India’s RCEP Fiasco

The Regional Comprehensive Economic Partnership (RCEP) next summit will be held in Manila, Philippines on November 12 – 14. Will India be talked into reducing tariffs?

India’s RCEP Fiasco
India’s RCEP Fiasco

The RCEP is a mega trade and investment partnership between the ASEAN members which include India, China, South Korea, Japan, Australia and New Zealand. The primary aim is for the largest trade bloc in the world with half the world’s population, 30% GDP and over a quarter of exports.

Prime Minister Narendra Modi will most probably be part of the next RCEP in Manila. India will face the pressure of reducing tariffs and opening its doors to imports and if there’s any person who can sort the issue it would be our honourable Prime Minister.

ASEAN’s main aim is to remove duties on at least 90% of the traded items. India however has a growing trade deficit with China, and hence cannot expose such reductions in tariffs especially with China. There is also an added pressure from the local domestic industry as it will lead to exports flooding into the market putting the local products demand on hold.

“We are worried about the kind of pressure that we would be under in the run-up to the RCEP Summit which is scheduled in the middle of this month. The final decision now depends on the resistance we face from our domestic industry against dropping tariffs and the political call that the leadership takes,” an official from India said.

RCEP also has certain key threats to the world as a whole which needs to be looked into. One such threat is the right to corporations to bypass the domestic legal system and sue governments in international tribunals. India for example has already been sued for charging companies taxes. Climate will also be at risk due to higher shipping and aviation emissions which will be harder to control as trade will most likely be higher. It is important to verify mistakes by examining past trade deals such as the India- ASEAN agreements, Japan-India Comprehensive Economic Partnership Agreement and the South Korea-India Comprehensive Economic Partnership Agreement.

India is focusing its efforts on obtaining a healthy offer from other countries, to balance the gains and losses between the goods and services negotiations. RCEP negotiations give an upperhand to the benefits that can be obtained from India as a whole but the inputs from the various industries need to be carefully examined before formulating their debate points.