Millennium Post

Mapping out a resolution

Conveying India's decision to hold back from joining the China-backed Regional Comprehensive Economic Partnership (RCEP), Prime Minister Narendra Modi effectively wrecked its aim to create the world's largest free trade area housing half of the world's population. The 16-nation bloc (now 15) is a proposed free trade agreement (FTA) between the ten member states of the ASEAN and its five (formerly six) FTA partners after India decided to opt out of the pact in November 2019. Given India's walkout, China, in a diplomatic gesture, announced that India is welcome to join the RCEP whenever it is ready. Arguing that the present form of the RCEP Agreement does not fully reflect the spirit and the agreed upon guiding principles of the RCEP, it fails to address satisfactorily India's outstanding issues and concerns, Prime Minister Narendra Modi explained why India continues to refrain from this agreement. This decision to keep away from this international platform is India's concern pertaining to its domestic economy, whereby India has been repeatedly raising the issue of market access and protected lists of goods in order to safeguard its domestic market from the fears that the country may be flooded with cheap Chinese agricultural and industrial products once it signs the deal. A very valid concern indeed as cheap Chinese products can potentially harm the domestic industry. Chinese Foreign Ministry spokesman Geng Shuang acknowledged India's concern, saying that "The RCEP is open. We will follow the principle of mutual understanding and accommodation to negotiate and resolve those outstanding problems raised by India and we welcome an early joining by India". But looking beyond diplomatic niceties, understanding that this regional trade agreement can be mutually beneficial in nature, there is also the aspect that India could have availed of this opportunity had it had a robust domestic economy to rely on. The unresolved core concerns for which India opted out of the pact because the proposed deal would have adverse impact on the lives and livelihoods of all Indians, is thus a matter of deliberation internally as the slumping economy so far, has had little addressing to any consequence. It is certainly in the interest of China to push for inking the deal during the RCEP summit in an attempt to counter-balance the impact of its lingering trade war with the US as well as to project the region's economic might to the West. Claiming that "India stands for greater regional integration as well as for freer trade and adherence to a rule-based international order. India has been pro-actively, constructively and meaningfully engaged in the RCEP negotiations since inception. India has worked for the cherished objective of striking balance, in the spirit of give and take," by the Prime Minister definitely stands justified, but talking of striking a balance in the spirit of give and take, this could only be achieved if the internal economy of India was capable of the capacity to allow undertaking the said international commitment.

The RCEP negotiations were launched by ASEAN leaders and six other countries during the 21st ASEAN Summit in Phnom Penh in November 2012. The purpose of initiating RCEP negotiations was to achieve a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement among the ASEAN member States and its FTA partners. But the unresolved issues of inadequate protection against import surge, lack of credible assurances to India on market access and non-tariff barriers, possible circumvention of rules of origin by certain countries etc., have been the deal-breakers. With concern for the vulnerable section of the society, refraining from RCEP also brings to highlight the general matter of lives and livelihoods with respect to larger economic decisions. Asserting that "Gone are the days when Indian negotiators caved-in to pressures from the global powers on trade issues," as per government sources, looking inward raises far more questions on how the economy is faring and what ought to have been done to have a better and more favourable situation. This agreement was meant to be the biggest free trade agreement with 40 per cent of global commerce and 35 per cent GDP involving 16 countries, home to 3.6 billion people or half the population of the world. Now, more than a third of that population group will not be a part of RCEP, not only is this international initiative considerably disempowered potentially, it is also for India which potentially stands to lose the benefits from being part of a larger network. India ships 20 per cent of all its exports to the RCEP countries and receives 35 per cent of all imports from them. China is the largest exporter to most countries of the group, including India. Of India's $105 billion trade deficit with RCEP countries, China accounts for $53 billion. Widening the trade deficit would drain foreign exchange reserve of India faster and a depleting foreign reserve is the last thing the Indian economy wants. India's economic slowdown is a major unresolved concern too given that the rate of GDP growth has been slowing down for five consecutive quarters. The GDP growth figures have been a topsy-turvy curve since the roll out of goods and services tax and this also points out to concerns of effective policy making on part of the government. The ghost of demonitisation from November 2016 still haunts the economy, and while it was still recovering, the GST rollout turned out to only compound matters further. With the industry reeling under pressure and the government grappling to deal with the domestic economic situation, the large-scale free trade pact with the conditions of RCEP will only lay bare the Indian businesses and agriculture to unequal competition from countries which are out seeking profit before everything else. As a matter of fact, RCEP was a pact both the industry and farmers opposed alike. Manufacturing sector in India has not recovered from crisis and the sector has seen strange trends recently as manufacturing output grew at its slowest pace in two years in October. The possibility of cheap Chinese products flooding Indian markets will only crush India's manufacturing sector. The services sector also being in doldrums is an added concern. The Impact of RCEP in agriculture will show on domestic players with respect to dairy products and spices, rubber, and coconut as they would face dumping from the South Asian spice majors. Sri Lanka is already on its way giving a hefty competition to Indian spice cultivators. India's withdrawal from the RCEP agreement and/or a possible delay can cover things up for the time being but eventually, a solid development must be accomplished so as to strengthen and safeguard the economy internally and seek further development beyond the borders and coasts.

Next Story
Share it