Leaving RCEP was a short-sighted decision, says former Foreign Secretary
Context: The Regional Comprehensive Economic Partnership (RCEP), a trade bloc of 15 countries including the 10 ASEAN members, China, Japan, South Korea, Australia and New Zealand, was signed without India, which was part of the long-running negotiations until it withdrew last year.
- While the agreement leaves the door open for India to join, that appears unlikely for now.
- Critics says the decision to opt out was “short-sighted” and will have broader strategic implications for India’s interests in the region.
- RCEP members is not just a trading arrangement — it has a strategic dimension as well.
- Keeping the door open for India from that point of view makes eminent sense, especially for countries like Japan and Singapore.
- The second point is India is effectively now on the margins of the regional economy as well as the global economy.
- Most of global trade now is organised through large trading arrangements, and if we are not part of it, whatever dynamism we can leverage from these trading arrangements, increasing our market share, become all that more problematic.
- Indian market getting flooded by cheaper imports, but we are not looking at the export side of things. India will be at a disadvantage in accessing markets in a dynamic region if it is outside RCEP.
- This also applies to investment. If India is part of RCEP and we are putting production units in India, we get access to a much larger market.
- There is a strategic dimension as well. The economic pillar of any relationship is equally, if not more, important than the security pillar.
- To focus more on security arrangements which have expanded rapidly and impressively whether with the U.S., the Quad or others.
- It has not been matched by a similar focus on the economic side. There is an asymmetry in terms of the network of relationships we are trying to establish.
- It’s been suggested India doesn’t lose out because we already have FTAs with some of RCEP’s members, including ASEAN and Japan. But, bilateral arrangement does not take preference over a regional arrangement.
How much is China a factor in India staying out of RCEP?
- China factor only reinforced existing sentiments against regional trading arrangements and FTAs.
- China has certainly been an important factor, but the decision to not go into RCEP predates the current tensions.
What will be the broader implications for India’s ‘Act East’ strategy?
- There is inconsistency of some of our recent moves, with the ‘Act East’ policy.
- One, not joining RCEP. Two, at the latest East Asia Summit (EAS), only India and the U.S. were not represented at a summit level [India was represented by the External Affairs Minister]. In the preceding Foreign Ministers’ meeting, our Minister of State was present, not the External Affairs Minister.
What will RCEP mean for China’s regional ambitions?
- For China to be part and parcel of RCEP when it is not part of the Trans-Pacific Partnership is a big thing.
- It formalises its economic network in this part of the world.
- Whatever it may have been doing bilaterally, the fact that it is a fully accepted member of this trading arrangement means that China will have to live by the rules and norms that have been agreed upon.
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