The China factor in India’s RCEP move (The Hindu)

Mains Paper 2: International Relations
Prelims level : RCEP
Mains level: The China factor in India’s RCEP move

Context

• Prime Minister Narendra Modi’s ASEAN sojourn this year will be remembered for India finally rejecting the Regional Comprehensive Economic Partnership (RCEP) trade deal.
• In his speech at the RCEP summit, PM argued that India has been proactively, constructively and meaningfully engaged in the RCEP negotiations since inception.
• The draft RCEP agreement did not fully reflect the basic spirit and the agreed guiding principles of RCEP and did not address satisfactorily India’s outstanding issues and concerns.

RCEP

• Apart from the 10 member states of the ASEAN, the deal was to include the bloc’s six free trade partners — China, India, South Korea, Japan, New Zealand, and Australia.
• The RCEP negotiations were launched 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.

Indian demands

• Shifting the base year for tariff cuts from 2014 to 2019.
• To avoiding a sudden surge in imports from China by including a large number of items in an auto-trigger mechanism.
• To stricter rules of origin to prevent dumping from China. It’s a better deal in services.

Indian concerns

• India runs large trade deficits with at least 11 of the 15 RCEP members. China alone accounts for $53 billion of India’s $105 billion trade deficit with these.
• China’s need for greater access to the Indian market to sustain its manufacturing industries will hurt the Indian industry and farmers due to a surge in Chinese imports.
• India’s experience with FTAs has been underwhelming. Niti Aayog suggested that FTA utilisation is in the 5%-25% range.
• Domestically, the RCEP generated considerable opposition with major stakeholders coming out against it – farmers, dairy industry or the corporate sector.

India at RCEP

• It comprises half of the world population and accounts for nearly 40% of the global commerce and 35% of the GDP. RCEP would have become the world’s largest FTA after finalisation, with India being the third-biggest economy in it.
• Without India, the RCEP does not look as attractive as it had seemed during negotiations.
• ASEAN has been keen on a diversified portfolio so that member states can deal with major powers and maintain their strategic autonomy. ASEAN member states have tried to keep the U.S. engaged in the region.
• The Act East policy has been well received. With China’s rise in the region, ASEAN member states have been keen on Indian involvement in the region.
• India’s entire Indo-Pacific strategy might be open to question if steps are not taken to restore India’s profile in the region. It signalled that, despite the costs, China’s rise has to be tackled both politically and economically.

China in the region

• China was particularly keen to see a successful conclusion of the RCEP summit and had been vigorously pushing for that.
• Both geopolitically and geo-economically, China is set to dominate the Indo-Pacific.
• Japan is now suggesting that it would work towards a deal that includes India.

Way forward

• Economic isolation is not an option for India.
• There are reports that India will move towards bilateral trade pacts.
• India will have to prepare itself more fully to take advantage of such pacts. Domestic reforms will be the need of the hour.

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Prelims Questions:

Q.1) With reference to the UNESCO Creative Cities Network (UCCN), consider the following statements:
1. It was created in 1980, is a network of cities which are thriving, active centres of cultural activities in their respective countries.
2. UNESCO has recently designated Mumbai as a member of UNESCO Creative Cities Network (UCCN) in the field of FILM and Hyderabad in the field of Gastronomy.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: B
Mains Questions:
Q.1) New Delhi seems to be signalling that Bejing’s rise in the Indo-Pacific has to be tackled politically and economically. Comment