After a range of discussions for eight long years, (RCEP) Regional Comprehensive Economic Partnership came into existence in Asia in order to streamline trade between countries in the region. South Korea, Australia, China, Japan, and New Zealand and the 10 members of the Association of Southeast Asian Nations (ASEAN) are the part of the deal.
The major objective of the pact is to bring down trade barriers between these nations and boost businesses. But, although India and USA are major economies, are still not a part of it. India opted out of it last year in 2019 and USA has been a member since the very beginning of the discussions.
What is RCEP?
You must have heard regarding RCEP Regional Comprehensive Economic Partnership for several years in which few Asian nations have refused to for a free trade agreement. The remaining fifteen countries have accepted its membership. India’s call is seen as a shock for the RCEP member countries since countries like China, Australia, New Zealand were eyeing India’s large domestic market.
What are the benefits of RCEP?
- Many countries in Asia hope that this agreement will help the coronavirus epidemic recover faster. Mohammad Azmin Ali, Malaysia’s international trade and industry minister, said the agreement indicated that the RCEP countries decided to ‘open their markets instead of taking protectionist measures in this difficult time’.
- Under RCEP, there will be a single rule of trade for all member countries, which will benefit everyone. Under this, easy movement of goods will be strengthened. This will also attract multinational companies to more investment in member countries.
By this, member countries will do business according to each other’s needs and keeping in mind the economic outlook. This deal will make the deal easier between member countries.
Why India opted out of RCEP?
- In November last year, India disassociated itself from the deal and blamed China for the growing trade deficit. India had said that joining the deal meant that the Chinese market was filled with Indian goods, which would adversely affect India’s internal economy.
- This time India has not participated in the deal, but officials said the doors have been kept open for India to redo the deal. As per India, RCEP did not take care of India’s issues, due to which they did not participate in it.
- By becoming a partner in this deal, import duty on 80 to 90 percent of the goods imported into India would be reduced. There is a fear in the Indian industry that the reduction of import duty will lead to a glut of foreign goods in the Indian market, especially from China.
- In such a situation, India’s trade deficit may increase. India’s trade deficit with other RCEP member countries continues to grow. The benefits and losses of India from the “RCEP deal”:
- “Self-reliant India” campaign could be weakened by RCEP. Had India become a partner in the RCEP deal, it would have been the third largest member among the countries. Experts believe that this deal could have affected the investment and supply chain in India, which is already a big challenge before India in the Corona period. Also, being a partner of this deal does not give India the opportunity to capitalize on the opportunity to expand and use the domestic market. That is to say, simply participating in the RCEP deal could weaken the self-sufficient India campaign.
Why did USA not participate in RCEP?
USA, under President Trump’s administration, opted out of TPP (Trans-Pacific Partnership) due to growing participation of China . Also its aggressive trade rules kept it away from joining any of the trade agreements existing in the Asia Pacific region.
Impact of Opting out of the RCEP Deal
Some specialists believe that this call may have a negative impact on India’s business activities. Under the RCEP, there will be a rule of trade for all member states, which will benefit everyone.
Under this, the smooth movement of goods will be strengthened and at the same time all formulations will also get relief. It will also attract multinational companies to invest more in member countries. Through this, the member countries will do business according to each other’s needs and keeping in view the economic outlook. This way India may lose out on very lucrative opportunities.
But Prime Minister Narendra Modi have a different take on this. He said in his address that, “When we look around the US during the seven-year RCEP talks, So many things have been modified with world economic and trade matters. We cannot ignore these changes. ‘Meanwhile, trade advisers have stated that India’s call to not be part of the RCEP would protect domestic trade from unfair competition.
Will all countries benefit from RCEP?
On the outside it may seen like a fair agreement, but may not be beneficial for all. China being one of the biggest economies in this bracket of countries, may overpower and not give equal opportunities to all countries to make the most of the agreement. As mentioned in the earlier sections, China may flood its products in different nations impacting their domestic markets and livelihood of common people. It will be tough for smaller economies to make their mark in this scenario. So smaller markets must look out for some cut throat competition.
Will RCEP improve relationship of all major countries involved?
RCEP is the biggest Free Trade Agreement (FTA) across the world involving 30 percent of the entire economy and 45 percent of the entire population. Comprising of 15 nations, it will undoubtedly boost regional integration. It is an excellent opportunity for countries like Japan and South Korea to mend their relationships which were otherwise a bit strained.
Each of these countries has imposed certain restrictions on each other’s goods especially South Korea who went to the extent of boycotting Japanese goods. Coming together on this platform will help in reworking the situation for a mutual benefit and maintaining harmonious relationships.