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The objective of the RCEP Agreement is to establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development.

–          Summary of RCEP Agreement

On November 15th 2020, the largest regional trading bloc came into existence amidst the one of the greatest crisis of this century. After seven years of negotiations, the 15-member Regional Comprehensive Exchange Partnership (RCEP) was signed by 10 members of ASEAN, China, South Korea, Japan, Australia and New Zealand.  Instantly, RCEP dominated the headlines, webinars and international podcasts given its significance in global trade and implications for a post-pandemic order.

RCEP is remarkable in many aspects. First, it accounts for nearly 30% of the population and 30% of the world trade. It is expected to soon take over EU that currently holds 33% share in world trade. Second, it is the first regional multilateral trade agreement in the Indo-Pacific modeled around ‘ASEAN Plus One’ Free Trade Agreements (FTAs).  Third, it is the first-ever trade agreement between the East Asian economies – Japan and South Korea with China – also the three largest economies of the bloc who have been historically at dispute.

India, who was also a founding member of the RCEP opted to stay out of the binding agreement as it walked out in 2019. It Flagged concerns regarding flooding of Chinese goods into its domestic market, and demanded for an auto-trigger mechanism while  objecting to ratchet obligations that does not let member countries increase tariffs once they stand reduced. India already suffers a trade deficit with most of the RCEP signatories and a further reduction of up to 90% tariffs on imports may lead to disastrous outcomes.

With this move then and the official signing without India now, several analysts have commented how India has lost a vital opportunity and “missed the bus for economic development.”  While political and economic commentators are engrossed with the importance of RCEP for India, there’s a different perspective on the table. How important is India for RCEP?

India is one of the fastest growing economies of the Indo-Pacific and a major regional player in the geopolitics of the region. It also shares bilateral FTAs with ASEAN and other members of RCEP including Japan and South Korea.  An economic rationale for a country to be a part of a trading bloc is to boost its domestic goods as exports and gain greater market access to other economies. India, a country of 1.35 billion people is one of the developing economies with high movement from small to middle-income population. A study suggests how India is on path to become the second largest middle-income market by 2022. Another asset is the volume of data that India wants stored locally and is eyed by all developed and developing countries.

On several occasions, RCEP members have been vocal for India to join the agreement given its strategic and market value, hence have kept the door open as an observer. The final agreement signed also addresses some of the concerns and issues that India raised including safeguards, trade in services, movement of people and rules of origin. Moreover, for being on the negotiating table since the beginning, India will receive a waiver of 18-month restriction on entry of new applicants. This special treatment signals towards a favourable outlook for India among Asian economies and overall relevance for the global economy.

While there is a hope in diplomatic circles that India may review its position after the key concerns have been dealt with, India’s Minister of External Affairs  in a recent statement distinctly put forth India’s reservations referring to RCEP without naming it, “In the name of openness, we have allowed subsidised products and unfair production advantages from abroad to prevail”.

India may face some short-term challenges with respect to investment and access to RCEP-members’ markets but not all is lost in the long run. Further cooperation on a bilateral level with ASEAN and QUAD powers Japan and Australia is already on the table. Meanwhile, a strategic partnership with the Biden administration may help India seek entry to Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as an alternative to RCEP without China.

Apoorva Jain
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APOORVA JAIN is pursuing her Master's in Politics (with specialization in international studies), from Jawaharlal Nehru University, India.
She is currently a research intern at the Eastern Interest.

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