Regional Comprehensive Economic Partnership (RCEP)
The RCEP is among the proposed three mega Free Trade Agreements (FTAs) in the world so far – the other two being the TPP (Trans-Pacific Partnership, led by the US) and the TTIP (Trans -Atlantic Trade and Investment Partnership between the US and the EU). 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) and its six FTA partners. RCEP negotiations were officially launched in November 2012 at the ASEAN Summit in Cambodia.
RCEP member states accounted for a population of 3.4 billion people with a total Gross Domestic Product (GDP, PPP) of $49.5 trillion, approx. 39 percent of the world's GDP, with the combined GDPs of China and India making up more than half that amount. RCEP will be the world's largest economic bloc, covering nearly half of the global economy. According to estimates by PwC, the Gross Domestic Product (GDP, PPP) of RCEP member states is probably to amount to nearly $250 trillion by 2050, with the combined GDPs of China and India making up more than 75% of the amount.
Members of RCEP
Objective of RCEP
RCEP aims to boost goods trade by purging most tariff and non-tariff barriers: a move that is expected to provide the region’s consumers greater choice of quality products at reasonable rates. It also seeks to liberalize investment norms and do away with services trade restrictions.
What India get after joining RCEP
RCEP is a proposed Free Trade Agreement (FTA) between ten ASEAN member states and their six FTA partners.
- It presents a decisive platform for India which could enhance strategic and economic status in the Asia-Pacific region and can complement its Act East Policy.
- This will increase India-ASEAN trade and improve connectivity in the region especially India's NE region.
- The RCEP would help India streamline the rules and regulations of doing trade, which will reduce trade costs and improve India's competitiveness
- It can boost India’s inward and outward foreign direct investment, particularly export-oriented FDI, so this will create direct and indirect employment.
- It would also facilitate India’s MSMEs to effectively unite into the regional value and supply chains and aid India to become a manufacturing hub.
- India enjoys a comparative advantage in the services sector such as ICT, healthcare, and education services, etc. Thus, RCEP will create opportunities for Indian companies to access new markets.
While India joining RCEP give immense benefits but some issues which not going well with some stakeholders in India and they lobbying against RCEP
- Greater access to Chinese goods may have an impact on the Indian manufacturing sector. India has got a huge trade deficit with China. Under these circumstances, India proposed a differential market access strategy for China.
- There are demands by other RCEP countries for lowering customs duties on a number of products and greater access to the market than India has been willing to provide.
- India has a trade deficit with ASEAN, after RCEP this could increase further
- India wants ASEAN countries should open up their services sector so that Indian professionals and workers can have easier entry into their market. But RCEP members don’t focus on the service sector liberalization.
- There is apprehension that once the RCEP agreement signed, China would harm the domestic market with its cheap exports and would also dump its products.
- There is fear in farmers and dairy sector after RCEP, our market flood with Australia and New Zealand products. Because the dairy sector enjoy competitiveness and state strong support so people against this pact in India.
If India is out of the RCEP, it would make its exports price uncompetitive with other RCEP members’ exports in each RCEP market, and so loss of exports and this have cascading effects
- forex shortages
- depreciation of the rupee
- India also loss some sectors where it enjoy advantages than other RCEP members countries
India's move regarding RCEP
So it is important that India focuses on resolving the structural issues in the domestic market and work on reforms that aid India to improve in ease of doing business and attracting FDI, before concluding the RCEP negotiations.
- India should focus on second-generation reforms of its domestic economic policies, like factor markets, land reforms, etc to make its trade more competitive and export-oriented.
- These reforms will help India better access other markets and will mitigate some of the repercussions arising from the RCEP.
- The RCEP can be a stepping stone to India’s Act East Policy, but at a time of growing protectionism and the US-China trade war, opening our market to China (through RCEP) can prove to be disastrous, given the structural issues in the Indian market.