ and ‘Patent Term Extensions’ — both intellectual property obligations that Least Developing Countries are exempted from till 2033
  2. Data exclusivity: A form of legal monopoly protection for a drug, over and above the patent protections & is given expressly to compensate for the investment made during clinical trials
  3. Impact: Regulators cannot approve a similar drug with similar data for the next five years, delaying the entry of generic, affordable versions
  4. For India, agreeing to data exclusivity will mean amending the Drugs & Cosmetics Act (FDA law)
  5. It would prohibit Indian Drug Regulatory Authority (DRA) from registering a more affordable version of a medicine as long as the exclusivity lasts over the clinical trial data
Jun, 15, 2016

India warned against pitfalls in ASEAN trade agreement

  1. Context: Issue of pharma IPRs in ongoing Regional Comprehensive Economic Partnership (RCEP) negotiations
  2. Médecins Sans Frontières (MSF) has warned India that it will no more remain ‘the pharmacy of the developing world’ if the proposals in the pact are adopted
  3. MSF Access Campaign and other civil society organisations are pushing for the removal of harmful intellectual property provisions
  4. Such provisions could potentially increase drug costs by creating new monopolies and delaying the entry of affordable generics in the market
Apr, 23, 2016

RCEP draft moots tough curbs on cheap medicines

  1. Context: A leaked chapter of the draft Regional Comprehensive Economic Partnership (RCEP)
  2. What? RCEP in its current form could reduce access to affordable medicines in many developing countries
  3. Concerns: Japan & Korea are demanding patent term extensions by 5 years from current 20 years
  4. India has consistently opposed patent extensions, restrictive rules on copyrights and other anti-consumer measures
Apr, 21, 2016

India not obstructionist at RCEP: Commerce Ministry

  1. Indian Efforts: India was one of the first countries to have submitted its offers on Goods, Services and Investments even before the last RCEP Round in Brunei held in February 2016
  2. This in line with the RCEP Ministerial mandate
    India’s prompt offer was highly appreciated by all the RCEP member countries
  3. In fact, several other RCEP countries’ initial offers on Goods have fallen short of the agreed Basic Concept on Initial Offer (BCIO) thresholds
  4. And such countries have been urged to improve their offers to enable negotiations move forward
Apr, 20, 2016

RCEP to India: Cut tariffs or exit FTA talks

  1. Ultimatum: India has been told to either agree to eliminate tariffs on most products quickly or leave the talks on the proposed FTA being negotiated by RCEP
  2. Why? India’s perceived obstructionist, defensive and half-hearted approach that is delaying the conclusion of the talks
  3. India’s protectionist stance: Focusing only on the export of manpower and not on liberalising trade in goods and other services, as well as investment
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