World’s largest regional trade deal has been signed between fifteen Asia-Pacific countries, including China, Japan and South Korea at 37th Association of Southeast Asian Nations (ASEAN) Summit on November 15 2020. Among these fifteen, there are nations like Australia, New Zealand, and 10 members of ASEAN. This trade deal is being called Regional Comprehensive Economic Partnership, or RCEP.
Regional Comprehensive Economic Partnership “aims to achieve a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement among the ASEAN member states and its FTA (free trade agreement) partners.” This is supposed to cover 2.2 billion people with a combined GDP of $26.2 trillion with a major motive of encouraging pandemic-weakened economies by reducing tariffs, strengthening supply chains with common rules of origin, and codifying new e-commerce rules.
The benefits include-
• Include a tariff elimination of at least 92% on trading goods.
• Improving online consumer and personal information protection.
• Transparency and paperless trading.
• Simplified customs procedures.
India took everyone by surprise by opting out of this trade deal. PM Narendra Modi said he withdrew due to the impact this trade deal would have had on the vulnerable Indian population. This deal would have brought down import duties on 80% to 90% of the goods. Some Indian industries feared that this would result in an increased inflow of imports majorly from China with which it has a massive trade deficit. India’s trade deficit with other RCEP countries were also rising. A few Red flags were observed, one being issue of unavailability of MFN (Most Favoured Nation) obligations, where it would be forced to give similar benefits to RCEP countries that it gave to others.
This could be both positive and negative for India. India would have the third biggest economy in the RCEP. It is believed that India might lose investments while its consumers may end up paying more than they should, especially when global trade, investment and supply chains face unprecedented challenges due to the Covid-19 pandemic.
RCEP countries would also somewhat loose Indian market that is hard to get in given the current scenario of global economy. This can prove to be an opportunity for India to grow its domestic market and move towards Atmanirbhar Bharat. RCEP would bring in cheap goods in turn affecting the demand of home grown, made in India products mainly for sectors like including dairy, agriculture, steel, plastics, copper, aluminium, machine tools, paper, automobiles, chemicals. India has officially opted out of the biggest trade deal in the world due to the vulnerability of marginalised sector of its society.
