Round The World
New Delhi, 16 November 2019
RCEP Pull-out
INDIA TAKES A STANCE
By Dr. D.K Giri
(Prof. International Politics, JMI)
India pulling out of 16-country Regional
Comprehensive Economic Partnership (RCEP) in the Bangkok meeting this month may
have surprised the other member countries, but elated many in India. Even the
main Opposition, the Congress party welcomed the decision. The business sector
was happy as it would protect them from the unequal competition with Chinese
manufactured goods. In particular, the farmers, MSMEs, dairy, manufacturing
sector, pharmaceutical, steel and chemical industries will benefit from having
not to compete with Chinese and ASEAN companies at this stage of India’s
economy. The decision was held as an assertion of India’s confidence and
reaffirmation of its economic nationalism.
Since RCEP is potentially a big bloc of
economic powers, covering half of world’s population and nearly 30 per cent of
global GDP, the biggest trade pact after the WTO, India opting out of it should
merit a debate. Noted economists like Arvind Panagariya, the first
vice-chairman of NITI Aayog argue that India stands to lose outside RCEP. It
should have joined the new bloc and asserted its position from within. Whether
this perspective has political economic merit is what I would like to engage
with here.
Obviously, there were political, economic and
cultural forces against joining the Bloc. Political issues tilting BJP against
joining were mainly: BJP did not do so well in the State polls, the winter
session of Parliament is coming up soon, where BJP may not want to face the
Opposition’ ire, and the farmers bodies and MSMEs turning against the
government. The economic arguments
included; the threat to “Make in India” strategy, the fear of being flooded by
low quality, low priced Chinese goods, competition with Chinese manufactures, absence
of credible assurances to market access and non-tariff barriers for Indian
goods.
The cultural pressures came from Swadeshi
Jagarn Manch (SJM), the Bharatiya Kisan Sangh (BKS) both affiliates of
Rashtriya Swayam Sevak Sangh (RSS), which vigorously defends ‘Indian culture’.
RSS also is the ideological parent of BJP. The SJM went to the press saying the
‘Make in India’ efforts will be undone by joining RCEP, and apart from hitting
the small and medium sector, and farmers, it will make out data unsafe. Prime
Minister Modi in his speech said, “The present form of the agreement does not
fully reflect the basic spirit and the agreed guiding principles of RCEP. It
does not address satisfactorily India’s outstanding issues and concerns. In
such a situation, it is not possible for India to join the RCEP agreement”.
Indeed, Modi’s complaint was serious. The
RCEP was not following the founding principles. One could expect this if China
is involved. But two of India’s Quad partners Japan and Australia too are parts
of the Bloc, albeit in an indirect way. The mega free trade agreement is
originally between 10 ASEAN countries plus 6 of their FTA partners. These
countries have made room for India to join later. Whether India will rethink on
it is another matter.
Arguably, India’s geopolitical position and
economic conditions are against joining RCEP. The export competitiveness of
India is questionable. Out of 15 other countries in RCEP, India runs a trade deficit
to the tune of $105 billion with 11, out of which $53 billion is with China.
The RCEP would have opened up the Indian market making Indigenous companies even
more vulnerable; that too, without reciprocity from China which would have
increased the trade imbalance.
Secondly, India is not in the best of terms
with China, in fact, is in an adversarial position. China is making sporadic
claims on Indian territories, meddling in Indian internal affairs, chipping
away India’s neighbors. More than any other power, even super powers, China wants
other countries like India to be subservient to Beijing or face its economic
and military might. This is not acceptable to India with its bigger footprint
in international political arena than China.
New Delhi should think of alternative
options. It was negotiating a Free Trade Agreement with the European Union. The
EU is still the biggest trading partner of India. New Delhi should resume the
negotiation and conclude the FTA. Now, in the face of competition from China,
the EU will also dilute its position to come to an agreement with India. When
Angela Merkel, the German Chancellor was in Delhi, she made it amply clear that
EU will be inclined to sign the FTA.
Merkel also made it clear that Germany and
European Union would like India to be the political and economic counter-weight
to China. She said any trade talks with India will be conducted with the China
angle. It is high time India moves fast to do it. European Union is the natural
partner of the Union of India, given the similarity of their political and
social structures. Also, the EU realises the mistake it has committed by
investing heavily in China, whose politics runs counter to the values and
ideals that founded the European Union.
The other major power, the only super Power
is the United States which has been waiting for India to take a pro-active
position vis a vis China in Asian politics. It is India which has been
dithering. New Delhi must talk to President Trump, before the end of his first
term, to sign a Free Trade Agreement. It is alright to have gala function and
extend support to Trump in his next elections, but in return, USA needs to back
India to emerge as an equal player with China in the India-Pacific Region.
New Delhi has done, after quite a bit of
dilly dallying in regard to China, with all these swing-stroll-and-supper
diplomacy, two correct moves; one is not to join China’s Belt-and-Road project,
and the RCEP. But that is the start. China will not stop needling India by
propping up Pakistan and poaching on countries like Nepal. So New Delhi needs
to build its strategic economic and security alliances as soon as practicable.
The next steps, therefore, is moving closer
to Europe and United starts and consolidating ties with its time-tested
partners like Japan, Australia, and countries in the Middle East. New Delhi
needs to also continue its mutually beneficial relations with ASEAN countries.
Two of the engagements with ASEAN in the recent past testify that New Delhi can
work closely with it. One was when the heads of 10 ASEAN countries attended the
Republic Day parade on 26 January 2018 and the same year, Modi being invited as
the key note speaker at the Sangri-La dialogue in Singapore, where he enunciated
his India-Pacific vision and said it will be ASEAN-specific. ASEAN countries
have their own dynamics with China; New Delhi could continue to have bilateral relations
with them.
For quite a while, some of us have been
arguing for taking a firm stand in regard to China. New Delhi’s recent rebuff
to China on latter’s Kashmir concerns, and now pulling out of RCEP indicate
that Modi government is nudging itself to do so. One hopes such stance will
continue unless China radically changes its expansionist and hegemonic stance.---INFA
(Copyright, India
News & Feature Alliance)
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