Benefits of RCEP Agreement
- The Regional Comprehensive Economic Partnership (RCEP), which is a proposed Free Trade Agreement between ten ASEAN member states and their six Free Trade Agreement (FTA) partners namely India, Australia, China, Japan, New Zealand and Republic of Korea, is expected to provide market access for India’s goods and services exports and encourage greater investments and technology into India.
- It would also facilitate India’s MSMEs to effectively integrate into the regional value and supply chains.
- On the other hand, India is not a member of the Asia-Pacific Economic Co-operation (APEC) which is a grouping of twenty-one countries in the Asia Pacific region with an aim to deepen and strengthen economic and technological cooperation amongst APEC member countries.
Regional Comprehensive Economic Partnership
- The RCEP negotiation process had started in 2013 and is unlikely to be concluded by the end of 2016.
- The proposed FTA aims to open up trade in goods and services as well as liberalise investment policies.
- It will cover a market of over 3 billion people in these 16 countries — whose total combined GDP is more than $17 trillion and collectively account for 40% of world trade.
- Negotiations on the RCEP have entered a decisive phase.
India should join RCEP because:
- Allows India to diversify markets in Southeast Asian countries and garnering benefits of common FTA over the whole region.
- Enable India to become a member of global production networks by scattering the production chains in different countries.
- Lenient time limits for attaining labour and environmental standards along with provision of protecting small industries would allow India to secure domestic interests.
- Joining the bloc will give boost to ‘Act east policy’ and would acts as shield against losses due to Trans Pacific Partnership.
India should not join RCEP because:
- Study by Commerce Ministry indicates that it can lead to a revenue loss of 1.6% of the GDP.
- Joining the bloc can result in cheaper imports from China as China offers low price and better quality.
- Competition with Indonesia and Philippines can reduce the benefits of service trade within the bloc
- Domestic issues may arise due to such alliance such as harm domestic manufacturing, leather industry etc.
- Ambiguity in the definition of balanced outcome with respect to downscaling of tariffs
- 15 Asia-Pacific nations including India fear that China may dump its excess capacity in several items including steel, as well as highly subsidised items which may harm local industry of importing countries and distort trade.
What are the concerns that remain?
- The first is the greater access Chinese goods will have to the Indian market, a problem given India’s massive trade deficit. To circumvent this, given that India is the one country that doesn’t have an FTA with China, the government has proposed a “differential market access” strategy for China, which others are inclined to accept.
- After the Wuhan summit, India and China have made progress on addressing the trade deficit, with China increasing access for Indian goods such as pharma and agricultural products.
- The second concern is about demands by other RCEP countries for lower customs duties on a number of products and greater access to the market than India has been willing to provide.
- The more developed RCEP countries such as Australia and Singapore have been unwilling to accommodate India’s demands to liberalise their services regime and allow freer mobility of Indian workers.
Asia-Pacific Economic Cooperation
- APEC stands for Asia-Pacific Economic Cooperation.
- It is a regional economic forum of 21 Pacific Rim member economies
- Established in 1989
- APEC’s 21 members aim to promote free trade throughout the Asia-Pacific region
- APEC account for about half the world’s trade and almost 60 per cent of global GDP
Why was it established?
- In response to the growing interdependence of Asia-Pacific economies and the advent of regional trade blocs in other parts of the world;
- To fears that highly industrialized Japan (a member of G8) would come to dominate economic activity in the Asia-Pacific region; and
- To establish new markets for agricultural products and raw materials beyond Europe
- India is not a member. India has applied but membership was denied because it does not border Pacific Ocean
- India is an observer member in APEC
- HQ: Singapore
- Lima, Peru, Nov 2016. Theme was “Quality Growth and Human Development”
- Da Nang, Vietnam, Nov 2017. Theme was ‘Creating New Dynamism, Fostering a Shared Future’
- The 2018 APEC summit was held recently held in Papua New Guinea.