Asian nations form world’s largest trade bloc: What kept India from taking the leap? – eDairyNews
India |17 noviembre, 2020

RCEP | Asian nations form world’s largest trade bloc: What kept India from taking the leap?

India’s decision not to become a signatory to the free trade agreement was largely based on concerns of surges in imports that may have severely disadvantaged domestic industries.

KEY HIGHLIGHTS
-By some estimates, the combined GDP of all the economies party to the agreement stood at $26.2 trillion (2019) or approximately 30 per cent of the world’s GDP
-Representatives from the dairy industry, for instance, had cautioned that taking the RCEP leap would mean facing greater competition from products from New Zealand and Australia. Similar concerns were forwarded by players in India’s steel and textiles space
-India had also sought assurances of greater market access in other RCEP member countries and promises of more lenient import-tariff regimes

Following eight long years of negotiations that stretch back to 2013, the leaders of 15 nations in the Asia-Pacific inked one of the largest free trade agreements in history – the Regional Comprehensive Economic Partnership (RCEP) – via video link on Sunday. Along with China, other members included Australia, New Zealand, Japan, South Korea, Indonesia, Malaysia, the Philippines and Thailand.

Covering 2.2 billion people, and accounting for roughly 30 per cent of global output, the RCEP deal is engineered to increase the cross-border flow of goods, services and investment and set new, consensus-based regulations for blossoming industries like e-commerce and intellectual property.

In a joint statement, the leaders of the 14 nations noted the importance of the deal particularly in light of the global economic downturn caused by the COVID-19 pandemic. By some estimates, the combined GDP of all the economies party to the agreement stood at $26.2 trillion (2019) or approximately 30 per cent of the world’s GDP.

The RCEP didn’t address India’s concerns adequately

However, that value may have been significantly larger were it not for India’s decision not to become a signatory to the deal. In January this year, Prime Minister Narendra Modi announced India’s decision not to participate in the agreement at the Asean Summit in Bangkok. “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, it is not possible for India to join the RCEP agreement,” he said.

India’s decision was largely made on the back of grouses made over the uninhibited flow of cheap imports, specifically from China, that would disadvantage domestic industries. Industry representatives had voiced their fears that such imports would ‘flood’ the market and had advocated for greater protection from such import surges.

Representatives from the dairy industry, for instance, had cautioned that taking the RCEP leap would mean facing greater competition from products from New Zealand and Australia. Similar concerns were forwarded by players in India’s steel and textiles space.

During the negotiations, India had proposed an auto-trigger mechanism that would enable it to raise tariffs on goods and services when imports exceeded a specific threshold. The protectionist stance that India adopted was also made in view of the fact that it experiences significant trade deficits with a large number of RCEP signatories.

India had also sought assurances of greater market access in other RCEP member countries and promises of more lenient import-tariff regimes. It had also requested a change in the base year for tariff reduction from 2013 to 2014 – when India began increasing import duties on certain products.

However, when these assurances and changes did not materialise, there was no longer intent from India to participate in the pact. RCEP members have since left the door open for India to make a U-turn and join, but in July this year, PM Modi once again reiterated India’s stance, also noting that the decision was not under review. As trade within Asia continues to expand, it remains to be seen whether India will eventually look to resolve its issues with the RCEP towards becoming a signatory.

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