India has to watch its slice of the cake and China’s ambitions. The RCEP clearly doesn’t work
The 16-nation Regional Comprehensive Economic Partnership (RCEP), which contributed 30.8 per cent to global trade in 2017, had the potential to become one of the largest trading blocs of our times. Essentially a free trade agreement (FTA) between signatories, it had the promise of opening up markets of each of the partner countries to the others. But that’s just the sheen that blunts the fine print. That is free trade doesn’t mean all are equals. So India has rightly walked out of it as the disadvantages far outweigh the advantages. As potential group members gathered in Bangkok to close the deal, India, worried about a potential flood of Chinese imports without a corresponding increase in our exports to that country and a lopsided trade deficit, asked the right questions. First, China is pushing this as part of its escape route from the trough that its tariff war with the US is forcing it into. By virtue of its hold on the region, it would automatically helm the group and make its partners look anti-US, something that the Modi Government could ill afford now. Second, with the deal allowing China free access to our markets, there were fears that China would dump cheaper goods in India using the RCEP as a major tool. This would kill our small businesses. Had we joined RCEP, India would have to commit to tariff elimination for about 90 per cent of items from the ASEAN, Japan and South Korea, and over 74 per cent from China, Australia and New Zealand. Indian negotiators failed to convince the forum members about adequate protection against cheap Chinese imports and other safeguards in order to make the deal more acceptable to domestic concerns. Even in the services exchange market, with many Southeast Asian countries offering lower wages, Indian workers would be left out from outsourced jobs. Then there were issues related to limiting technology transfer of foreign companies, possible circumvention of rules of origin and no credible assurances on market access and non-tariff barriers.
Critics may argue that not being a part of the bloc is tantamount to not having an even footing in terms of preferential access and losing export competitiveness. Yet the fact remains that we cannot ignore our interests. An FTA portfolio can on paper attract external investments but none of India’s other FTAs has worked significantly so far. Still, India was in favour of a well-negotiated RCEP in which all sides would gain reasonably instead of absolutely. India would not get too large a slice of the cake under China’s neo-imperial designs. It must, therefore, strengthen sub-regional cooperation like the BIMSTEC. Pragmatism doesn’t mean we are shy, it means measuring our chances wisely.
