RCEP: Implications for Indian trade and economy

Abstract

Since the last decade, regional trade agreements (RTAs) have been on the rise. Be it Trans-Pacific Partnership (TPP) or Trans-Atlantic Trade and Investment Partnership (TTIP), member countries have been pushing hard to develop regional trading blocs. Seeing the accelerated rise in RTAs, developing and emerging economies too have started building and investing in their own regional trade networks. Regional Comprehensive Economic Partnership (RCEP) is a prime example of the same, where 16 countries situated closely in a geographic sense are planning to come together and build a new trade regime. The US in the past had been party to such multi-lateral trade agreements, but in the last decade, it proposed a major trading bloc (Trans Pacific Partnership) covering many of the states in the pacific region. This trading bloc, however, ignored two major economies, i.e. China and India, the economies which contribute to ~15% of the global trade.1 To counter this, China endorsed RCEP which plans to cover all the major Asian economies. RCEP is a proposed trading bloc to link ten ASEAN member states and their free trade agreement partners, i.e. Australia, China, India, Japan, South Korea and New Zealand. In all, the proposed trading bloc would include more than 3 billion people, a combined GDP of $17 trillion and about 40% of world trade.2 The negotiation started way back in 2013, but the final agreement is yet to be achieved. The core of the negotiating agenda includes trade in goods and services, investments, economic and technical cooperation and dispute settlement. The materialisation of this FTA would be a powerful vehicle to support the spread of global production networks and reduce the inefficiencies of multiple Asian trade agreements that exist presently. The most important part of RCEP has been its flexibility clause which states that “RCEP will include appropriate forms of flexibility including provision for special and differential treatment, plus additional flexibility to the least-developed ASEAN Member States”.3 The rigidity when it comes to laws and policies had been in the past a major reason for the failure of trading blocs. The RCEP clause tends to take care of that giving a level playing field to all its participating members.