Disaster averted by walking out of RCEP
November 30, 2020
Fifteen countries including Japan, China, Australia, South Korea have entered into the Regional Comprehensive Economic Partnership (RCEP) agreement; a trade block from which India walked out last year. On 4th November last year Prime Minister Narendra Modi refused to join RCEP. It’s notable that had India joined RCEP, under this agreement, 74 to 92 percent of the products would have come under zero tariffs; that is, India would have allowed them to be imported at zero import duty, and likewise other member countries would have reciprocated. India walked out of this trade block, because it was clear that this agreement could have disastrous impact on manufacturing sector, dairy, agriculture, pharmaceuticals, and intellectual property regime and through that public health and agriculture etc. It’s notable that an impression is being created that by some people that by walking out of RCEP, India would be cut off from the countries of this trade block, whereas, the fact is that we already have an agreement with ASEAN countries. It’s yet another issue that due to ASEAN agreement, our trade deficit with ASEAN countries has increased by more than two and half times. Much of this trade deficit has been due to the fact that China was exporting goods to India via ASEAN countries, at zero tariffs. Apart from this, there is general understanding that ASEAN-FTA is a very badly negotiated FTA and therefore, there is a need to review and renegotiate the same. However, the problem is that this FTA didn’t have a review clause. Thanks to the efforts of the government, ASEAN countries have agreed to the review recently. We have FTA's with Japan and South Korea too. Again due to these FTAs, our trade deficit had increased by two and a half to three times with these countries too. Right now the losses we have incurred due to these FTA are quite huge, and these agreements instead of benefitting our economy, have actually caused a kind of deindustrialisation. Had we made a more comprehensive agreement, and now including China, losses would have been even bigger.
Had we signed RCEP, our dairy industry would have finished. Milk powder exported from New Zealand at Rs 180 per kg, against our domestic price of rupees 290 per kg. If such cheap milk comes from New Zealand and Australia, people will stop rearing cows in India. Similarly, this agreement would also hit the agriculture sector deeply. When the RCEP negotiations were going on, almost all sectors and within manufacturing almost all industries had been struggling hard to impress upon government to either keep whole of their industry or most of their products, out of zero tariff commitment. There was hardly any sector which would have been benefitted. Every industry organisation was asking to stall this agreement. How can we allow 74 percent Chinese products to be imported from China at zero duty?
Japan, now signing this RCEP, looks strange, and is against the stated position of Japan, apart from being contradictory to their strategic and diplomatic concerns. The Japan had earlier announced that if India does not join RCEP, they will also not join. Something has happened suddenly, perhaps after the election of Joe Biden in the US, Japan's stance might have changed. However, strategic and diplomacy experts are viewing the recent developments on the forum of RCEP with surprise, as it apparently looks surprising from the point of view of own interests of members, especially Japan, Australia, New Zealand and South Korea. This is especially due to the fact, that for them China is more of a threat than an economic partner.
They cannot separate economic ties with China from its expansionist designs, disrespecting and disregarding even international laws and treaties. Experts are of the opinion that China will benefit the most from RCEP, while these countries may be left in lurch. For Japan, South Korea, New Zealand, Australia, it looks to be an attempt of suicide. It is strange to have such an agreement when the whole world is turning against China, 14 countries have knotted ties with China, giving her an advantage.
So far as the assumption that these countries may gain foothold in Chinese markets, we shouldn’t forget that there is an iron curtain in China. Nobody can make out the true cost of their produce and subsidies given by Chinese authorities to their manufacturers and thereby helping them capture markets internationally. It’s notable that different countries impose several non tariff barriers too on imports coming from the rest of the world. China is among those countries which impose maximum of non-tariff barriers. Member countries of RCEP, look upon India as a mere market for their produce. However, why should we allow ourselves to become a market for them? Why don't we produce for ourselves and give employment to our people? India has taken this decision to walk out of RCEP thoughtfully, despite a lot of pressure. Every country thinks of itself, and of its self-reliance. Note that due to globalization, FTAs and multilateral agreements such as WTO, our manufacturing has been badly affected. Government’s resolve for self reliance is an effort to bring back manufacturing. Country cannot afford to further destroy its manufacturing, dairy and agriculture. If we concede in RCEP, then we have to give up our policy of self reliance, as self reliance by protection and promotion of domestic industry cannot go along imports free from tariff.