Latest Topics in News
RCEP – Regional Comprehensive Economic Partnership [2023]
Why RCEP is in News Now
- Sri Lanka and Bangladesh have applied to join RCEP
- Shows RCEP’s growing importance as a regional trading bloc
The Regional Comprehensive Economic Partnership (RCEP) is back in the news as Sri Lanka and Bangladesh have applied to join the trade bloc. As per recent reports, Sri Lanka has already submitted its application to join RCEP while Bangladesh is expected to apply after its national elections in 2024.
This shows the growing importance and appeal of RCEP as the world’s largest regional trading agreement. For smaller South Asian economies like Sri Lanka and Bangladesh, joining RCEP provides access to the dynamic Southeast Asian markets as well as major economies like China, Japan and South Korea. With a combined GDP of $29.7 trillion, RCEP covers nearly a third of the global population and economy.
Regional Comprehensive Economic Partnership
| Sections | Details |
|---|---|
| Key Takeaways |
RCEP Overview:
|
| India and RCEP |
|
| Pros and Cons for India |
|
| Strategic Implications |
|
Introduction to RCEP
What is RCEP?
- World’s largest regional free trade agreement
- Formed between ASEAN countries and partners
- Key facts (population, GDP covered etc)
The Regional Comprehensive Economic Partnership or RCEP is the world’s largest regional free trade agreement to date. It is a mega trade deal between the 10 member states of the Association of Southeast Asian Nations (ASEAN) and five of their major trading partners – China, Japan, South Korea, Australia and New Zealand.
The RCEP was first proposed in 2011 and negotiations concluded in 2020. In total, it covers 15 countries with a combined population of 2.2 billion people and total GDP of $26.2 trillion, making it the largest trading bloc globally. By allowing free flow of goods and services between these countries, RCEP aims to boost economic growth and investment in the Asia-Pacific region.
History of RCEP
- Origins and negotiation timeline
- India’s withdrawal in 2019
The RCEP negotiations were first launched in November 2012 between the 10 ASEAN member states and their 6 major trading partners – China, Japan, South Korea, Australia, New Zealand and India. The goal was to consolidate the existing ASEAN+1 FTAs into a single comprehensive agreement.
After nearly a decade of negotiations, India decided to opt out of the RCEP in November 2019. India’s decision was driven by concerns about cheap Chinese imports flooding the Indian markets and the lack of concessions for the services sector where India has strength. The remaining 15 nations signed the RCEP agreement in November 2020.
RCEP Member Nations MAP
Key Facts about RCEP
| Parameter | Value |
|---|---|
| Full Name | Regional Comprehensive Economic Partnership |
| Date of Signing | November 2020 |
| Number of Member Countries | 15 |
| Total Population of Member Countries | 2.2 billion |
| Total GDP of Member Countries | $29.7 trillion |
| Coverage | Free trade agreement between ASEAN and 5 FTA partners |
| Areas of Cooperation | Economic activities, trade services, technical collaborations, dispute resolution, and other related issues |
| Environmental Protection and Labour Rights | Not covered |
Formed
At ASEAN summit hosted by Vietnam on 15th Nov 2020.
Regional Comprehensive Economic Partnership Member Countries
| Country | Membership status |
|---|---|
| Brunei | Member |
| Cambodia | Member |
| Indonesia | Member |
| Laos | Member |
| Malaysia | Member |
| Myanmar | Member |
| Philippines | Member |
| Singapore | Member |
| Thailand | Member |
| Vietnam | Member |
| Australia | FTA Partner |
| China | FTA Partner |
| Japan | FTA Partner |
| New Zealand | FTA Partner |
| Republic of Korea (South) | FTA Partner |
Key Aspects of RCEP
Areas Covered
- Reducing tariffs on goods and services
- Investment, intellectual property, e-commerce etc
The RCEP agreement covers a wide range of areas including trade in goods and services, investment, intellectual property, e-commerce, and dispute settlement. It aims to reduce tariffs on most goods traded between member countries over the next 20 years. RCEP also establishes common rules around trade and investment between member states.
Benefits of RCEP
- Increased trade and investment
- Integrated supply chains
- Strategic benefits
RCEP aims to boost trade and foreign investment within the bloc by easing the flow of goods and services between member countries. It helps integrate regional supply chains and provides unfettered access to a large combined market of 2.2 billion people. RCEP members also gain strategically by establishing a regional economic bloc excluding the United States.
Regional Comprehensive Economic Partnership Significance
| Key Points |
|---|
| Covers about 30% of global GDP |
| Nearly a third of the world’s population, some 2.2 billion people |
| Common rules around trade, intellectual property, e-commerce, and competition will be set |
India’s Concerns with RCEP
- Trade deficits
- Protecting agriculture and dairy
- Mechanisms like auto-trigger
India had several concerns regarding RCEP, including worsened trade deficits with member nations, lack of safeguards for agriculture and dairy sectors, and ineffective auto-trigger mechanisms to raise tariffs if imports surge. Joining RCEP would also have given China greater access to the Indian market, which India was apprehensive about. These concerns ultimately led India to not join the trade agreement.
WHY INDIA DID NOT JOIN
Reasons for India’s withdrawal from Regional Comprehensive Economic Partnership
| Reason | Explanation |
|---|---|
| Unfavourable Balance of Trade | India has a bilateral trade deficit with most of the member countries of RCEP |
| Chinese Angle | India’s trade deficit with China is higher than that of the remaining RCEP constituents put together |
| Non-acceptance of Auto-trigger Mechanism | Other countries in the RCEP were against India’s proposal to raise tariffs on products in instances where imports cross a certain threshold |
| Protection of Domestic Industry | India expressed apprehensions on lowering and eliminating tariffs on several products like dairy, steel etc. |
| Lack of Consensus on Rules of Origin | India was concerned about a “possible circumvention” of rules of origin |
| Services and Investment Business | India does not want an agreement to be signed regarding good trade only. The trade agreement for only goods but no services and investment business will not enhance but only damage the Indian economic policy. |
Sectors showing resistance to RCEP
| Sector | Explanation |
|---|---|
| Dairy | India is concerned about New Zealand exporting dairy products, which could lead to job losses and importing needs |
| Automobile | RCEP could allow a “back-door entry route” for automobile parts from China |
| Textile | Free import of polyester fabrics from China, Vietnam, Bangladesh and other countries could lead to cheaper textiles, affecting an already-hit sector |
| Steel | Excessive imports could harm the domestic market and India’s export competitiveness |
| Agriculture | RCEP would make things worse for the sector, which is already experiencing a downturn |
RCEP vs Other Agreements
- Compare with agreements like Quad
- Importance for India’s Act East policy
The RCEP can be compared to the Quadrilateral Security Dialogue (Quad), another major strategic partnership in the Indo-Pacific region. While the Quad contains only 4 nations – India, US, Japan and Australia, RCEP consists of 15 Asia-Pacific countries including China. Unlike RCEP, Quad is focused on security issues rather than trade. RCEP complements India’s Act East policy by integrating India with major Asian economies.
Way Forward for India
- Pros and cons of joining RCEP
- Strengthening domestic industry first
- Keeping doors open for future accession
India needs to balance the pros and cons before deciding on joining RCEP. Benefits include access to large Asian markets, FDI and integration into regional supply chains. However, India needs to prioritize strengthening its domestic manufacturing and MSME sector through reforms before opening up to unbridled imports. India could negotiate bilateral FTAs with RCEP members before joining the bloc. Keeping its options open, India can join RCEP in the future once its industry becomes more competitive.
Benefits of RCEP for India
| Benefit | Description |
|---|---|
| Enhanced market access and trade | RCEP can create better opportunities for Indian suppliers to enter member countries’ markets and improve import infrastructure at the entry point. |
| Technological advancement | Japan and South Korea can help India with technical gaps, high-end technologies and strategic advancement. |
| Investment from China | China has been a source of investment for Indian firms, which can help economic growth. |
| Global value chains | India can become an integral part of global supply chains through RCEP. |
| Strategic considerations | Japan is pushing for Indian presence in RCEP to steer away from Chinese dominance. |
| Safeguarding India’s overseas markets | India can protect its overseas markets as other RCEP member nations may replace Indian textile exports. |
| India’s huge domestic market | India’s large domestic market and increasing disposable incomes make it a lucrative market for exporting countries. |
Comparison of RCEP and Quad
| Aspect | RCEP | Quad |
|---|---|---|
| Members | 15 member countries including China, Japan, South Korea | 4 member countries including India, Japan, US, Australia |
| Purpose | Promote trade and investment in the Asia-Pacific region | Strategic dialogue to address regional security issues |
| China’s presence | China is a member country | China is not a member country |
| India’s role | India is a member observer | India is a member country |
| Coordination | Japan and Australia are members of both RCEP and Quad | Japan and Australia are members of both RCEP and Quad |
Final thoughts
In summary, RCEP is a milestone regional trade agreement that promotes Asia-Pacific economic integration. While opting out for now, India is focused on building its domestic industrial capacity first. Joining RCEP later from a position of strength would align with India’s goal of becoming an export-oriented manufacturing hub.
Few basic question about FTAs
Question: What is/are Free Trade Agreements (FTAs)?
Answer: FTAs are arrangements between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non tariff barriers on substantial trade between them. FTAs, normally cover trade in goods (such as agricultural or industrial products) or trade in services (such as banking, construction, trading etc.). FTAs can also cover other areas such as intellectual property rights (IPRs), investment, government procurement and competition policy, etc.
Major FTAs Signed by India
| Country / FTA Partner | Free Trade Agreement |
|---|---|
| SAARC Countries | South Asia Free Trade Agreement (SAFTA) |
| Mauritius | India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA) |
| ASEAN | India-ASEAN Comprehensive Economic Cooperation Agreement (CECA) |
| Republic of Korea | India-Korea Comprehensive Economic Partnership Agreement (CEPA) |
| Japan | India-Japan Comprehensive Economic Partnership Agreement (CEPA) |
| APTA Member Countries | Asia Pacific Trade Agreement (APTA) |
Which are the major FTAs /CEPAs/ PTAs of India?
| S. No. | Acronym | Groupings | No. | Member Countries | FTAs/PTAs |
| 1 | APTA | Asia Pacific Trade Agreement | 5 | Bangladesh, China, India, Re public of Korea, Sri Lanka. – | PTA |
| 2 | India ASEAN TIG | India ASEAN Trade in Goods Agreement | 11 | Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam and India. | FTA |
| 3 | BIMSTEC | Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Cooperation | 7 | Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal. | Under negotiations |
| 4 | GSTP | Global System of Trade Preferences | 44 | Algeria, Argentina, Bangladesh, Benin, Bolivia, Brazil, Cameroon, Chile, Colombia, Cuba, Democratic People’s Republic of Korea, Ecuador, Egypt, Ghana, Guinea, Guyana, India, Indonesia, Iran, Iraq, Libya, Malaysia, Mexico, Morocco, Mozambique, Myanmar, Nicaragua, Nigeria, Pakistan, Peru, Philippines, Republic of Korea, Romania, Singapore, Sri Lanka, Sudan, Thailand, Trinidad and Tobago, Tunisia, Tanzania, Venezuela, Viet Nam, Yugoslavia, Zimbabwe. | PTA |
| 5 | IBSA | India Brazil and South Africa | 3 | India, Brazil and South Africa. | Under negotiations |
| 6 | SAFTA | South Asia Free Trade Agreement | 7 | India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives | FTA |
| 7 | ISLFTA | Indo Sri Lanka FTA | 2 | Sri Lanka, India | FTA |
| 8 | IMCECA | Indo Malaysia CECA | 2 | Malaysia, India | FTA |
| 9 | ISCECA | India Singapore CECA | 2 | Singapore, India | FTA |
| 10 | JICEPA | Japan India CEPA | 2 | Japan, India | FTA |
| 11 | IKCEPA | India Korea CEPA | 2 | South Korea, India | FTA |
Official RCEP Website
FAQ
What is RCEP and its purpose?
The Regional Comprehensive Economic Partnership (RCEP) is a regional free trade agreement between the 10 ASEAN member states and their 5 FTA partners – China, Japan, South Korea, Australia and New Zealand. The purpose of RCEP is to promote trade, investment and economic integration in the Asia-Pacific region by reducing tariffs and aligning trade rules between member countries.
Is India a member of RCEP?
No, India is not a member of RCEP.
Why did India leave the RCEP?
India left the RCEP negotiations in 2019, citing concerns over inadequate protection for its domestic industries, especially agriculture and dairy sectors.
How many Country in RCEP?
There are 15 countries that are part of the RCEP – the 10 ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) and the 5 FTA partners (China, Japan, South Korea, Australia, New Zealand).
Who is the founder of RCEP?
RCEP was jointly proposed and founded by the 10 member states of the Association of Southeast Asian Nations (ASEAN) in 2011. The negotiations were led by ASEAN along with China, Japan, South Korea, Australia, New Zealand and initially India.
