The world forums are flooded with various bilateral, trilateral and multilateral summits where different nations pledge to improve global economy, address climate insurgency, terrorism and various issues pertaining to global importance. One such treaty to boost trade in Eastern part of the world was introduced in ASEAN (Association of South-Eastern nations) summit 2012 in Cambodia. Regional Comprehensive Economic Partnership (RCEP) framework was kick started in Nov 2012 with 16 signatories, 10 from ASEAN (Brunei, Cambodia, Laos, Myanmar, Vietnam, Indonesia, Thailand, Singapore, Malaysia and the Philippines) and 6 free trade agreement (FTA) nations of ASEAN (China, India, Japan, South Korea, New Zealand and Australia). The RCEP is termed as the largest trading agreement as the countries involved comprise almost half of world population, a quarter of world exports and 30% of world’s GDP. The RCEP seemed promising for all the signatories except India which formally opted out during the ASEAN 2019 summit in Thailand.
"Neither the Talisman of Gandhiji nor my own conscience permits me to join RCEP," said PMO Narendra Modi in Bangkok, thus ending the agreement that began seven years ago. However, the rest 15 nations continued, with insistence from China, citing to “isolate” India. Refusing to join RCEP PM Modi highlighted the fact that RCEP does not satisfactorily address India’s economic concerns. Indian economy is going through a tough time for five consecutive quarters with GDP figures showing downward turns after the roll out of GST. Coupled with demonetization, the economy is yet to achieve its ultimate strength. As the economy is still healing, the exposure of Indian markets to imported products would further degrade its status. According to a report by Niti Aayog, India has trade deficit with 11 out of 15 members of ASEAN-6 which have further doubled during last four years from $54 billion in 2013-2014 to $105 billion in 2018-2019. The biggest reason attributed to India opting out of RCEP is that Indian markets will be vulnerable to Chinese products with Indian manufacturers getting hit majorly. The seepage of Chinese goods will further deepen the trade deficit that currently stands at $70 billion. India wanted to incorporate auto trigger mechanism in the trade deal which will automatically increase the tariff when imports increased the threshold, which was refused by other nations.
RCEP was a trade pact which was highly refuted by industry and farmers. In agriculture, domestic spice growers are already having a hard time from Sri Lanka which would be elevated once import barrier got lifted. Spices like cardamom, pepper, rubber and coconut would have faced stiff completion from their Southern-Eastern counterparts. Vietnam and Indonesia have surplus rubber to export and dairy products from Australia and New Zealand would have disrupted the Indian dairy industry causing job loss and dead end for Indian manufacturers. 2017 report of Niti Aayog mentioned that FTA did not work well for India as India had wide range of market for foreign products to seep into but the vice versa situation was not as productive as anticipated, thus widening the trade deficit.
In South Asia, the major economies are China and India which are frequently involved in stiff completion on various grounds. With China, trying every measure to increase its dominance, it is crucial for India to take wise steps and improve the country’s economic outlook. RCEP was China backed deal and it surely has various other promising policies like Belt and Road Initiative, Made in China 2025, etc. India needs to introduce its own policies, ease land acquisition, reform labour laws and bridge infrastructure deficit through articulate planning and implementation. As a student of PGDM in Calcutta Business School and as a budding manager I would like to see a self sufficient India with its own policies in global forums.
#CalcuttaBusinessSchool #Learningmanagement #CBS