To what extent do you think that ratifying the Regional Comprehensive Economic Partnership (RCEP) deal is in India's interest? Argue in the light of opportunities and challenges for India in RCEP.
Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) and the six states with which ASEAN has existing free trade agreements.
Opportunities for India
- RCEP can be means to achieve its goal of integrating with the East Asian economies and obtain access to a vast regional market from Japan to Australia.
- RCEP will beef up India’s trade volume with countries of the region, including China and Japan. India’s services sector information technology, telecom, business process outsourcing (BPOs) and knowledge process outsourcing (KPOs) and other skilled services such as banking are likely to accrue benefits.
- India has FTA with several members of the proposed RCEP. Numerous terms of agreement for FTAs and different Rules of Origin have created a ‘spaghetti-bowl’ situation, thereby impeding the harmonisation and effective use of the FTAs. With the RCEP, it is hoped that simpler and streamlined rules, cutting across the region, will facilitate smoother trade ties. Trade costs are also likely to go down.
- India is not a member of two other major regional economic groupings: Asia-Pacific Economic Cooperation (APEC) and the Trans-Pacific Partnership (TPP). RCEP will aid in bridging of gaps and aligning India with the global value chain.
Challenges before India
- Tariff barriers, which have been a matter of discontent in bilateral FTAs, particularly in the case of the ASEAN-India FTA, will be central to the negotiations in the upcoming rounds of RCEP negotiations. Addressing the issue of tariff barriers is the biggest challenge for operationalising RCEP.
- Non-trade issues such as environment and labour are likely to be prickly as well and need greater attention.
- Weak manufacturing base and threats of survival for the Medium, Small and Micro Enterprises (MSME) sector due to possible influx of goods from RCEP.
- India already has a trade deficit of about $ 50 billion. RCEP will further liberate Indian market for Chinese goods. This is a cause of worry for India.
As WTO is loosing prominence due to deadlock on various issues, India need multilateral trade agreements to give boost to its exports. Increasing exports is a necessity to encash on demographic dividend. India must expedite its efforts under skill India, Make in India, zero effect zero defect schemes to make the domestic manufacturing sector competent enough to face the challenges and break into global value chain.