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India Won't Join RCEP Trade Pact: Supporters Say Deal was Unfair, Critics Argue This Could Isolate India in the Region

Professor of Financial Economics and Part-time Value Investor, Transfin.
Nov 5, 2019 9:59 AM 2 min read

India will not join RCEP trade pact. Supporters of the move say deal was never fair and was against India's interests. Critics say this could hurt India's regional standing and isolate it.



India will not join RCEP.

So it is settled. After over six years of negotiations, India has decided to not join the Regional Comprehensive Economic Partnership (RCEP) while the other 15 countries in the bloc have decided to move ahead with the pact. In the end, negotiating RCEP was always going to be complicated business.


A Tiger and A Dragon Walk Into A Bar: ...And neither of them agreed with the other on anything, ever. India felt there were “significant outstanding issues, which remain unresolved” (ie, that armada of Chinese imports waiting impatiently to cross the Bay of Bengal) and that the deal finally drafted did not adhere to “the basic spirit and the agreed guiding principles of RCEP”. Prime Minister Narendra Modi declared India's departure at the 3rd RCEP Summit in Bangkok on Monday.


India Won't Join RCEP Trade Pact: Supporters Say Deal was Unfair, Critics Argue This Could Isolate India in the Region


Supporters of the move say deal was unbalanced, against India's interests.

There are both supporters and critics of the government's decision. Supporters of the pull-out argue that being party to RCEP would have led to a flood of cheap, mass-produced Chinese imports in the Indian market. Such an import surge would have, besides increasing India's $50bn+ trade deficit with China, hurt local small businesses and traders. Moreover, the reluctance of other countries to move the base year from 2014, inadequate commitment to the services sector, and requirement to do away with agricultural tariffs would have negatively impacted the Indian economy, which is already in a fragile state, this side opines. ToI


Critics say move could isolate India in region.

The opposite side decries Delhi's decision. Staying out of RCEP, they say, would hurt India's chances to strike deals or secure concessions with individual countries in the RCEP tent. It would also mean that India would miss out on a huge trade bloc that includes every major economy in the region, isolating it in the global supply chain - that too, even as China secures the leading position, trade-wise and strategic implications-wise. This side also laments what they characterise as India's suspicions of free trade deals whilst failing to reform and increase its own economy's competitiveness. CFR



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