The Regional Comprehensive Economic Partnership (RCEP), which was signed into being by 15 countries of the Asia-Pacific region last week, is set to become the largest trade bloc in the world. It represents about 30% of the world’s economy and population. Its members are some of the world’s top economic and trading powers, including China, Japan, South Korea, the ASEAN bloc and Australia and countries with smaller economies like Vietnam and the Philippines. India opted out of the bloc last year, after 11 years of negotiations, on some valid considerations. There were legitimate fears that goods from these countries would flood the Indian market. That would have done harm to some key areas of the economy and industries, including services, agriculture, dairy products and manufacturing.
India’s decision was also influenced by the fact that the RCEP is dominated by China, with whom it has problems other than those related to trade. There are fears that China’s trade rules and predatory practices may not be fully contained by the RCEP framework, and concerns about its increasing presence in 5G telecommunications are real. India already has a free trade agreement with ASEAN, and separate deals with South Korea and Japan. There are also moves for such deals with Australia and New Zealand. During the negotiations, India had sought some safeguards to protect its interests but there was no clear commitment to put them in place. New Delhi considered that as a deal breaker and decided that the balance of advantages and disadvantages was tilted in favour of the latter. The decision to stay out of the deal resulted from this view, aided by the protectionist sentiment that was growing in the country.
But it may not be in India’s best interest to keep itself permanently out of such a strong and growing trade bloc. A global free trade system under common rules and regulations is not even a distant possibility now, and regional and bilateral deals are to take its place. India is planning to bilateral trade agreements with the European Union (EU) and the US. But it is doubtful whether the country will get better deals in these trade agreements. Countries which have problems with China, such as Japan and Australia, are also members of the RCEP. The region covered by the RCEP will be economically the most dynamic in the next few years. In the final RCEP agreement, some issues of concern for India like trade in services and movement of people and safeguards have been addressed, and the group has left the door open for India, waiving the normal cooling period. So, there is a case for reviewing the present decision in the coming months.