India is the second-most populous country in the world and the country has one of the largest economies in Asia. However, the country is unlikely to join the world’s largest free-trade bloc in the nearest future. This is because India remains more inclined toward bilateral agreements. As a reminder, 15 Asia-Pacific countries signed the Regional Comprehensive Economic Partnership (RCEP) in November. Importantly, those countries combined represent about 30% of the global economy.
Let’s have a look at the countries that signed this mega trade deal. China, Japan, Australia, South Korea, Australia, New Zealand, and the 10 member states of the Association of Southeast Asian Nations.
It is worth mentioning that India was part of the negotiations that began in 2013. However, the country declined to join RCEP. According to New Delhi, issues surrounding its core interests remained unresolved. According to other member countries, India has the opportunity to rejoin.
Importantly, the mega trade deal is expected to eliminate most tariffs on traded goods, strengthen supply-chain linkages in the region. Moreover, the agreement includes standardized rules for investments into member countries.
Furthermore, it also has provisions on areas such as e-commerce, competition laws, and intellectual property rights. Based on the information provided by the Asian Trade Center, under common rules of origin agreement, when a product is created to meet RCEP’s originating criteria, the regulation is the same for all 15 member countries. As a result, it will be possible to send specific products to any of the RCEP countries and to receive the same preferential tariff treatment. Thanks to this agreement, companies will be able to lower the costs as well as to improve the conditions in general.
India and mega trade deal
It is worth mentioning that India would lose both economic and strategic influence in the region if it doesn’t participate in RCEP. The mega trade deal could attract multinational corporations. This includes the ones trying to diversify their supply chains out of China. Moreover, it would also make ASEAN a more attractive alternative production base than India.
However, the government’s thinking around RCEP was likely under the influence of India’s existing bilateral trade agreements with many of the member countries. People should keep in mind that limited benefits from prior trade agreements remain a source of worry, especially as India runs trade deficits with the members of the RCEP bloc. Moreover, the country wants to protect domestic producers. The government should work with companies to make local products more competitive around the world.