See More on Facebook

Diplomacy, Economics

India should have signed up for RCEP

India has decided to put a halt on its joining the largest planned free trade area.


Written by

Updated: November 13, 2019

Had India not pulled out at the last minute from signing the deal during the 3rd summit of the Regional Comprehensive Economic Partnership (RCEP) in Bangkok on November 4, the RCEP would have been the largest free trade area in the world so far—comprising of 16 Asia Pacific countries that house 3.4 billion people, and constituting one-third of the global gross domestic product (GDP) and 40 percent of global trade. Ten member countries of the Association of Southeast Asian Nations (ASEAN) along with Australia, China, India, Japan, New Zealand and South Korea form the RCEP, also known as the ASEAN+6, have been attempting to integrate regional trade (including other possible tenets of economic integration like cross-border investments) since 2012. Incidentally, however, it gained the latest momentum only recently, after China put additional effort to implement the RCEP free trade agreement framework in the aftermath of its escalated trade war with the United States. Of course, China needs to think of new markets so that it can keep its factories running.

Despite India pulling out, the hope that a deal will be reached is still alive. The signing date of the charter has been postponed to the beginning of 2020, ostensibly not to leave India out. The joint leaders’ statement issued on November 4 not only recognised the fact that India has significant outstanding issues yet to be resolved, but all participating countries also vowed to ‘work together to resolve these issues in a mutually satisfactory way’. In all likelihood, the deal will be inked early next year by the other countries, even if India cannot be brought on board. Interestingly though, China, this time around, is very keen to bring India along.

India’s concerns

India has both explicit and implicit reasons to reject the current draft of the 20-chapter agreement. Indian policy-makers are not entirely convinced that the deal would help reduce its fast burgeoning trade deficit with 11 out of the 15 other countries. The deficit accounted for a whopping $105 billion in 2018, of which trade with China alone constituted $53 billion. In fact, given Indian products lacking a competitive edge, both in quality and price, New Delhi is apprehensive of a further worsening of the trade gap as more competitive goods are likely to flood into its market after it signs the free trade agreement. India has major market-related concerns on the following five sectors: e-commerce, industries (mainly steel and electronics), agribusiness, dairy products and fast-moving consumer goods.

The Indian authorities fear that foreign exchange reserves could be unsustainably drained, once the electronic payment gateway—one of the instruments being used to implement the free trade agreement—is opened. The draining of reserves would put macroeconomic stability at constant risk. Cheap Chinese steel and electronic goods, now facing the heat of the US tariff, might kill peer industries in India. Nepal’s southern neighbour also fears large-scale Australian agribusinesses and dairy products from New Zealand uprooting the mostly traditional, underinvested family-run and subsistence-based agriculture and animal husbandry sectors. On the consumer packaged goods sector, the scale of production has been one of the major constraints for India. Many of the industries are likely to be soon shut down due to fierce competition from these regional players. This, in turn, may make a significant dent on Prime Minister Narendra Modi’s ‘Make in India’ initiative.

The implicit reasons for India’s rejection of the Regional Comprehensive Economic Partnership are perhaps more potent than the explicit ones mentioned above. The first and foremost, India has started to see the entire framework increasingly becoming an instrument handy only to China—to advance its mercantilist interest at the cost of the geostrategic ambitions of India. Second, India is panicked about the potential compromise of fair free-market practices by Chinese protectionism.

Third, India believes in a unique hypothesis that China—by making the regional framework a conduit—would sell its products and components to India under the manufacturing labels of other RCEP countries like Laos, Cambodia and Vietnam where Chinese factories are now relocating themselves to take advantage of the cheaper labour costs. And finally, India sees the unhindered access to domestic trade data generated in the course of market transactions as a potential security threat. In the proposed charter, India is looking to ensure the confidentiality of such data or limiting it to domestic use only. Such electronically generated data, analysed by artificial intelligence, is now treated globally as precious information. It has been used successfully to track and predict consumer behaviour and has influenced product design and marketing.

For all these reasons, Prime Minister Modi’s decision to opt out from the deal was hailed by the Indian media and intelligentsia alike. But India’s choice does not seem to have duly considered the whole gamut of issues and implications. For example, if India’s interest is to contain China from monopolising the RCEP framework, wouldn’t its presence have been more effective to achieve that objective? A subgroup of democratic countries like India, Japan, South Korea, Australia and New Zealand together in the RCEP itself would have been in a far better position to discipline China if it chose to transgress. More importantly, what will happen to Modi’s flagship ‘look East’ foreign policy paradigm if he preferred to withdraw from such an overarching regional economic integration framework? And, in the long run, India’s competitive advantage will not improve if its firms are not tested through international competition.

Why does this matter to Nepal?

An obvious question for Nepal would be: How does the Regional Comprehensive Economic Partnership, or India’s participation in it, matter to Nepal? If China and India agreed to undergo strategic cooperation instead of competing for political and economic influence in the entire Asia Pacific region, it can allow this country to successfully pitch for Nepal-India-China trilateralism. If the grouping were allowed to become a real free trade zone, like the European Union, market entry into one of its member countries would effectively mean unhindered access to the entire trading bloc. Given the expansiveness of Nepal’s economic interaction with India, the latter’s participation in the framework and the ensuing expected market efficiency will likely benefit Nepal.



Enjoyed this story? Share it.


The Kathmandu Post
About the Author: The Kathmandu Post was Nepal’s first privately owned English broadsheet daily and is currently the country's leading English-language newspaper.

Eastern Briefings

All you need to know about Asia


Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.



By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Diplomacy, Economics

South Korea outpaces China with 505 new virus cases

The death toll now stands at 13, while 26 patients have been discharged after recovering fully. South Korea has reported its largest daily spike of 505 new coronavirus infections, outnumbering China for the first time as the government restricted exports of face masks amid a supply shortage. China, where the central city of Wuhan is the epicentre of the country’s outbreak, recorded 450 new cases yesterday. This brings South Korea’s total tally to 1,766, as officials warn that the number will continue to grow until around March 20 – two months after its first case. Experts say South Korea’s numbers are spiking because the authorities are testing people by the thousands each day, with the aim of testing all 210,000 members o


By The Straits Times
February 28, 2020

Diplomacy, Economics

China’s coronavirus fight remains challenging

 Key Party meeting calls for full vigilance in control, prevention tasks to avoid risks. The novel coronavirus epidemic in Hubei province is still complicated and challenging, a key Party meeting concluded on Wednesday as it drew attention to the risks of the epidemic rebounding in other areas. Xi Jinping, general secretary of the Communist Party of China Central Committee, presided over the meeting of the Standing Committee of the Political Bureau of the CPC Central Committee in which members listened to a report by the leading group of the CPC Central Committee on coping with the epidemic outbreak and discussed key related tasks. At the meeting, Xi and other members of the Standing Committee of the Political Bureau of the CPC Central Committee donate


By China Daily
February 27, 2020

Diplomacy, Economics

UN chief hails China’s efforts to contain outbreak

Official urges all countries to ‘do everything to be prepared’ to contain the epidemic. United Nations Secretary-General Antonio Guterres on Monday praised China’s contribution to the global fight against the novel coronavirus pneumonia outbreak, noting that the Chinese people are making efforts for all of humanity. The UN chief expressed his gratitude to all of the people in China who are sacrificing many aspects of their normal lives to prevent the virus from further spreading, after discussing the outbreak with World Health Organization Director-General Tedros Adhanom Ghebreyesus in Geneva. Guterres said the decline in the number of new cases in China since the beginning of February is a very good sign, and he expressed the hope that this trend


By China Daily
February 26, 2020

Diplomacy, Economics

WHO calls China’s anti-virus effort ‘aggressive, agile’

Control measures taken by the country offered experience in improving the global response to the disease. While the substantial recent slowdown in the spread of novel coronavirus in China is real, and it is now reasonable to restore work activities step by step, health experts warned that risks abound of the virus flaring up again and they cautioned against complacency, the WHO-China Joint Mission on COVID-19 said at a news conference after its one-week field investigations in China. “Ambitious, agile and aggressive” control measures taken by China to control the novel coronavirus pneumonia epidemic, bolstered by nationwide solidarity and advanced scientific research, have altered the curve of the outbreak for the better, averted a large number of potentia


By China Daily
February 25, 2020

Diplomacy, Economics

Map shows latest tally of Covid-19 cases in Taiwan, Taipei tops list

 After Taiwan reported its first confirmed cases, health authorities finally released on Monday the latest tally of Covid-19 cases in each administrative region, with Taipei being the highest.  More than one month after Taiwan reported its first confirmed cases, health authorities finally released on Monday the latest tally of COVID-19 cases in each administrative region, with Taipei being the highest. An interactive map on the website of Taiwan Centers for Disease Control (CDC) shows the cities and counties where the country’s 28 coronavirus patients currently reside. Marked in red, the capital city has listed sev


By Asia News Network
February 24, 2020

Diplomacy, Economics

Asean, China enhance cooperation in response to Covid-19

The Asean Coordinating Council (ACC) and the Asean-China Foreign Ministers met on Thursday in Laos to discuss to how to respond to the coronavirus disease (Covid-19). The ACC’s special meeting, initiated by Vietnam as Chair of ASEAN, was attended by the Foreign Ministers of ASEAN member countries and the ASEAN Secretary-General. Chairing the meeting, Vietnamese Deputy Prime Minister and Foreign Minister Pham Binh Minh said the event aimed to implement the ASEAN Chair’s Statement released on February 14 on the bloc’s collective response to COVID-19. Minh said that in the face of the epidemic, ASEAN needed to promote its cohesive and responsive spirit, and intensify co-operation within the bloc and between the bloc and its partners to respond to ch


By Viet Nam News
February 21, 2020