India has reportedly decided not to join the Regional
Comprehensive Economic Partnership (RCEP). The decision, as per the External
affairs ministry’s secretary (East), Vijay Singh Thakur, reflects both the
government’s assessment of current global situation and of the fairness and
balance of the agreement.
The Regional Comprehensive Economic Partnership (RCEP) is a
proposed free
trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN)
(Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its FTA partners
(China, Japan, South Korea, Australia and New Zealand).
The process of forming RCEP was initiated in the August 2011
ASEAN meeting. The formal negotiations were launched in 44th ASEAN summit in
August 2012. Since then 27 rounds of negotiations between officials and three
summits of the leaders of the proposed participants have taken place. In
December 2014 on the sidelines of the 6th round of negotiations held in New
Delhi, the Government of India had held an outreach event with their business
community to educate them on the goals of RCEP, showing keenness to join the
partnership.
Had India joined RCEP, it would have been the largest trade
agreement in the global economy, involving over one third of world's GDP and
more than half the world's population.
In his speech at the 3rd RCEP Summit, PM Modi said “The present
form of the RCEP Agreement does not fully reflect the basic spirit and the
agreed guiding principles of RCEP”, adding that "India’s farmers, traders,
professionals and industries have stakes in such decisions." Citing the
economic principles of Gandhi Ji, the PM said, "When I measure the RCEP
Agreement with respect to the interests of all Indians, I do not get a positive
answer. Therefore, neither the Talisman of Gandhiji nor my own conscience
permits me to join RCEP."
The present format of RCEP agreement, required India to abolish
tariffs on 74% of goods from China, Australia and New Zealand, and 90% goods
from Japan, South Korea and ASEAN.
Apparently, the decision to withdraw has been taken in the
interest of India's poor, farmers and to give an advantage to India’s service
sector, as the Indian negotiators felt that India may become a dumping ground
for cheap Chinese goods, devastating millions of small and medium Indian
enterprises, especially in the manufacturing sector.
As the things stand today, the RCEP agreement is likely to be
finalized and signed in 2020. Chinese officials have been quoted as saying that
India is welcome to join the RCEP later.
The right wing ideologues of the ruling BJP, like Swadeshi
Jagran Manch, RSS etc have welcomed the decision. The principal opposition
party the Indian national Congress (INC) has also welcomed the decision (though
they claim that the government was forced by them to withdraw from RCEP). The
reactions of the economists, business analysts and political observers have
been rather ambivalent.
In my view the decision has to be viewed from the domestic politics,
geo-political and economic angles.
The domestic political establishment was vertically divided on
the issue of joining WTO in 1995. There were widespread farmers' protests and even
violent demonstrations. Regardless, the minority government led by PVN Rao took
the decision to become full member of WTO. There is little evidence to indicate
that Indian agriculture, manufacturing and trade would have performed better
had India not joined WTO in 1995 full member.
Geo politically, the decision to withdraw from RCEP might be
viewed as India siding with the USA in Sino-US trade conflict.
More on this tomorrow.
