Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between –
- The 10 members of ASEAN
- Additional members of ASEAN +3 = China, Japan, South Korea
- Members with which ASEAN countries have FTA = India, Australia, New Zealand
RCEP includes more than 3 billion people, has a combined GDP of about $17 trillion, and accounts for about 40 percent of world trade. By any means, this is a huge community in making.
What is the significance of RCEP for India?
From India’s point of view, the RCEP presents a decisive platform which could influence its strategic and economic status in the Asia-Pacific region and bring to fruition its “Act East Policy.” It is expected to be an ambitious agreement bringing the 5 biggest economies of the region – Australia, China, India, Japan and South Korea – into a regional trading arrangement.
There are three immediate benefits that its trade policymakers should note-
#1. The RCEP agreement would complement India’s existing free trade agreements with the ASEAN and some of its member countries.
This consolidation can address challenges emanating from implementation concerns vis-à-visoverlapping agreements, which is creating a “noodle bowl” situation obstructing effective utilization of these FTAs.
It will also help achieve its goal of greater economic integration with countries East and South East of India through better access to a vast regional market ranging from Japan to Australia.
NOTE: India is not a party to two important regional economic blocs: the Asia-Pacific Economic Cooperation and the Trans-Pacific Partnership. The RCEP would enable India to strengthen its trade ties with Australia, China, Japan and South Korea, and shouldreduce the potential negative impacts of TPP and TTIP on the Indian economy.
#2. Gets India closer to ASEAN
- Clubbing with the ASEAN has been a principal policy priority for both China and India.
- At present, while China has clubbed with the ASEAN+1, ASEAN+3 and ASEAN+6,
- India is clubbed only under the ASEAN+6 framework
#3. India can leverage its capabilities in IT, Healthcare, Education and services
- The RCEP will create opportunities for Indian companies to access new markets
- India is well placed to contribute to other countries in RCEP through its expertise in services
Countering TPP with RCEP
New Delhi fears the TPP, although years away from reality, could mean losing some textile and drugs exports to countries like Vietnam, which has embraced both the TPP and the RCEP.
TPP is set to change the landscape of global trade. For India, it is most likely to affect sectors likeleather goods, plastics, chemicals, textiles and clothing.
We will discuss more about TPP in a later discussion but suffice to say that RCEP’s realisation is important for India.
Questions for you
- What’s the history behind ASEAN+1, ASEAN+3, ASEAN+6 and how is ASEAN+6 related to RCEP?
- Apart from RCEP, TPP – there is another arrangement called as Trans-Atlantic Trade and Investment Partnership (TTIP). What do you know about it?
- With China not clamping down on its excess steel production, how do you think these FTA arrangement will pan out? Or will they not? What is USA’s stance on this?
- It would be worthwhile to investigate the loyalties of the ASEAN nations wrt. China OR India. What are the major countries in ASEAN and who are they friends with. Why would you say so?