Introduction
The Regional Comprehensive Economic Partnership was introduced during the 19th Asean meet held in November 2011. The RCEP negotiations started during the 21st Asean Summit in Cambodia in November 2012.
The Regional Comprehensive Economic Partnership (RCEP) is a free-trade agreement between the 10 Association of Southeast Asian Nations (Asean) members plus Australia, China, Japan, New Zealand and South Korea.
It is worlds largest trade agreement. According to data by the World Bank, the agreement would cover 2.3 billion people or 30% of the world’s population, contribute US$ 25.8 trillion about 30% of global GDP, and account for US$ 12.7 trillion, over a quarter of global trade in goods and services, and 31% of global FDI inflows.
Proponents
For decades, New Delhi has pursued a strongly protectionist set of economic policies as part of its historic commitment to an industrialisation plan based on import substitution. Only after an exceptional financial crisis in 1991 did the government begin progressively dismantling a slew of tariff barriers. Despite India's rapid integration into the global economy over the previous three decades, New Delhi's stance in trade discussions has remained mostly protectionist.
It is expected that tariffs on a wide variety of products and services would be reduced or eliminated under the RCEP once it is fully implemented. In reality, many economists and policy experts believe that India would gain economically and strategically from becoming a member of the RCEP. Consumers in India will benefit from lower prices and greater quality as a result of the RCEP's inclusion in global value chains and the influx of foreign investment that will result from it. Exports to Thailand, Cambodia, Vietnam, Malaysia, and the Philippines have increased as a result of previous free trade agreements between India and these countries. China and Japan, which provide commodities and industrial materials at lower prices, have helped boost India's manufacturing capacity. Analysts have further argued that joining the RCEP would create jobs and sustain economic growth. The RCEP's political rationales were very strong. India would have been able to influence the deal in the future if it had been a signatory.
India's exclusion from the agreement, on the other hand, diminishes its power to define the new global trading system.
Lowering trade barriers
Access to Global Value chain
Greater Economic Integration
Consumer Sovereignty
Better Quality of goods
Push to certain sectors that would gain from liberal import and export
Opponents
India's experience with free trade agreements has reaffirmed an ideological narrative emphasising the significance of self-sufficiency. While the government's own analysis indicates that India has gained in aggregate from earlier trade deals, opponents point out that India now has negative trade balances with some RCEP memberstates as a consequence of previous accords. Additionally, critics have connected similar deals, such as free trade agreements with Japan, South Korea, and ASEAN, to India's industrial downturn. India's external affairs minister, Subrahmanyam Jaishankar, recently argued that free trade agreements have resulted in deindustrialization, and while the minister did not name specific sectors, trade associations argue that industries such as electronics and light manufacturing have suffered as a result of FTAs. India has trade deficits with 11 of the 15 RCEP countries, and some experts feel that India has been unable to leverage its existing bilateral free trade agreements with several RCEP members to increase exports.
Second, India's leaders are also responsible for the country's enormous agricultural lobby. For genuine reasons, many Indian farmers think that a rapid opening of the country's agricultural markets to foreign agricultural goods will put them at a major disadvantage. Large-scale changes may become too expensive — and may even result in the elimination of the small, family-owned farms that dot the country's landscape. Dairy farmers are especially resistant to market access for foreign producers, fearful of competition from Australia's and New Zealand's competitive and industrialised dairy sectors.
Major problems that remained unsolved throughout the RCEP discussions were India's exposure to China. This included India's concerns over "inadequate" safeguards against import surges. It believed there was also a possibility of circumventing rules of origin — the standards used to establish the country of origin of a product — without which some nations may dump their goods by routing them via lower-tariff countries.
India was unable to ensure countermeasures like an auto-trigger mechanism to raise tariffs on products when their imports crossed a certain threshold.
It also wanted RCEP to exclude most-favoured-nation (MFN) obligations from the investment chapter, as it did not want to hand out, especially to countries with which it has border disputes, the benefits it was giving to strategic allies or for geopolitical reasons. India believed the pact would compel it to offer to all RCEP members the incentives accorded to other nations in critical areas like defence.
Conclusion
India may prioritise its development and join RCEP when it deems the timing is right. India should not hurry and should carefully weigh the costs and advantages.
Indian policymakers proved to be mindful of domestic industry’s concerns and chose not to get into a deal with respect to the RCEP. India today is counted amongst the largest economies of the world and that is the reason why RCEP needed India on board. It's remarkable that India has finally found its global footing and is assertive. India negotiated its stance well and chose to stay out as External Affairs Minister said no deal is better than a bad deal.
There are no hard and fast rules in economics, and there is no assurance that FTAs would boost GDP. It is critical for policymakers to develop a strategy that is tailored to India's requirements, rather than mindlessly follow the herd.