Don’t ignore RCEP
India must re-examine markets to the east
As United States President Donald Trump ensured that the G-7 meeting in Quebec descended into schism, and deep divides over trade and tariffs split the Western alliance, India must re-examine its position on global and regional trade architecture swiftly. Relying on the World Trade Organisation or on existing trade connections is clearly a strategy whose time has passed. In this reconsideration, the Regional Comprehensive Economic Partnership, or RCEP, must play a major role. After all, the RCEP is unquestionably the next major frontier in economic integration. It connects the states of southeast Asia that are members of the Association of South East Asian Nations, or Asean, with countries that have signed free trade agreements (FTAs) with Asean, including India and China. The RCEP countries are the nexus of the world trading system. Well-trafficked trade routes pass through southeast Asia, and the region’s economies are growing and vibrant. The RCEP includes both commodity exporters such as Australia and Indonesia and services hubs such as Singapore. Yet Indian officials at the highest levels have expressed very public doubts whether the RCEP will actually be in India’s interest. While recognising the validity of these fears, it is nevertheless now clear that if New Delhi abandons the RCEP, or allows it to go forward without India’s participation, then this country will be left on the sidelines of world trade.
Much of the concern repeatedly expressed about the RCEP surrounds the fact that China will be a participant in the bloc. After all, China accounts for 60 per cent of India’s $83 billion trade deficit. Fear of Chinese imports and Chinese overcapacity should not be allowed to cripple trade negotiations, however. India must certainly reserve the right to put in place emergency anti-dumping measures, but it cannot afford to ignore the opportunities inherent in integrating further with the global trading system. Overall, New Delhi’s recent attitude to trade agreements has been worryingly short-sighted. Much attention has been focused on producers who have found it difficult to compete. Yet the benefits for consumers are largely ignored. In addition, research has shown that FTAs, such as the one India has with Asean, are not being taken full advantage of by India’s exporters — and so the government might be more fruitfully employed educating exporters and aiding them to access the new markets open to them, than in cutting off trade negotiations.
If India is to succeed in reviving its exports and creating jobs at home, it must transform its domestic productive base, and render it more competitive and export-oriented. A combination of structural reform and openness to trade is thus the only formulation for success. India’s exports as a proportion of its gross domestic product have stagnated. The rise of protectionist sentiment in Washington reveals that even the US — one of the few countries with which India has a trade surplus — cannot be relied on as an export destination. Other markets must be found — which means that the RCEP is no longer optional for India. The government must re-invigorate its participation in the RCEP negotiation process. The worst possible outcome would be if the trade agreement goes forward without India.