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- Regional Cooperation of Economic Partnership or RCEP Deal: All You Need to Know; Why India Opts Out Of RCEP Nations; Why RCEP Matters Most For China
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2 hours agoAuthor: Ravindra Bhajani
15 countries in the Asia-Pacific signed the world's largest trade deal on November 15 at the 37th ASEAN (Association of Southeast Asian Nations) Summit. The gross domestic product (GDP) of the countries involved in this deal is $ 26 trillion, or more than 30% of the total GDP of the world. India has decided to stay out of this deal.
Vietnam had annual summit of this association of 10 South East Asian countries. Deal was signed at this summit. The remaining 15 countries finalized it on Sunday after India's decision to stay out of the deal. Most of the countries involved in the deal are economically dependent on China. This deal is seen as China's attempt to increase influence in the region.
What is RCEP?
- The Regional Comprehensive Economic Partnership (RCEP) is a trade deal in which the countries involved will make markets available to each other. Import duties in their respective countries will be brought down to 2014 levels. With the opening of the service sector, the process of supply and investment and rules will be simplified.
- Negotiations on the deal began in November 2012. This trade group comprises 2.1 billion people, or about 30% of the world's population. The deal also has some rules regarding intellectual property, but there is no mention of environmental protection and labor rights.
Which countries are included in the RCEP?
- The deal includes 10 ASEAN member countries – Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. Also included are five Free Trade Agreement (FTA) partners of ASEAN countries – Australia, China, Japan, Korea and New Zealand. India has an FTA with ASEAN countries and has been involved in initial negotiations on the deal. However, in November 2019, Prime Minister Narendra Modi denied involvement in the deal.
RCEP has so many benefits, so why did India stay out?
- If India has decided to stay out of the RCEP, it is because of the self-reliant India campaign. Had India been involved in this deal, it would have been difficult for him to stop cheap Chinese goods from entering his market. This would harm domestic industries. India's trade deficit with China is $ 50 billion, which would have increased further.
- Indian pharmaceutical companies were in favor of joining the RCEP, as it would have made it easier for them to supply generic medicines to China. However, losses were incurred in dairy, agriculture, steel, plastics, copper, aluminum, machine parts, paper, automobiles, chemicals and other sectors.
- Due to this deal, import duty on imported goods would have to be reduced from 80% to 90%. Apart from this, service and investment rules would also have to be made easier. Some Indian industries feared that if the custom duty was reduced, there would be a flood of imported goods in the country, especially from China.
- During the negotiations on this deal, India raised the issue of the provision of Most Favored Nation (MFN) Obligation. Under this deal, RCEP countries also have to give India the status that it has given to MFN countries. India was also opposed to considering 2014 as the base year to reduce tariffs.
- According to Prime Minister Narendra Modi, India has decided to stay out of this trade deal keeping in mind the impact on the life and livelihood of all Indians. Especially in view of the deprived sections of the society. According to officials, the way for India's involvement in the deal is still open in future.
What did India lose by not joining RCEP?
- In some sectors, along with pharmaceutical companies, India would have found it easier to do business in the countries involved in the RCEP deal. Now it will not be so easy. Had India been involved in this deal, it would have been the third major economy in the block.
- Staying out of the deal means that India may face problems in new investment from the countries involved in the deal. Similarly, Indians will have to pay a higher price on imported goods from these countries. Especially in an environment when Corona has damaged efforts to develop global trade, investment and supply chains.
What kind of opportunities are made for India now?
- Due to being out of the deal, India will now be able to promote its local industry and realize the self-sufficient India campaign. The goods that are imported will help to increase production in the country, thereby reducing the trade deficit with these countries.
What does the RCEP deal mean for China?
- Former US President Barack Obama announced a multinational trade deal in the form of a Trans-Pacific Partnership (TPP), which excludes China. There were 11 countries in the US and Pacific Rim in this deal. It was only after this that negotiations started in 2012 about the RCEP.
- Not everyone was happy about this deal in America. When Donald Trump became president, he put the TPP on hold. He increased cooperation with emerging economies of Asia and imposed higher tariffs on China. As such, China was running out of space to sell goods and stepped up efforts for the RCEP.
- It can be understood that China has a surplus of 1 trillion dollars in trade deficit. He buys less from other countries and sells them more. Half of this surplus was due to trade from America. America does not buy as much goods from China as it does from any other Asian country.
- Trump started a trade war with China in the first half of 2019. Exports from China to the US fell by 8.5% overall. At the same time, it has increased by only 2.1% in other countries of the world. As a result, it became the status of production surplus. It became necessary for him to find a new market to sell his goods.
- Atrocities have increased in the Xinjiang region of the Communist Party of China, which the European Union (EU) is eyeing. Trump and the EU have already ceased doing business with Chinese military-backed tech companies such as Hikvision and Huawei. Soon, the EU may also review trade relations with China on the lines of the US.
- Even American President-Elect Joe Biden has not given any indication on the policy regarding China that the situation will be like before. This has increased China's uneasiness and has given momentum to the RCEP and created a new market for itself.