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Why Did India Decide Against RCEP? Here Are the Reasons You Need to Know

RCEP

After PM Modi attended RCEP summit in Bangkok, India announced that it is coming out of the negotiations that were started in 2012.

Elaborating on the decision, PM Modi said that the present form of the RCEP (Regional Comprehensive Economic Partnership) Agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP. He added that it also does not satisfactorily address India’s outstanding issues and concerns and in such a situation, it is not possible for India to join the RCEP agreement.

He added that when he measures the RCEP Agreement with respect to the interests of all Indians, he does not get a positive answer and that neither the talisman of Gandhiji nor his own conscience permits him to join RCEP.

Economic Reasons Behind the Move

Certain core concerns of India which would impact the livelihood of all Indians, especially the vulnerable sections of the society had still remained unaddressed at the end of seven year-long, twenty-nine round negotiation process. The reason why the government decided to pull out of the deal. These core concerns were-

Trade deficit

India already faces 105 billion dollar trade deficit with the RCEP countries, half of which comes from China(53 billion dollars), signing RCEP without addressing this deficit would only increase it further particularly since most of China’s domestic policies are trade-distorting and one-sided.

In its current form, the RCEP would not have improved the material standing of Indian firms, particularly in areas like agriculture, electronics, and manufacturing. India’s metal producers also would have lost from the greater competition having already been buffeted by previous FTAs with Southeast Asian countries.

In terms of agriculture, firms producing commodities like dairy, pepper, coconuts and cardamom will face pressures from both higher-end producers like Australia and New Zealand and also like-minded competitors in ASEAN, in case of Indian rubber.

If there was reciprocal market access that would have been ensured for India in lieu of facing competition from other countries, then the deal could still have been considered. But given that India’s companies would not increase their market access significantly in other countries, this deal would not work out for them.

Duty cuts and flooding of products

The RCEP could have forced India to cut duties on about 90 percent of the goods that are currently imported to India over the next 15 years. This raised a concern of cheaper imported goods, particularly from China and dairy products from Australia and New Zealand flooding Indian markets.

RCEP also wanted 2013 to be fixed as base year effectively implying that member countries should slash import duties on products to the level that existed in 2013. This would have further exacerbated the problem of dumping which was unacceptable to India which wanted 2019 to be considered as the base year.

Safeguards against dumping

India wanted an auto-trigger mechanism to be institutionalised in the pact which would have served as a kind of protective mechanism to be invoked in case of an unexpected flow of imports. There was also a high chance possible circumvention of rules of origin by certain countries against which India wanted safeguards. In absence of such guarantees, it was no longer tenable for India to stick with RCEP.

Data localisation

In pursuance of PM Modi’s call of data being the new gold, India wanted all countries to have the rights to protect data. This would imply that countries can share data only where it is “necessary to achieve a legitimate public policy’ and wanted to localize the storage of data. The issue has been remained unresolved.

Consistent stand of Union Government

The government led by PM Modi had been very consistent in their stand that securing economic interests of Indians would be the first priority of the government while negotiating RCEP Agreement and the same was reiterated several times by many ministers of the Modi government particularly Commerce Minister Piyush Goyal, External Affairs Minister S.Jaishankar and Agriculture Minister Narendra Singh Tomar.

 

 

Conclusion

After taking into consideration the views of vast sections of the society including farmers, traders, industrialist, professionals and the diary sector, Indian government has rightly taken the decisive step to pull out of RCEP Agreement.

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