The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement in the Asia-Pacific region between the ten member states of the Association of Southeast Asian Nations (ASEAN) and five of ASEAN’s FTA partners.
India, which is also ASEAN’s FTA partner, opted out of RCEP in November 2019.
RCEP potentially includes more than 3 billion people or 45% of the world’s population, and a combined GDP of about $21.3 trillion, accounting for about 40 percent of world trade. India’s decision to not join RCEP reduced the impact of RCEP significantly.
The combined GDP of potential RCEP members surpassed the combined GDP of Trans-Pacific Partnership (TPP) members in 2007. Continued economic growth, particularly in China, India and Indonesia could see total GDP in RCEP grow to over $100 trillion by 2050, roughly double the project size of TPP economies.
The RCEP was built upon the existing ASEAN+1 FTAs with the spirit to strengthen economic linkages and to enhance trade and investment-related activities as well as to contribute to minimising development gap among the parties.
The Regional Comprehensive Economic Partnership was introduced during the 19th Asean meet held in November 2011. The RCEP negotiations were kick-started during the 21st Asean Summit in Cambodia in November 2012.
RCEP is among the proposed three mega FTAs in the world so far. The other two is:
RCEP is viewed as an alternative to the TPP trade agreement, which includes the United States but excludes China.
Objective of RCEP
China’s role in RCEP
RCEP was pushed by Beijing in 2012 in order to counter another FTA that was in the works at the time: The Trans-Pacific Partnership (TPP). The US-led TPP excluded China. However, in 2016 US President Donald Trump withdrew his country from the TPP. Since then, the RCEP has become a major tool for China to counter the US efforts to prevent trade with Beijing.
Reasons behind India’s withdrawal from RCEP
On November 4, 2019 India decided against joining the 16-nation Regional Comprehensive Economic Partnership (RCEP) trade deal, saying it was not shying away from opening up to global competition across sectors, but it had made a strong case for an outcome which would be favourable to all countries and all sectors.
Prime Minister Narendra Modi, in his speech at the RCEP Summit said “the present form of the RCEP agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP. It also does not address satisfactorily India’s outstanding issues and concerns in such a situation.”
There was a fear in India that its industries would be unable to compete with China and Chinese goods would flood Indian markets. India’s farmers were also worried given that they would be unable to compete on a global scale.
Benefits of joining RCEP
Disadvantages of stepping out of RCEP
India’s decision to not join the RCEP will not detract the country from mounting a focussed effort in enhancing its competitiveness and expanding its export base. India needs to explore other means for enhancing its market access. Therefore, bringing the ongoing trade negotiations with the US which is India’s largest export destination, to a successful conclusion should be a priority. A realistic yet meaningful FTA strategy needs to be formulated for the next five years based on the RCEP negotiation experience.