The Regional Comprehensive Economic Partnership is a proposed agreement between the member states of the Association of Southeast Nations (ASEAN). It was introduced in the 19th ASEAN meet which took place in November 2011. During the 21st ASEAN meet in Cambodia (November 2012), the negotiations were initiated with a deadline of November 2019. Member states of ASEAN and their Free Trade Agreement partners include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam, China, Japan, India, South Korea, Australia and New Zealand.
RCEP aims to create an integrated, open market within the sixteen countries who were a part of it. These countries together account for one-third of the world’s Gross Domestic Product (GDP) and are home to approximately 3.6 billion people (nearly half of the world’s population). The RCEP negotiations included a multitude of areas including but not limited to trade, dispute settlement, economic cooperation and much more. The main purpose of these negotiations was to create a mega-regional economic agreement.
India, one of the 16 countries, on 4th November 2019, decided to withdraw from the same. Prime Minister, Shri. Narendra Modi said that India was not turning its back on the global competition across various fields. He also said that “the present form of the RCEP Agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP. It also does not address satisfactorily India’s outstanding issues and concerns in such a situation”. This decision did not come as a surprise to the others as it was opposed by the agricultural sector as well as the trade sector of the country. The traders were worried that the deal would cause the market to be flooded with Chinese goods affecting the local businesses. It would also lead to tariff elimination on almost 90% of the goods which are traded amongst the ASEAN countries. India too would have to eliminate tariffs on approximately 74% of its goods in trade with countries like China, New Zealand and Australia. India is already seeing a trade deficit of 105 billion USD with RCEP countries and out of that 54 Billion USD with China alone. By accepting the terms of RCEP, India would have increased this deficit further and would cause a slowdown in the economy.
Some of the key issues pertaining to the RCEP include insufficient protection against import surge, possible circumvention of rules of origin, no credible assurance on market access, non-tariff barriers, among others. The Prime Minister of India mentioned that India will remain committed to a comprehensive outcome of the RCEP negotiations and it wants a unified approach for goods, services as well as investments amongst all the sixteen participating countries.
It was anticipated that RCEP will be mutually beneficial for all the sixteen countries that are involved. However, accepting the RCEP would have impacted India’s domestic markets. Also, an economic imbalance would hinder India’s strategic interests in Southeast Asia.
Usually, agreements like RCEP see little interest from the general public, especially in India. However, in the case of RCEP, some countries saw opposition rising due to the Trans-Pacific Partnership negotiations. After this, the farmers in India started protests against the RCEP while the summit was going on in Bangkok. Due to this, criticism grew amidst the civilians and the Indian National Congress condemned the negotiations. The Prime Minister could not neglect this criticism and the will of the people. Diplomats had predicted that the Modi administration would display a lot more enthusiasm in the negotiations after the 2019 general elections in India. Finally, the government realised that they could no longer ignore the people’s wishes and not account for the widespread opposition to the agreement in the country
When a country like India rejects the RCEP, it may or may not influence other countries to back out of the negotiations but it will definitely make them reconsider their respective stances. It could also derail the efforts of ASEAN to maintain a free and open trade system. India, by backing out of RCEP, has shown to the rest of the world that it’s not just a market for goods but also a country which takes it’s the position when needed. By doing so, it has shown that in the world’s largest democracy, the will of the people matters the most.