India exits RCEP 2020 | What Next ?

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IASbhai Daily Editorial Hunt | 21st Nov 2020

“It does not matter how slowly you go as long as you do not stop.” – Confucius

Dear Aspirants
IASbhai Editorial Hunt is an initiative to dilute major Editorials of leading Newspapers in India which are most relevant to UPSC preparation –‘THE HINDU, LIVEMINT , INDIAN EXPRESS’ and help millions of readers who find difficulty in answer writing and making notes everyday. Here we choose two editorials on daily basis and analyse them with respect to UPSC MAINS 2020-21.

EDITORIAL HUNT #254 :“India exits RCEP 2020 | What Next ?

India exits RCEP 2020 | What Next ?

Biswajit Dhar
India exits RCEP 2020 | What Next ?

Biswajit Dhar is Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi

      HEADLINES:

India’s no to RCEP could still be a no

      CENTRAL THEME:

The circumstances under which New Delhi had distanced itself from the RCEP negotiations have hardly improved

SYLLABUS COVERED: GS 2 : 3 : International Groupings : Agreements : Trade

      MAINS QUESTION:

Critically examine the trade deficits of India in post-COVID era .Throw lights on economic equilibrium with and without RCEP.  -(GS 3)

      LEARNING: 

  • RCEP Objectives
  • A Comparison with TPP
  • Progress and the Problems
  • Re-engaging India

      INTRODUCTION: 

  • LARGEST FREE TRADE AGREEMENT : 15 East Asian countries agreed to take their economic integration several notches higher by forging the Regional Comprehensive Economic Partnership (RCEP).
  • GLOBAL OUTREACH : In 2019, RCEP members accounted for about 30% of world output and population and 28% of world trade.

But more importantly, about 44% of their total trade was intra-RCEP.

  • REGIONAL VALUE CHAIN : It is a major incentive for the members of this agreement to agree to the deal for this could contribute to the strengthening of the regional value chains.
  • ECONOMIC REVIVAL : This may well prove propitious for the RCEP member countries in their efforts to recover from the downturn.

      BODY: 

THE OBJECTIVES

  • THE TRIGGER : The initiative to establish RCEP was taken by the member-states of the Association of Southeast Asian Nations (ASEAN) in 2011.
  • AN ASEAN-LED PROCESS : That would allow ASEAN members to “engage interested ASEAN FTA partners in establishing a regional comprehensive economic partnership agreement”.

India exits RCEP 2020 | What Next ?

SOURCES : THE HINDU

THE GUIDING PRINCIPLES

  • The “Guiding Principles and Objectives” , the de facto spoke of “progressively eliminating tariff and non-tariff barriers on substantially all trade in goods”
  • The aim was to achieving “high level of tariff liberalization through tariff elimination on a high percentage of both tariff lines and trade value”.

SHARED VALUES

  • MORE REFINED ENGAGEMENT : The ASEAN agreed for high quality agreement that would “substantially eliminate restrictions and/or discriminatory measures”.
  • CORNERSTONES : RCEP negotiations on a framework for investment “to cover the four pillars of promotion, protection, facilitation and liberalization”.
  • A COMPREHENSIVE AGENDA : It was, therefore, quite clear that the RCEP participating countries (RPCs) had given themselves an ambitious agenda of trade and investment liberalisation.

A COMPARISON WITH THE TPP

  • BACKSEAT DRIVERS : Several commentators have observed that RCEP is not likely to usher in comprehensive economic integration in East Asia.
  • SPECULATIONS : It appears that this view has arisen by comparing RCEP with the Trans-Pacific Partnership (TPP), which would have been the world’s most extensive FTA in terms of market opening.
  • MARKET CYNICISM : But there have always been doubts whether the TPP was promoting “free trade” or a highly discriminatory “managed trade”.
  • TRADE CONCERNS : The TPP included several regulatory issues including the controversial labour and environmental standards.

Issues such as “anti-corruption” and regulatory barriers could severely impede trade flows.

  • LIBERAL MARKET : In contrast, RCEP includes traditional market access issues, following the template provided by the World Trade Organization (WTO).

India exits RCEP 2020 | What Next ?

SOURCES : GZERO

  • MULTI-ANGULAR REFORMS : RCEP also includes issues that are currently being discussed by several groups of WTO members as a part of their agenda to “reform the multilateral trading system”.
  • INITIAL ALTERATIONS : The issues like electronic commerce, investment facilitation, were first step towards a multilateral agreement on investment.
  • TRUST IN SMALL ENTERPRISES : RCEP is enabling environment for the participation of small and medium enterprises in global trade .
  • LIGHTNING MOMENTUM : While India has been opposed to the inclusion of all these issues in the WTO, the formation of RCEP could provide serious momentum.

PROGRESS MADE AND PROBLEMS

  • MAKING ADVANCES : In case of trade in goods, RCEP members have taken big strides towards lowering their tariffs.

EXAMPLE
China has agreed to cut its average tariffs from 9.4% in 2014 (adopted as the “base year” for tariff cuts”) to 1.2% for Australia and all ASEAN members.

  • LONG TERM COMMITMENT : The 10th year of implementation of RCEP, China also committed to reduce tariffs on almost 90% of its imports from these two RCEP members to 5% or less.
  • EXCLUSION LIST : Less than 4% of its products figure in the exclusion list, implying that their tariffs will not be reduced.
  • AGGRESSIVE MARKETS : Vietnam’s tariff offers to China look similar: average tariffs would drop from 10% in 2014 to 2% by the 10th year, and nearly 90% of its imports from China will be tariff-free.

Moreover, Vietnam does not have an exclusion list. 

  • MAXIMUM EXPORT SUBSIDIES : Malaysia has had the lowest levels of protection and this will be reduced as it implements its commitments under RCEP.
  • COMMERCIAL LIBERALIZATION : In contrast to their market access commitments under goods, commitments made by RCEP members for services trade liberalisation do look shallow in terms of the coverage of the sectors.

Movement of natural persons, an area in which India had had considerable interest, is considerably restricted.

  • LEVEL PLAYING FIELD : RCEP members have allowed relatively limited market access only to individuals in managerial positions or those having high levels of skills.
  • UNFAIR TRADE PRACTICES : The areas of investment and electronic commerce, in both of which India had expressed its reservations on the template adopted during RCEP negotiations, the outcomes are varied.
  • The text on investment rules shows that it is a work-in-progress.
  • DISPUTE REDRESSAL MECHANISM : The rules on dispute settlement procedures are yet to be written in.

Therefore, it will be interesting to see whether the controversial investor-state-dispute-settlement (ISDS) mechanism. 

  • ELECTRONIC COMMERCE : RCEP members have agreed not to “prevent cross-border transfer of information by electronic means where such activity is for the conduct of the business of a covered person”.
  • PRIVACY AND PROTECTION :  A member can deny transfer of information if it is necessary to “achieve a legitimate public policy objective or unjustifiable discrimination or a disguised restriction on trade”.

      IASbhai Windup: 

RE-ENGAGING INDIA

  • DOORS LEFT OPEN : RCEP Ministers adopted a Declaration on India’s Participation in the agreement through which the door has been left open to India to join RCEP Agreement as an original signatory.
  • OBSERVER STATUS : India has been invited to participate in RCEP meetings as an observer and in economic cooperation activities undertaken by RCEP members.
  • SINCE THE BORDER CLASHES : India has imposed a number of import restrictions on Chinese products and has also subjected investment flows from its northern neighbour to greater scrutiny.

INDIA’S CONCERNS

  • The levels of market access it was expected to provide
  • The deep cuts in tariffs on imports from China
  • The provisions relating to the investment chapter, have become even more significant over the past several months.

India’s initiative for its economic turnaround, the Atmanirbhar Bharat Abhiyan, is primarily focused on strengthening domestic value chains,while RCEP, like any other FTA is solely focused on promoting regional value chains.

SUGGESTED READING : RCEP 2020 
       SOURCES:   THE HINDU EDITORIAL HUNT | India exits RCEP 2020 | What Next ?

 

 

TRENDING NOW : Important The Hindu Editorials 

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