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Tough decisions ahead for India at RCEP GS: 2 :EMPOWER IAS

 

Tough decisions ahead for India at RCEP

 

 

In news:

  • Union Commerce Minister Piyush Goyal will attend the RCEP Ministerial meeting to be held in Bangkok. 

 

 

Background:

  • In the September round of negotiations, the ASEAN countries firmly asked India to clear its position; whereas, India insisted on ensuring safeguard of domestic industry, farmers and their interests.
  • The other negotiating members are planning a parallel RCEP 15 -a deal without India as well.

 

 

Ahead of RCEP meeting:

  • India’s hopes for retaining the right to implement data localisation laws remain alive as Indian negotiators declined to agree to the e-commerce chapter of the Regional Comprehensive Economic Partnership (RCEP) agreement.
  • India did not agree to the e-commerce chapter clauses, negotiations were now entering a frantic phase because there were still several uncertainties related to the cross-border transfer of electronic information that remained.
  • The section on transfers of information and processing of information says that “a party shall not take measures that prevent transfers of information, including transfers of data by electronic or other means, necessary for the conduct of the ordinary business of a financial service supplier.”

 

 

Regional Comprehensive Economic Partnership (RCEP)

About RCEP

  • The Regional Comprehensive Economic Partnership (RCEP) is a so-called mega-regional economic agreement being negotiated since 2012 between the 10 ASEAN (Association of South-East Asian Nations) governments and their six FTA partners: Australia, China, India, Japan, New Zealand and South Korea.
  • Formally launched in November 2012 at the ASEAN Summit in Cambodia
  • The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement that is often characterised as a China-led response to the  Trans-Pacific Partnership (TPP) put forward by the US.

 

 

What does the RCEP propose?

  • The purpose of RCEP is to create an “integrated market” spanning all 16 countries, making it easier for products and services of each of these countries to be available across this region.
  • ASEAN says the deal will provide “a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region”.

 

 

https://economictimes.indiatimes.com/img/67400558/Master.jpg

 

Aim:

  • To strengthen economic linkages and to enhance trade and investment related activities
  • Coverage Area: trade in goods and services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce, small and medium enterprises (SMEs) and other issues.

 

 

How important is it?

Significance: Globally:

  • Taken together, the 16 countries negotiating the RCEP encompass about one-third of global GDP and almost half the world’s population.
  • The RCEP includes countries that make up 45% of the world’s population with 33% of its GDP, and at least 28% of all trade in the world today. 
  • If RCEP will conclude it will bring stability in world market.
  • The pact aims to cover the trade in goods and services, as well as investment, intellectual property and dispute resolution.
  • It is seen that the total GDP in RCEP could grow over to $100 billion by 2050 if the growth of the countries like China, India and India continues to be high.
  • If the RCEP is implemented it would bring large income gains to not only Asia but the world economy.
  • RCEP will also reduce the overlapping between Asian FTAs.
  • It will reduce the trade barriers in Asia and new rules will be consistent with WTO agreements.
  • It will promote easier FDI flows and technology transfers by multinational corporations.
  • In the current scenario of growing protectionism, Regional Comprehensive Economic Partnership provides an opportunity for the countries to prosper by increasing trade, creating jobs and other economic opportunities and India should make use of such an agreement.

 

Importance of RCEP for India:

  • Strengthen ties with other countries: It would enable India to strengthen its trade ties with Australia, China, Japan and South Korea.
  • Beneficial to Indian economy: It will reduce the negative impacts of trans-pacific partnership (TPP) and transatlantic trade and investment partnership (TTIP)on the Indian economy.
  • Increase market access: Rise in protectionism and non- tariff barriers and the deadlock in WTO negotiations are also important reasons for India to join the RCEP agreement as it can increase market access.
  • Act East Policy:  RCEP also has the potential to influence India’s strategic and economic status in the Asia-Pacific region and help in fulfilment of India’s Act East Policy
  • Foreign Direct Investment:  RCEP will facilitate Indian companies to access new markets. Further, it will give a boost to Foreign Direct Investment (FDI). RCEP would help India in attracting greater FDI in areas such as ICT, IT-enable services, healthcare and education services. India enjoys advantage in such areas.
  • Boost to textiles and pharma industries: RCEP will particularly boost textiles and pharma industries. It will also facilitate India in removing technical barriers to trade like sanitary and phyto-sanitary measures of these products.
  • Strengthening trade ties:  RCEP will facilitate India’s Integration into regional production networks harmonizing trade-related rules. India is not a party to two other important regional economic blocs namely Asia- Pacific Economic Cooperation and Trans-Pacific partnership.
  • MSMEs: It would also facilitate India’s MSMEs to effectively integrate into the regional value and supply chains.

 

 

What is the difference between TPP and RCEP?

  • The two deals have been shaped by the countries that led negotiations: the US and China, respectively.
  • The TPP was a more ambitious plan, including market access for goods and services as well as regulations on labour, the environment, intellectual property and state-owned companies.
  • The RCEP, on the other hand, is more narrowly focused on standardising tariffs across the region, as well as improving market access for services and investment.
  • RCEP also includes special provisions for developing economies, such as gradual tariff liberalisation and transition times.

 

 

http://www.mylotrade.com/wp-content/uploads/2016/01/tpp-vs-rcep.jpeg

 

 

 

Impact if India remain outside RCEP:

 

Impact on India:

 

  • Exports:

  • If India is out of the RCEP, it would make its exports price uncompetitive with other RCEP members’ exports in each RCEP market.

 

  • Impact on Agriculture and allied Activities:

  • Agriculture and allied sector in India has already been facing adverse effects due to India-ASEAN FTA despite of relatively high protection of agriculture and a tariff-coverage of 73-80%.
  • Under RCEP, if tariff cuts cover 92-80% of products, there will be adverse impact due to heating up of competition for Indian farmers.

 

  • Impact on Manufacturing:

  • There are concerns that RCEP will have adverse impact on Indian manufacturing sector while competing with cheaper products from ASEAN and China.

 

  •  Intellectual Property Rights and Health Sector:

  • There are allegations that Japan and South Korea have been advocating for ‘TRIPS Plus’ IP protection regimes in the RCEP.

 

  • Impact on E-commerce:

  • The e-commerce rules in RCEP impose binding rules that will mandate India to give away data to large multinational companies.

 

  • Impact on maritime cooperation:

  • Staying out would also run counter to the government’s plans to ramp up its engagement with ASEAN countries through the “Act East” policy, as well as its hopes for maritime cooperation in the India-Pacific.

 

 

https://www.thehindu.com/business/Economy/hhjbyd/article28229265.ece/alternates/FREE_615/RCEP

 

Indian Offers at RCEP

 

 

Concerns:

  • China factor: China is the biggest hurdle with which India has a $57 billion trade deficit.
  • Trade deficit: India already has a trade deficit with 11 nations.  Those who favour the deal, argue trade deficits can be compensated by capital inflow and trade-offs are involved in most of the trade negotiations. They see that this trade off can come in the defence and aerospace sectors.
  • Zero tariffs: There are growing concerns over whether India will accept zero tariffs on the majority of imported goods from China.
  • Make in India:  The Centre’s ‘Make In India’ initiative to boost manufacturing and job creation can get hit by a pact.
  • The main stumbling blocks for the RCEP are the India-China trade relationship, as well as some concerns from Australia and New Zealand on labour and environmental protections. 
  • Impact on various industrial sectors: Eliminating duties under the RCEP will have negative impact on  many sectors including steel, aluminum, auto-components, many engineering items and readymade garments.
  • Influence on investment decisions: RCEP will influence new investment decisions in textiles, leather, processed food, machinery and electronic component sectors.

 

 

Way ahead:

  • Despite all the concerns, India must take into account the significance of RCEP and not move out of RCEP negotiations.
  • The Commerce Ministry is holding a series of meetings with various industry associations on tariff elimination under RCEP pact .
  • India should ensure the economic viability of small farmers and small-scale industries in the face of import competition.
  • India must try to extract meaning concessions for enhancing market access for its services sector.
  • India needs to maintain a balance between the opening of its economy and protecting its domestic manufacturing industry.

 

 

Conclusion:

India’s absences from RCEP will virtually handover this significant grouping to China, which is certainly not in India’s interest. Thus RCEP is a huge opportunity which India should not miss.

 

What is ASEAN?

  • The Association of Southeast Asian Nations is a regional organization which was established to promote political and social stability amid rising tensions among the Asia-Pacific’s post-colonial states.
  • The motto of ASEAN is “One Vision, One Identity, One Community”.
  • 8th August is observed as ASEAN Day.
  • ASEAN Secretariat – Indonesia, Jakarta

 

Aims:

  • Accelerating economic growth, social progress, and sociocultural evolution among its members,
  • Protection of regional stability
  • Providing a mechanism for member countries to resolve differences peacefully

 

Member nations:

 

  • Indonesia
  • Malaysia
  • Philippines
  • Singapore
  • Thailand
  • Brunei
  • Vietnam
  • Laos
  • Myanmar
  • Cambodia

http://www.iasparliament.com/uploads/files/asean.png

 

Objectives

  • Economic growth: To accelerate economic growth, social progress and cultural development for a prosperous and peaceful community of Southeast Asian Nations.
  • Regional peace and stability: To promote regional peace and stability through abiding respect for justice and the rule of law and adherence to the principles of the United Nations Charter.
  • Collaboration: To promote active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative fields.
  • Raising living standards: To collaborate more effectively for the greater utilisation of agriculture and industries, the expansion of their trade, the improvement of transportation and communications facilities and the raising of the living standards of peoples.
  • Cooperation with international organizations: To maintain close and beneficial cooperation with existing international and regional organisations.

 

India and ASEAN

  • India's relationship with ASEAN is a key pillar of her foreign policy and the foundation of Act East Policy.
  • Economic Cooperation:
  • ASEAN is India's fourth largest trading partner.
  • India's trade with ASEAN stands at approx. 10.6% of India's overall trade.
  • India's export to ASEAN stands at 11.28% of our total exports. The ASEAN-India Free Trade Area has been completed.
  • ASEAN India-Business Council (AIBC) was set up in 2003 to bring key private sector players from India and the ASEAN countries on a single platform.
  • Socio-Cultural Cooperation: Programmes to boost People-to-People Interaction with ASEAN, such as inviting ASEAN students to India, Special Training Course for ASEAN diplomats, Exchange of Parliamentarians, etc.
  • Delhi Declaration: To identify Cooperation in the Maritime Domain as the key area of cooperation under the ASEAN-India strategic partnership.
  • Delhi Dialogue: Annual Track 1.5 event for discussing politico-security and economic issues between ASEAN and India.
  • ASEAN-India Centre (AIC): To undertake policy research, advocacy and networking activities with organizations and think-tanks in India and ASEAN.
  • Political Security Cooperation: India places ASEAN at the centre of its Indo-Pacific vision of Security and Growth for All in the Region.

 

 

Source)

https://www.thehindu.com/business/india-rejects-rcep-e-commerce-chapter/article29659912.ece