India’s negotiating position has emerged as a challenge to concluding the Regional Comprehensive Economic Partnership (RCEP), particularly due to its stance that it has witnessed limited benefits from the earlier trade agreements, as per a report.
According to DBS Bank's report, India’s reticence to participate in trade agreements has been on various grounds. For RCEP, it already runs a trade deficit with all the member countries.
Besides, previous FTAs have not materially improved India’s trade math, and certain unfavourable provisions have turned to be sticking points.
While being a part of RCEP carries challenges, it will also open India and rest of the proposed members to numerous opportunities, the report noted.
The early phase of adjustment will be an uphill task as few import tariffs will have to be dismantled, leading to higher competition from imports and in turn hurting export competitiveness, it said.
“Opportunity cost of non-participation is significant as multilateral trade agreements will help improve India’s integration to the global supply chains and market access opportunities,” said DBS.
RCEP comprises 10-member ASEAN bloc (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its six FTA partners - India, China, Japan, South Korea, Australia, and New Zealand.
Since the US withdrew from the Trans-Pacific Partnership (TPP) agreement in 2017, the Asia Pacific bloc has been keen to expedite the RCEP as a viable alternative for global trade with lower trade barriers.
Plans were conceptualised in 2012 and found a renewed vigour in the past two years. Trade ministers are due to meet in Bangkok on October 10-12, with plans to conclude negotiations by the ASEAN summit meeting in November.
With trade conflicts and protectionist policies dominating the narrative, multilateral free trade agreements reinforce benefits from a wider market access and enjoy preferential or lower trade barriers.
Cumulatively, the bloc accounts for a third of the world GDP, half the world’s population, a quarter of world trade and nominal GDP surpassing the US.
Once completed, the agreement is expected to lower trade and non-tariff hurdles, liberalise service trade, ease part of regulatory hurdles in regional trade and improve investor protection, among others.
There are also push factors. Better market access to other countries could help offset slowing domestic growth, just as the trade environment gets more challenging, noted DBS.