India opts out of RCEP; China,14 others to go ahead with trade-opening deal  

Pic: PIB

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Prime Minister Narendra Modi stated in Bangkok ,on November 4 that India would not join the Regional Comprehensive Economic Partnership (RCEP) , that was meant to enable trade of goods and services amongst 16 countries, including China and 10 ASEAN members, without or a minimum of import duties and would have made half of the world population live in a free trade environment.  
India’s position was made clear at the summit of the RCEP in Bangkok. What are the reasons for India not joining the RCEP that also includes Australia, New Zealand? Given the present state of economy marked by slowdown, India feels that the deal would result into the Chinese imports swamping the Indian market, harming interest of its farmers, small industries. Against cheap imports from China and other major producers in the region, the Indian farmers and small and medium manufacturers would not be able to survive. Such a situation could also lead to large scale displacement of unemployment. 
The RCEP , which would be implemented in 2020 among the other 15 countries, envisages 90 per cent of the goods moving within the region at zero duty. As far as India was concerned, China would have been enabled to export 74 per cent of its goods at zero duty . That could have been suicidal for India. In any case, India’s trade deficit with China is close to USD 58 billion. Indian exports are primarily of raw material like metals whereas China has flooded the Indian market with almost everything from electronics to smart phones, consumer durables, chemicals, textiles and capital goods. 
Countries like New Zealand are very competitive in milk and  dairy products and would have found  a huge market in India without duty. It might have helped consumers, but seriously harmed our farmers and the dairy sector. Indian farmers are already reeling under low prices.    
When it comes to India getting access to the RCEP huge market without duty; we are not really yet very offensive about it. Our overall exports are languishing at USD 300 for several years and the country is not able to take advantage of even the existiing Free Trade Agreements with ASEAN, Japan and South Korea. We are running deficit (importing more than exports) with all these countries. 
So, Net-net India is not yet ready for such ambitious deal, which may help in the long run but with a lot of pain in the short term and  political costs to the ruling dispensation. In fact, India’s strength lies in services like IT, hospitality, medical services, financials, engineering etc ; but Indians find it tough to get work permits in these countries. The Indian negotiators wanted easy work permit rules, prescribed in the RCEP deal, but this was not acceptable to the others.       

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