[Editorial Analysis] Seize the deal

Mains Paper 2: International Relations
Prelims level: Regional Comprehensive Economic Partnership
Mains level: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests


• At a time when globalisation has lost its lustre and much of the world is looking inwards, 15 countries came together and signed the Regional Comprehensive Economic Partnership (RCEP) on the sidelines of an online ASEAN summit hosted by Vietnam on Sunday.

• India had been a part of negotiations for almost nine years till it pulled out in November 2019, stating that inadequate safeguards and lowering of customs duties will adversely impact its manufacturing, agriculture and dairy sectors.

• By staying out, India has blocked itself from a trade bloc that represents 30 per cent of the global economy and world population, touching over 2.2 billion people.

Trade reforms:

• There are strong economic and strategic reasons to not let the RCEP door remain shut permanently for India. The economic reasons first.

• Clearly, India’s decision is influenced by China dominating the RCEP trade bloc since New Delhi already has a Free Trade Agreement with ASEAN, separate deals with South Korea and Japan, and discussions are on with Australia and New Zealand.

• Trade data suggests that India’s deficit with China, with which it does not have a trade pact, is higher than that of the remaining RCEP constituents put together. So why blame trade deals?

• Moreover, trade deficits are not all bad, and definitely not for consumers. Even otherwise, import of cheaper intermediate goods only help add value to final products.

• Yes, some fears are not unfounded. Trade policy reform always exerts pressure on the domestic industry in the transition period.

• Firms that do not rise to the occasion run the risk of falling by the wayside.

• So, they did after the 1991 reforms when India started lowering tariffs.

• But providing stability in export-import policy and a favourable exchange rate did help the industry shape up, and match global quality and pricing.

• This is borne out of the experience of over two decades since 1991.

• India was much better off, both in terms of its share in global trade, FDI inflows, growth of the domestic industry, and rising income levels of its people.

Sending the right message:

• Strategically, India does need to prepare itself for China’s maritime challenge and the aggression it has displayed along the borders.

• Alliances such as the informal strategic forum, the Quad, which includes the US, Australia and Japan, will help New Delhi check Beijing’s dominance in the South China seas and the Indo-Pacific region.

• Despite all the differences with China, at the end of the day, Australia and Japan have not stayed out of RCEP.

• Being an emerging power, New Delhi must send the right messages.

• Instead of sitting out and building tariff walls across sectors, it must prod and incentivise the industry to be competitive, and get inside the RCEP tent at the earliest opportune moment.


• Trade lifts all boats, New Delhi must get inside the RCEP tent at the earliest opportune moment.

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