World's biggest Free Trade Deal, Is India part of it?

 

RCEP "Regional Comprehensive Economic Partnership"

Introduced in 19th ASEAN Summit held in November, 2011 in Indonesia. Officially launched and negotiations started during the 21st ASEAN Summit in Cambodia in November, 2012.

It is a trade pact between 10 Member ASEAN bloc and 5 Asia-Pacific States which have Free Trade Agreement with ASEAN. Earlier total 6 were there as India too was part of it. On November 4, 2019 India decided against joining the RCEP.

• It is viewed as alternative of TPP (Trans Pacific Partnership)
• RCEP is the largest regional trading agreement to this day.
• Accounts for 30% of Global GDP, 26% OF FDI flows and 2 billion of world's population.

MEMBERS :

10 ASEAN Countries + 5 Asia Pacific States

1. Myanmar        
2. 
   Thailand
3. Cambodia
4. Singapore
5. Indonesia
6. Laos
7. Vietnam
8. Malaysia
9. Philippines
10. Brunei 
11. Australia
12. China
13. Japan
14. South Korea
15. New Zealand 

AIM :

• Lower tariffs
• Open up trade in product & services & promote investment to help emerging economies catch up with the rest of the world.
• Create integrated market.
• Economic cooperation,  

Why India decided against joining the RCEP ?

• As India was concerned about cheap Chinese goods entering the country that too in large quantity,
• Fear to Domestic producers,
• Countries could dump their products by routing them through FTA channel and there was no auto trigger mechanism where in situation like this, a country could not stop the import.
• Ratchet obligations : means if a country signs the trade agreement, it cannot go back and increase tariffs,
• RCEP decided that they will reduce their tariffs taking 2013 as base year & will reduce the it to 90-92%. But India on other hand wants 2019 as base year to reduce the tariffs. And countries didn't agree to this demand,
• Rules of origin: For example if China manufactured large amount of steel and exports to India in large quantity and if India somehow stops the imports. In this situation what will happen is, the same steel will be exported to India by some other country where China have exported its steel. So there is no rule specified for that as well,
• Escalating tensions with China,
• China dominance,
• Its predicted that textiles, dairy & agriculture may be effected by this FTA,
• India’s exports to FTA countries has not outperformed overall export growth or exports to rest of the world,
• FTAs have led to increased imports and exports, although the former has been greater,
• Free Trade Agreement with ASEAN the deficit between import & export is considerably increasing. India’s trade deficit with ASEAN, Korea and Japan has widened post-FTAs

Certain graphs will clarify

(graphs taken from document released by NITI AYOG on FTA)

 

Note : RCEP agreement is open for accession by India, so door is open as can join anytime. At present India may participate in RCEP meetings as an observer.