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.
