Dinesh Kamath's Editorial 'India should not walk out of RCEP' that was published in Newsband

India should not walk out of RCEP

There were negotiations on the Regional Comprehensive Economic Partnership (RCEP), among 16 Asian and Pacific Ocean countries. They were the 10 ASEAN members and their Free Trade Agreement (FTA) partners, Australia, China, India, Japan, New Zealand and Republic of Korea. They want a “substantive agreement” on the trade deal by the end of this year. This was made clear at a meeting in Singapore.

India is among the countries that will have to take a call at this point, and the government has decided to set up a group of four ministers to advise Prime Minister Narendra Modi in this matter. 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, China increased access for Indian goods such as pharma and agricultural products. There were demands by other RCEP countries for lower customs duties on a number of products and greater access to the market. The more developed RCEP countries did not accept India’s demands to liberalise their services regime and allow freer mobility of Indian workers.

Slowing down India’s RCEP engagement or walking out of the talks at this stage, owing to forthcoming elections, will give China further space in the regional trade and security architecture. At a time when the U.S. has broken from the global concord on multilateral trade agreements, an Indian walkout would cause more danger.  

India must press for more importance to WTO and less and less of the FTA with multiple partners. The FTA are making a mockery of the WTO and the simple rule based system. For businesses it is becoming more and more complicated and challenging to compete. Indian business suffer from high cost of capital, corruption and poor infrastructure, while other countries dump their products in India.

For "Look East", India can give easy travel for people and stick by the rules of WTO. India should approach the situation realistically with its need based policies rather than arbitrary decision of pulling out abruptly. The hesitation and fears to allow goods, services and manifold labour from other countries, here the RCEP countries with 40% of world GDP, show up the continuing archaic mercantilism, the merchants' manufacturers' and govts' policy opposition to import/economic contacts with foreign countries. This 18th,19th century economic policy proclivity has become inapplicable in view of technology, science and communication explosion. Economic symbiosis has been waiting to happen; govts and vested interests are refusing to learn from this. Adding to this backwardness is the tendency of rabble rousing parochial sentiments of power hungry politicians, rather uncommitted to Democracy and people's welfare in an all inclusive sense. Divisive politics operates in the name of welfare and protecting local interests. Regional economies have their own contributions to make comparative advantage. For example, there can be manpower contributions at various levels to even advanced economies from India.

India need not play down on RCEP absolutely and slow pedal until it gets the rhythm of joining other members with trade augmenting strategies. US shuns its role in multilateral trade and China is shaky on its major trade with US .Hence India can play the minimum role to use opportunities left by China and US in consonance with the trade of other RCEP members. Hit out or get out cannot be the strategy.

First of all, we should strengthen our manufacturing sector before giving greater access to other regional nations. Around 30 crore people are below poverty line. Our first aim should be giving proper employment to them.

India's exports over the last five years are lower than the level they attained in 2013 - 14. With oil prices hardening, we are back to having an annual trade deficit of $ 200 billion, even as remittances and software exports are levelling off. There is a worrying return to protectionism after a generation. Our diplomatic outreach to Asean and Africa is not being supported by robust growth of trade and investment flows. Inevitably, if we walk out of RCEP, all these countries will place us in the Talk, not Walk category.