Regional Comprehensive Economic Partnership (RCEP)

Regional Comprehensive Economic Partnership (RCEP)

The question is what is RCEP. The Regional Comprehensive Economic Partnership (RCEP) is a free trade deal as well as an economic accord. The RCEP discussions began in 2012 and were recently completed with the signing of this agreement on November 15, 2020. This agreement has been signed by 15 countries, excluding India. It includes chapters on international trade in commodities and services, investments, and e-commerce, among others.

• The pact has been signed by 15 countries so far. The Association of Southeast Asian Nations (ASEAN) has ten members: Singapore, Malaysia, Thailand, Vietnam, Laos, Cambodia, Philippines, Indonesia, Brunei, and Myanmar, as well as five other ASEAN trade partners: Australia, China, South Korea, Japan, and New Zealand.
• India used to be a part of this commercial bloc. When none of its issues was addressed, it left in November 2019.
• The Role and Significance of Regional Comprehensive Economic Partnership (RCEP) include the participating countries account for roughly 30% of global GDP and 30% of the global population.

What is the goal of the RCEP?

The RCEP intends to create an integrated market with 16 nations, making it easier for each of these countries’ products and services to be available throughout the region.

Trade-in goods and services, investment, intellectual property, dispute settlement, e-commerce, small and medium-sized businesses, and economic cooperation are all on the table.

China’s role in RCEP

Beijing pushed for the RCEP in 2012 to counter another free trade agreement that was in the works at the time: the Trans-Pacific Partnership (TPP). China was left out of the TPP, which was led by the United States. President Donald Trump of the United States, on the other hand, withdrew his country from the TPP in 2016. Since then, the RCEP has grown in importance as a tool for China to oppose US efforts to stifle trade with the country.

Importance of RCEP for India:

During the COVID-19 pandemic, this agreement is intended to restore some stability to the area and the world, whose trade has suffered in recent years as a result of not just the pandemic, but also trade disputes, geopolitical conflicts, and a general downturn in regional economies.

It is intended to enhance regional commerce, which could aid in the recovery of the region’s economies.

However, the fact that China dominates this bloc, which continues to engage in unfair trade practices, manipulate currency exchanges, and pursue a mercantile strategy, is a negative factor (maximum exports and minimum imports).

China continues to sell to other countries while also restricting access to its markets for commodities from other countries.

It also continues to violate human rights in its factories by using forced labour and child labour to make things at lower prices.

Talking about the importance of RCEP for India, other nations will now be prevented from launching their products in China and gaining access to Chinese markets due to numerous tariffs and non-tariff barriers.

Why did India refuse to sign the RCEP trade agreement?

On November 4, 2019, India announced its withdrawal from the 16-nation Regional Comprehensive Economic Partnership (RCEP) trade agreement, claiming that while it was not opposed to opening up to the global competition in all sectors, it had made a compelling case for a result that would benefit all countries and sectors.

In his remarks at the RCEP Summit, Prime Minister Narendra Modi said: “The current RCEP agreement does not completely reflect the RCEP’s essential ethos and agreed-upon guiding principles. It also fails to adequately address India’s unresolved issues and concerns in such a situation.”

India and the Regional Comprehensive Economic Partnership (RCEP):

In 2012, India became a founding member of the pact. However, India has always expressed reservations about key provisions of the agreement.

1. Trade Deficit: India has been disadvantaged by many of the Free Trade Agreements struck with the ASEAN, South Korea, and Japan. The country has massive trade imbalances with these countries. India has a trade deficit of over $50 billion with China, and China refuses to address these concerns.
2. Chinese Goods Flooding: With the signing of this agreement, India was expected to decrease its customs taxes (the amount paid to import a specific item into a country) on all commodities from China, including steel and solar photovoltaic cells, by about 80%. China dumps many of these products into India, prompting India to implement anti-dumping taxes and other measures.
3. Promotion of the Indian Manufacturing Industry: India wants to expand its manufacturing sector and reduce its dependency on supply chains beginning in China. This South Asia free trade agreement would provide China with yet another opportunity to dump its goods and benefit from Indian markets, even as it continues to prohibit Indian goods and services from entering its markets.
4. In addition, India would have had to reduce tariffs on items from South Korea, Japan, and ASEAN nations by more than 90% if it joined the RCEP.
5. Dairy Product Issue: India is the world’s largest producer and user of milk and milk products. Australian and New Zealand dairy products would have been pushed into Indian markets, causing significant losses to Indian farmers and producers. India would have had to reduce tariffs on dairy goods from these countries by over 86 percent.
6. Legal Issues: The chapter on e-commerce is another concern. India is concerned about the transnational flow of data, and its impending data protection law aims to encourage data localisation rather than the unfettered movement of Indian data to other countries, particularly China. This, too, has not been adequately handled.
7. While nations wish to benefit from India’s economic expansion, population, and market size, it has refused to grant India’s request for the free movement of natural persons.
8. India’s primary strength is in the services sector, and the country can benefit by exporting the services of its residents who excel in knowledge-intensive industries like biotechnology, education, medicine, and information technology.
9. This would entail a more straightforward visa process as well as transferable social security schemes. Indian nationals have been barred from entering certain countries.
10. In the past, China has exported commodities to India while concealing the rules of origin. India had expressed similar worries. RCEP, on the other hand, has failed to address it. China, for example, might continue to sell goods and services to India via the ASEAN area. India and the ASEAN region have a Free Trade Agreement (FTA).
11. As a result of these countries’ actions, India withdrew from the RCEP in November 2019. However, the moment has come to work out a better agreement with the bloc.

Conclusion

Meanwhile, preparations for the RCEP’s entry into effect will continue. Through the completion of the technical and institutional aspects of the Agreement, signatory States’ preparatory work aims to provide a firm foundation for the full and successful implementation of the Agreement.