Why did India opt out of the RCEP?
Regional
Comprehensive Economic Partnership (RCEP) is a proposed free trade
agreement in the Asia-Pacific region between the ten member states of
the Association of Southeast Asian Nations (Brunei, Cambodia, Indonesia,
Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and
Vietnam) and their five Free Trade Agreement (FTA) partners (Australia,
China, Japan, New Zealand, and South Korea). India, formerly ASEAN's
sixth FTA partner, decided to opt out of the pact in 2019. In light of
India's departure, the RCEP has announced that India is welcome to join
RCEP whenever it is ready.
The
RCEP negotiations were launched 7 years ago, in 2012 and this year
there was a big push to get it finalised. After India’s rejection, the
remaining 15 members decided to go ahead and underlined their intent to
sign a trade deal sometime next year, keeping the door open for India to
join at a later date.
But
why did India reject the agreement? Large trade deficits may possibly be
one of the reasons. India has trade deficits with most of the RCEP
countries. Out of 15, India has huge trade deficit with 11 countries.
The deficit with these countries has almost doubled in the last 5 years,
from $54 billion in 2013-14 to $105 billion in 2018-19. Out of this
$105 billion, $53 billion accounts for China. It was possible that the
RCEP may increase these deficits further, which might lead to depleting
foreign exchange reserves.
Additionally,
economists point out, a key concern for India is the dumping of cheaper
goods such as diary and farm products, and electronic items, especially
from China. The RCEP deal format required India to abolish tariffs on
more than 70% of goods from China, Australia and New Zealand, and nearly
90% goods from Japan, South Korea and ASEAN countries. This would have
made imports to India cheaper.
This, in turn, could have significantly
hurt our industries and farmers. The manufacturing sector has seen a
slowdown in recent months, with output growing at its slowest pace in
two years. In agriculture, domestic players dealing in spices -- chiefly
pepper and cardamom, rubber, and coconut may face dumping from the
South Asian spice majors. Vietnam and Indonesia have very cheap rubber
to export, and the free access of dairy products from Australia and New
Zealand could hurt our local dairy farmers.
Additionally, India’s past
experience with FTA has not been positive. The Niti Aayog, in 2017, had
published a report that pointed out that FTAs have not worked well for
India. It analysed multiple free trade agreements that India signed in
the past decade. Among those were FTA with Sri Lanka, Malaysia,
Singapore, and South Korea. The Niti Aayog analysis showed that import
from FTA countries increased while export to these destinations did not
match up.
With India’s inclusion, the RCEP
would have become the world's largest free trade area, comprising half
of the world population and will account for nearly 40 per cent of the
global commerce and 35 per cent of the GDP. However, with the RCEP
keeping its door open for India, it remains to be seen if India changes
its stance for inclusion in future.
Sources:
Various publications
Disclaimer: The
information provided herein is based on publicly available information and
other sources believed to be reliable, but involve uncertainties that could
cause actual events to differ materially from those expressed or implied in
such statements. The document is given for general and information purpose and
is neither an investment advice nor an offer to sell nor a solicitation. While
due care has been exercised while preparing this document, we do not warrant
the completeness or accuracy of the information. We will not accept any
liability arising from the use of this material. The recipient of this material
should rely on their investigations and take their own professional advice.
Follow, Like, subscribe
and share
"Your Trust, Our
Financial Expertise."
Infyture, Investment For Your Future
infyture.blogspot.com
Financial Planning || Equity
Tip || Demat Account || Mutual Fund Investment || Life Insurance || General
& Health Insurance || PMS & mini PMS || Retirement Planning
No comments:
Post a Comment
Please do not Enter any Spam Link in Comment Box