RCEP Trade Deal

Why in news?

The Regional Comprehensive Economic Partnership (RCEP) trade deal was signed.

What is RCEP?

RCEP deal is the largest regional trading agreement to this day.
The purpose of RCEP was to make it easier for products and services of each of these countries to be available across this region.
Negotiations to chart out this deal had been on since 2013.
It is signed by 15 countries led by China, Japan, South Korea, Australia, New Zealand and the 10-state ASEAN grouping.
[ASEAN - Association of Southeast Asian Nations]

Why did India exit the grouping?

India had justified its decision as protecting its economy from burgeoning trade deficits with a majority of the 15 RCEP members.
It wanted to safeguard the interests of industries like agriculture and dairy and to give an advantage to the country’s services sector.
The grouping’s refusal to accede to India’s requests on safeguards was a deal breaker.

How far is China’s presence a factor?

Escalating tensions with China are a major reason for India’s decision.
The various measures India has taken to reduce its exposure to China would have sat uncomfortably with its commitments under RCEP.

Major issues that were unresolved during RCEP negotiations were related to the exposure that India would have to China.
Rules of origin - It is the criteria used to determine the national source of a product.
India felt that there could be a possible circumvention of rules of origin.
In that case, some countries could dump their products by routing them through other countries that enjoyed lower tariffs.
This may lead to surges in imports.
India feared that there were inadequate protections against these surges.
MFN - India also wanted RCEP to exclude most-favoured nation (MFN) obligations from the investment chapter.
Other issues - India felt the deal would force it to extend benefits given to other countries for sensitive sectors like defence to all RCEP members.
RCEP also lacked clear assurance over market access issues in countries such as China and non-tariff barriers on Indian companies.
Also, the final agreement shows that the pact does address these issues.

What are India’s options now?

India is an original negotiating participant of RCEP.
It has the option of joining the agreement without having to wait 18 months as stipulated for new members in the terms of the pact.
Alternatively, India may be reviewing its existing bilateral FTAs with some of these RCEP members.
It will also make newer agreements with other markets with potential for Indian exports.
Over 20 negotiations, including with the US and the UK, are underway.

Source: The Hindu, Indian Express