RCEP- Why should India join? - Seeker's Thoughts

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Sunday, 23 September 2018

RCEP- Why should India join?


The Trade in the world

The trade is going through rough period as big trade facilitation institutes like WTO, and agreements like Trans Pacific Partnership losing their charm. The trade is important because since the world practiced open borders through trade relations- poverty and hunger have reduced remarkably. 
This is evident that developed nations are more interested in closing doors and adopting the policy of protectionism which is affecting developing nations. 
RCEP is considered as an alternative to the important multilateral treaties, and it is under negotiation between countries.  

What is RCEP?
Regional Comprehensive Economic Partnership (RCEP) – is a proposed free trade agreement (FTA) or comprehensive regional economic integration agreement between 10-ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) and its six FTA partners (Australia, New Zealand, India, China, Japan and Korea). The negotiations For RCEP was formally launched at 2012 ASEAN summit in Cambodia.


10+6 RCEP member states accounted for population of 3.4 billion people with total GDP (in terms of PPP) of 49.5$ trillion, approximately 38% of the world’s GDP and 29% of the world trade.
RCEP is viewed as an alternative to the Trans-Pacific Partnership (TPP), a proposed trade agreement that includes several Asian and America nations but excludes china and India.


The Benefit and Importance
RCEP when concluded will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for business in the region. 
The grouping will create the largest regional trading bloc in the world. 
It is expected that ‘being inclusive’ the RCEP will help in tackling with challenges arising from globalization and trade liberalization. 
RCEP is more focused on ‘affordability’.

Words of caution
While concluding RCEP, the focus should be in building the economic complementarities and generating interlinks.
The inter- linkage should enhance Regional Value Chains.
The skill matching needs to be given attention while sigining the Movement of Natural Person Harnessing Regional Skill Complementarities.

India’s Situation and Problems
 RCEP and India’s agreement
-- India has insisted on concluding a “balanced and collectively satisfactory” RCEP agreement.
-- India wants a services pact to be included in the government.
-- India also is holding a comprehensive stakeholder consultations with industries as well as different ministers to solve the trade deficit with China.

Why India wants services pact in RCEP Services are becoming a dominant driver of growth in both developed and developing countries. It contributes almost two-thirds of India’s GDP. Surplus (more income) in service trade finance is almost equal to the half of India’s trade deficit. India is pushing in services sectors for easier movement of its professionals to RCEP member countries.

Why is India reluctant in joining the RCEP?

The rising pressure for opening up markets in goods is making negotiations unsustainable for Indian domestic market.
 1.    Indian industry will have more to lose than gain if it agrees to a liberal tariff elimination schedule specially with respect to China at a  time of growing protectionism in the world.
2.      Government’s think tank NITI Aayog, in a note on free trade agreements (FTAs) and their costs for India, has argued that the country needs to rethink joining the Regional Comprehensive Economic Partnership (RCEP) as it will be disastrous to provide more market access to China, which is a key player in the grouping.
3.      The NITI Aayog note said while trade agreements are to promote bilateral trade, with both parties benefiting as a result of trade. With China, India’s trade seems to be skewed.  China’s capacity overhang in most sectors may lead to a surge of imports into India with very limited access for Indian exports to the Chinese market.

What should India Do?

If India is out of the RCEP, the export will be effected as Indian product would not be able to face the competition in the region, as well as keeping out will make Indian products priced higher while exporting. 
It may further lead to the shortage of foreign exchange, and rupee may depreciate more, That means rupee may get more reduced in front of dollar. 
India needs to identify “potential” sectors which can lead in exports like food , gems and gwellary, metals, refined petroleum , chemicals, leathers, and textile. 
India would get greater market access in other countries not only in terms of goods, but in services and investments also.
India must play its due role to get its due place in the regional economic configurations.