The RCEP is a must for India

Mains Paper: 2 | International Relations 
Prelims level: RCEP
Mains level:  The ongoing trade war and the way in which it will affect the nature and direction of global trade flows

Introduction 

• The Regional Comprehensive Economic Partnership (RCEP), a group of 16 nations negotiating a trade agreement.
• Indian industry is wary of the potentially adverse impact of preferential Chinese imports. But this is the only chance of securing a rules-based framework with China.

About the multilateral trading system 

• The multilateral trading system is the most conducive to the interests of a developing country.
• This is compelling trading nations to resort to regional trade agreements to expand their markets.
• The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) will become effective, sans the US, after the requisite ratifications.
• In between these two agreements, 26 trading nations would have implemented preferential arrangements, potentially at the cost of India. 
• India’s exports have been stagnating for some years now. It has not concluded a significant trade agreement in a decade. 

What are the effects of  trade war? 

• The ongoing trade war has already created turbulence and uncertainty in global markets. 
• Modern production networks stretch across manufacturing economies and trade agreements are important institutional mechanisms to facilitate countries’ access to such value chains. India must look for opportunities to hook into them.
• The India-China economic relationship should be seasoned with realism in these turbulent times, when geopolitics is transitioning. 
• India must, therefore, establish a more in-depth understanding with its neighbour on economic issues as they unfold over the next decade or so. 
• China’s average industrial tariff is 8.5%—by no means low. 
• The preferential tariff framework can give India better access to the Chinese market. 
• The opaque and discriminatory regulatory framework in China needs to be addressed for which a plurilateral framework, where several others have similar concerns, is better than a bilateral framework.

India’s angle 

• India’s reform agenda pervades all spheres of the economy. Positive developments have been reported in trade facilitation.
• In ease of doing business it helped along by systemic reforms such as the goods and services tax, strengthening and expansion of infrastructure and greater focus on technology facilitation. 
• Reliance on government largesse is neither possible nor desirable from a sustainability perspective. 
• India’s exclusion from RCEP will cost others heavily. The stage for negotiations at the diplomatic level seems to have passed.
• Some critical parts of such deals can only be concluded at the highest political levels. Some straight-talking with the major proponents is overdue. 
• India can ask for a long-term tiered approach to tariff reduction/elimination. It can seek front-loading of concessions from a trading partner like China.
• It can specifically pick those tariff lines where it has greater interest to integrate into regional value chains in the list of front-loaded items. 
• India should negotiate annexes to the main agreement on sectoral regulatory frameworks and processes/protocols. 
• The idea is to not only agree on concession schedules but to also freeze processes and regulatory rules for assured transparency. 

Way forward 

• This discussion will be incomplete if the value of services-related market access is not acknowledged, but we need to underplay our excessive focus on disciplines for movement of natural persons.
• Regional demography and continued focus on domestic services reforms will position us to take advantage of regional demands. 
• Therefore, we should build an evolutionary architecture to be reviewed periodically. 
• An industry must create a B-team of sectoral experts to support government negotiators. If negotiated well, the RCEP has the potential to be a game-changer for India.

UPSC Prelims Questions: 

Q.1)  The term ‘Aggregate Measurement of Support’, sometimes seen in news, is used in the context of the affairs of:
(a) Nuclear Suppliers Group (NSG)
(b) World Trade Organisation (WTO)
(c) BRICS
(d) Regional Comprehensive Economic Partnership (RCEP)

Ans: B

UPSC Mains Questions:
Q.1) How the Regional Comprehensive Economic Partnership is important for India’s trade sector?
 

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