RCEP

What is RCEP ?

The Regional Comprehensive Economic Partnership (RCEP) is an agreement between the member states of the 10 Association of Southeast Asian Nations (Asean) and its 5 free trade agreement (FTA) partners.

The pact aims to cover trade in….. goods and services, intellectual property, etc. 

When RCEP took place?

The Regional Comprehensive Economic Partnership was introduced during the 19th Asean meet held in November 2011. Now, all participating countries aim to finalise and sign a deal by November 2019.

RCEP was signed on 15 November 2020 at a virtual ASEAN Summit hosted by Vietnam .

 Members-15

They include the 10 Association of Southeast Asian Nations (ASEAN) members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and the

5 countries with which the bloc has free trade agreements (FTAs) — I Australia, China, Korea, Japan, and New Zealand.

Importance-

The RCEP is billed to be the “largest” regional trading agreement. 

The countries involved account for almost half of the world’s population,

Over a quarter of world exports, and makeup around 

-30% of the global Gross Domestic Product.

-RCEP's share of the world economy could account for half of the estimated $0.5 quadrillion global (GDP, PPP) by 2050.

 Objectives -

RCEP aims to create an integrated market with 15 countries, making it easier for products and services of each of these countries to be available across this region.

The negotiations are focused on the following:

 -Trade in goods and services, investment, intellectual property, dispute settlement, e-commerce, small and medium enterprises, and economic cooperation.

China's role in RCEP

RCEP was pushed by Beijing in 2012 in order to counter another FTA that was in the works at the time: The Trans-Pacific Partnership (TPP). The US-led TPP excluded China.

However, in 2016 US President Donald Trump withdrew his country from the TPP. Since then, the RCEP has become a major tool for China to counter the US efforts to prevent trade with Beijing.

India  Pulled out from RCEP

India decided to opt-out of the 16-nation Regional Comprehensive Economic Partnership (RCEP) trade deal in 2019

Reasons for India's Withdrawal

-Unfavorable Balance of Trade

Though trade has increased post-FTA with South Korea, ASEAN countries and Japan, imports have risen faster than exports from India.

According to a paper published by NITI Aayog, India has a bilateral trade deficit with most of the member countries of RCEP.

-Dumping of Chinese Goods

India has already signed FTAs with all the countries of RCEP except China.

This is the major concern for India, as after signing RCEP cheaper products from China would have flooded the Indian market.

-Non-acceptance of Auto-trigger Mechanism

In order to deal with the imminent rise in imports, India had been seeking an auto-trigger mechanism.

Auto-trigger Mechanism would have allowed India to raise tariffs on products in instances where imports cross a certain threshold.

However, other countries in the RCEP were against this proposal.

-Protection of Domestic Industry

India had also reportedly expressed apprehensions on lowering and eliminating tariffs on several products like dairy, steel etc.

For instance, the…..dairy industry was expected to face stiff competition from Australia and New Zealand.

Implications of India's Exit of RCEP

-India's exit of RCEP may also affect …India's Act East policy.

-Exiting RCEP, India can..still keep a check on China’s dumping of goods in India. However, from needles to the turbine, Chinese goods are all over the Indian market.

-Refraining from ..RCEP will provide protection to the Indian domestic industry from cheap imports.

-RCEP is a China-backed trade deal,… signing it without India will further strengthen China’s economic power.

-India envisages becoming a manufacturing hub. However, staying out of the ….RCEP reduces opportunities for trading with these countries, which together account for roughly a third of global trade.

Criticism

The RCEP has been criticized for ignoring labor, human rights, and environmental sustainability issue         

India to Review for RCEP?

-Global Economic Stagnation due to Covid-19: With global trade and the economy facing   low due to Covid-19 pandemic, RCEP can serve as a bulwark in containing the free fall of the global economy and re-energising economic activity..

-Strategic Need: 

Staying out of RCEP may also affect India's Act East policy.

The RCEP members have left the door open for India for inviting it to be an observer member and also waived a critical 18-month cooling period for interested applicants.

---------------------