Regional Comprehensive Economic Partnership (RCEP)

Context

Trade ministers from the 16-nation Regional Comprehensive Economic Partnership (RCEP) grouping to address contentious issues and clinch a deal this year, underscoring the fact that continuing uncertainties in trade and investment environment had dampened growth outlook

• The Regional Comprehensive Economic Partnership (RCEP) agreement is being negotiated among 10 ASEAN members and their six trade partners -- Australia, China, India, Japan, Korea and New Zealand
• This would create a free trade pact covering a third of the world's economy.
• This means a zero-customs duty zone in a geography that contributes 34% of global gross domestic product (GDP) and 40% of world trade. The region is also home to almost half of the world’s population.

Benefits of RCEP Agreement for India

• RCEP is expected to provide market access for India’s goods and services exports and encourage greater investments and technology into India.
• It would also facilitate India’s MSMEs to effectively integrate into the regional value and supply chains.
• India is not a member of the Asia-Pacific Economic Co-operation (APEC) which is a grouping of twenty-one countries in the Asia Pacific region with an aim to deepen and strengthen economic and technological cooperation amongst APEC member countries.
• India enjoys a comparative advantage in areas such as information and communication technology, IT-enabled services, professional services, healthcare, and education services.
• In addition to facilitating foreign direct investment, the RCEP will create opportunities for Indian companies to access new markets. This is because the structure of manufacturing in many of these countries is becoming more and more sophisticated, resulting in a “servicification” of manufacturing.
• RCEP would help India streamline the rules and regulations of doing trade, which will reduce trade costs. It will also help achieve its goal of greater economic integration with countries East and South East of India through better access to a vast regional market ranging from Japan to Australia. The RCEP can be a stepping stone to India’s “Act East Policy.”

Why India is refraining from joining RCEP

• India is concerned over the unfair" market access to Indian products and the "protectionist policies" of China that have created a significant trade deficit between the two nations.
• Enormous trade deficit with China has climbed to $57.86 billion.
• Various sectors, including dairy, metals, electronics, chemicals, and textiles, have urged the government to not agree on duty cut in these segments as it won’t be beneficial for Indian domestic producers.
• Several challenges in both goods and services sectors still persist.
• India wants commitment on free movement of professionals to RCEP countries, including China, as domestic information technology firms currently face challenges in entering the neighboring market.
• Biggest challenge in RCEP negotiations is to seek markets for global majors in such a way that it doesn't promote shifting the manufacturing base.
• Present structure of RCEP puts agriculture, horticulture, dairy and food processing in a vulnerable situation, especially from imports from New Zealand and Australia.
• RCEP will open backdoor negotiations and may lead to the country losing out on Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreements. This may result in giving way to global majors in agriculture seed and pharmaceutical manufacturing.