RCEP

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 (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,
Thailand, and Vietnam) and their five FTA partners (Australia, China, Japan, New Zealand, and
South Korea). India, ASEAN's sixth FTA partner, opted out of the agreement in 2019.

RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia.
[1]
In 2017, the 16 prospective signatories (including India) accounted for a population of 3.4 billion
people with a total Gross Domestic Product (GDP, PPP) of $49.5 trillion, about half of the world
population and 39 percent of the world's GDP.[2]

GDP GDP
Nominal PPP Official
Area Population GDP per per Currenc
lag Country Capital GDP
(km²) (millions of cap. (millions of cap. HDI y
language Leaders
US$) (Nomin Int$) (PPP, s
al, US$) Int$)
Monarch:
Elizabeth II
Governor-
None
Australia Australia General:
National
Commonwe 7,692,0 1,482,28 55,21 1,296,07 50,81 0.93 n dollar David
Canberra 24,419,900 and de
alth of 24 2 5 5 7 9 ($) Hurley
facto:
Australia (AUD) Prime
English
Minister:
Scott
Morrison
Brunei
Nation of
Brunei, the
Bandar Brunei Monarch:
Abode of 28,74 76,56 0.86
Seri 5,765 417,200 11,991 33,756 dollar ($) Malay Hassanal
Peace 0 7 5
Begawan (BND) Bolkiah
Negara
Brunei
Darussalam
Cambodia
Monarch:
Kingdom of
Cambodi Norodom
Cambodia
Phnom 0.56 an riel Sihamoni
Preăh 181,035 15,626,444 24,307 1,308 69,884 4,022 Khmer
Penh 3 (៛) Prime
Réachéanac
(KHR) Minister:
hâk
Hun Sen
Kâmpŭchéa
Standard
Chinese
China written in
People's Renminb simplifie
President:
Republic of i d
9,596,9 1,382,580, 13,118,6 25,102,9 18,15 0.73 Xi Jinping
China Beijing 9,489 (Chinese character
61 000 89 16 8 8 Premier: Li
Zhōnghuá yuan, ¥) s
Keqiang
Rénmín (CNY) see also:
Gònghéguó Languag
es of
China
Indonesia Jakarta 1,910,9 263,510,00 1,092,13 3,895 3,481,10 12,43 0.68 Indonesia Indonesia President:
Republic of 31 0 8 7 2 9 n rupiah n Joko
Indonesia (Rp) see also: Widodo
 GDP GDP
Nominal PPP Official
Area Population GDP per per Currenc
lag Country Capital GDP HDI language Leaders
(km²) (millions of cap. (millions of cap. y
US$) (Nomin Int$) (PPP, s
al, US$) Int$)
Languag
Republik
(IDR) es of
Indonesia
Indonesia
Monarch:
Japanese Naruhito
Japan 126,760,00 5,063,12 38,28 5,545,88 42,86 0.90
Tokyo 377,930 yen (¥) Japanese Prime
Nippon-koku 0 9 1 4 0 3
(JPY) Minister:
Shinzō Abe
Laos President:
Lao People's Bounnhang
Democratic Vorachith
Lao kip
Republic 0.58
Vientiane 236,800 6,492,400 18,674 2,051 53,626 6,115 (₭) Lao
Sathalanalat 6 Prime
(LAK)
Paxathipatai Minister:
Paxaxon Thongloun
Lao Sisoulith
Monarch:
Malaysia Abdullah
Malaysia Kuala
Malaysia n Prime
Federation Lumpur
28,63 0.78 n ringgit see also: Minister:
of Malaysia Putrajaya 330,803 32,019,500 340,923 9,623 988,993
6 9 (RM) Languag Tun Dr.
Persekutuan (administrati
(MYR) es of Mahathir
Malaysia ve)
Malaysia bin
Mohamad
Myanmar
(Burma)
Republic of President:
Burmese
the Union of Win Myint
Burmese see also:
Myanmar Naypyida 0.55 State
676,578 54,836,000 74,002 1,374 362,969 6,360 kyat (K) Languag
Pyidaunzu w 6 Counsellor:
(MMK) es of
Thanmăda Aung San
Myanmar
Myăma Suu Kyi
Nainnganda
w
Monarch:
Elizabeth II
Governor-
New General:
New
Wellingt 41,10 38,70 0.91 Zealand English Patsy Reddy
Zealand 270,467 4,786,710 215,172 195,103
on 7 6 5 dollar ($) Māori
Aotearoa
(NZD) Prime
Minister:
Jacinda
Ardern
Philippines
Republic of Philippin Filipino
President:
the 103,874,00 0.68 e peso (Tagalog
Manila 300,000 357,792 3,102 951,224 8,270 Rodrigo
Philippines 0 2 (₱) )
Duterte
Republika (PHP) English
ng Pilipinas
Singapore Singapor 719 5,607,300 316,872 51,43 537,447 90,72 0.92 Singapor Malay President:
Republic of e 1 4 5 e dollar English Halimah
Singapore (city-state) ($) Mandarin Yacob
Republik (SGD) Prime
 GDP GDP
Nominal PPP Official
Area Population GDP per per Currenc
lag Country Capital GDP HDI language Leaders
(km²) (millions of cap. (millions of cap. y
US$) (Nomin Int$) (PPP, s
al, US$) Int$)
Tamil
Singapura
see also:
Xīnjiāpō Minister:
Languag
Gònghéguó Lee Hsien
es of
Ciṅkappūr Loong
Singapor
Kuṭiyaracu
e
South Prime
Korea South Minister:
Republic of 1,597,39 29,11 2,127,16 39,44 0.90 Korean Lee Nak-
Seoul 100,210 51,446,201 Korean
Korea 2 4 4 6 1 won (₩) yeon
Daehan (KRW) President:
Minguk Moon Jae-in
Monarch:
Thailand
Vajiralongk
Kingdom of
Thai baht orn
Thailand 1,296,09 17,74 0.74
Bangkok 513,120 68,298,000 466,623 6,265 (฿) Thai Prime
Ratcha- 5 9 0
(THB) Minister:
anachak
Prayut
Thai
Chan-o-cha
Vietnam
President:
Socialist
Nguyễn Phú
Republic of Vietname
Trọng
Vietnam 0.68 se đồng Vietname
Hanoi 331,699 96,208,984 234,688 2,305 697,752 6,925 Prime
Cộng hòa 3 (₫) se
Minister:
Xã hội chủ (VND)
Nguyễn
nghĩa Việt
Xuân Phúc
Nam

Value
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 decide
not to join RCEP reducing 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.

On January 23, 2017, United States President Donald Trump signed a memorandum that stated
withdrawal of the country from the TPP, a move which is seen to improve the chances of success for
RCEP.

WHY INDIA PULLED OUT

 India pulled out of RCEP calling the now 15-nation pact unsatisfactory
 India pushed for auto-trigger clause in RCEP to protect its domestic industries
 China made other members of RCEP seal the pact without further delay

It was meant to be the biggest free trade agreement with 40 per cent of global commerce and 35 per
cent GDP involving 16 countries, home to 3.6 billion people or half the population of the world.
Now, more than a third of that population group will not be a part of the Regional Comprehensive
Economic Partnership or RCEP. "Neither the Talisman of Gandhiji nor my own conscience permits me to
join RCEP," said Prime Minister Narendra Modi in Bangkok on Monday as India stormed out of the free trade
agreement negotiations that began seven years ago.

The rest 15 countries decided to move ahead, at the insistence of China, in a bid to "isolate" India.
The 16 members of RCEP negotiations were 10 ASEAN members plus Australia, China, India,
Japan, New Zealand and South Korea. However, without India, RCEP does not look as attractive
trade pact as it promised to be during negotiation stage.

Refusing to join the RCEP, PM Modi said the pact does not address satisfactorily India's outstanding
issues and concerns. RCEP backers complained that India pitched in its demands at the "last minute".
However, India had raised the issues during negotiation stage as industry and farmers had expressed
their serious concerns over RCEP.

ECONOMIC SLOWDOWN

India's economy is passing through a difficult time. The rate of GDP growth has been slowing down
for five consecutive quarters, that is, since January-March 2018. The GDP growth figures have been
a topsy-turvy curve since the roll out of goods and services tax.

As the industry is reeling under pressure and the government is grappling to deal with the domestic
economic situation, a massive free trade pact like RCEP would have exposed the Indian businesses
and agriculture to unequal competition from countries which are lurking like giant sharks in the
export arena.

TRADE DEFICIT

India, as a whole, is a 'bad' business entity. It has massive trade deficits with almost all economic
powerhouses of the world. Of the 15 RCEP countries, India has serious trade deficits with at least 11.

India's trade deficit with these countries has almost doubled in the last five-six years - from $54
billion in 2013-14 to $105 billion in 2018-19. Given the export-import equation with the bloc, a free
trade agreement with the grouping would have increased it further.
At present, India ships 20 per cent of all its exports to the RCEP countries and receives 35 per cent of
all imports from them. China is the ringmaster of this export-import circuit. It is the largest exporter
to almost all countries of the group, including India. Of India's $105 billion trade deficit with RCEP
countries, China accounts for $53 billion.

Widening trade deficit would empty foreign exchange reserve of India at a faster rate. And, a
depleting foreign reserve is never good for any economy and is least desirable for the one trying to
recover.

INDUSTRIES AND FARMERS

RCEP was one of those pacts that was opposed by both the industry and farmers alike.
Manufacturing sector in India is in crisis. The sector has seen contraction in recent months.
Manufacturing output grew at its slowest pace in two years in October, according to Nikkei
Manufacturing Purchasing Managers' Index INPMI=ECI, compiled by IHS Markit.

Services sector is also not doing well, of late. It has seen, in the NPMI=ECI survey, first back-to-
back monthly slowdown since July-September 2017 in October. China and ASEAN countries have
robust service sector, and a free entry to these players may damage the lone saviour of Indian
economy in these times of crisis.

In agriculture, domestic players dealing in dairy products, spices -- chiefly pepper and cardamom,
rubber, and coconut would face dumping from the South Asian spice majors. Sri Lanka is already
giving a tough time to Indian spice growers.

Vietnam and Indonesia have very cheap rubber to export. Australia and New Zealand are waiting for
a free access to India for their dairy products. Indian businesses would be hit hard as RCEP does not
offer enough protection to them.

PAST EXPERIENCE

The Niti Aayog, in 2017, had published a report that pointed out that free trade agreements have not
worked well for India. It analysed multiple free trade agreements that India signed in the past decade.
Among those were FTA with Sri Lanka, Malaysia, Singapore, and South Korea.

The Niti Aayog analysis showed that import from FTA countries increased while export to these
destinations did not match up. Even India's export to FTA countries did not outperform its overall
export growth. The Niti Aayog found that FTA utilisation by India has been abysmally low between
5 and 25 per cent.

CHINAA'S GAMEPLAN

Finally, RCEP has come up as a Chinese gameplan to save its manufacturing industries from
crumbling under their own weight. Several industrial players in India red-flagged the Chinese agenda
of flooding the Indian market using the RCEP countries as a connecting network.
China has already covered most markets united under RCEP umbrella. The same Niti Aayog report
pointed out that China has changed the trade equation with the ASEAN countries after inking
ACFTA - standing for ASEAN-China free trade agreement - in 2010.

ASEAN-6 (Indonesia, Malaysia,Philippines, Singapore, Thailand and Vietnam) had a trade surplus
of $53 billion in 2010 which turned into a trade deficit of $54 billion in 2016.

India, with its 1.3 billion population, offers the biggest free access market to the Chinese companies
that are feeling the pinch of US-China trade war with Donald Trump administration taking on the
manufacturing giant in the past one-and-a-half years.

China needs greater access to Indian market to sustain its manufacturing industries. A failure to find
a market will have cascading effect on Chinese economy and President Xi Jinping's global
ambitions. In Bangkog, PM Modi just refused to be a willing dumping ground of China's trade
imperialism.

India wanted a key clause to be included in the RCEP pact for auto-trigger mechanism as a shield
against sudden and significant import surge from countries (read China). The RCEP covers trade in
goods and services, and also investments, economic-technical cooperation, competition and
intellectual property rights.

Earlier this week, India announced that it was dropping out of the Regional Comprehensive
Economic Partnership (RCEP). Its exit came amid a wide array of assertions from commentators —
with some claiming that India’s past trade agreements had harmed its economy and that RCEP would
do worse, others going further to demand a return to the inglorious days of ‘selfsufficiency’, and yet
others insisting that the withdrawal reflected the weakness of the government against the efforts of
protectionist  ..

China was particularly keen to see a successful conclusion of the RCEP summit and had been
vigorously pushing for that. But that’s precisely where the problem for India lay as well. India’s
demands at the RCEP negotiations included shifting the base year for tariff cuts from 2014 to 2019;
avoiding a sudden surge in imports from China by including a large number of items in an auto-
trigger mechanism; calling for stricter rules of origin to prevent dumping from China; and a better
deal in services. The China factor, therefore, was key to New Delhi’s assessment of costs and
benefits.

ASEAN has always been keen on a diversified portfolio of partners so that its member states can
leverage their centrality in their dealings with major powers and maintain their strategic autonomy.
While China’s clout has been growing in the region, ASEAN member states have tried to keep the
U.S. engaged in the region as well. But with the Trump administration giving mixed signals about
Washington’s commitment towards the region, ASEAN has been looking at New Delhi with a
renewed sense of anticipation.

The Modi government’s proactive outreach to the region in the form of its ‘Act East’ policy has been
well received. Anxious about China’s increasingly overweening economic and security presence in
the region, ASEAN member states have been keen on a substantive Indian involvement in the region.

ndia’s decision to keep away from the RCEP will, hence, certainly cause concerns about its larger
game plan vis-a-vis the region. New Delhi’s entire Indo-Pacific strategy might be open to question if
steps are not taken to restore India’s profile in the region. For China, this looks like a win at a time
when the Trump administration is pushing Asia into making a choice in its favour by jettisoning
Chinese largesse on infrastructure and technology.

Beijing’s dominance
Both geopolitically and geo-economically, China now looks set to dominate the Indo-Pacific, which
may not be good news for the region and India. This is the reason why Japan is now suggesting that
it would work towards a deal which includes India. Even as China is pushing for an early conclusion
of RCEP among the remaining 15 members, Japanese Trade Minister Hiroshi Kajiyama made it clear
that Tokyo “wants to play a leading role toward reaching an early agreement between all 16
countries, including India, with the aim of signing it in 2020.”

Economic isolation is not an option for India and so there are reports that New Delhi will be moving
towards bilateral trade pacts. India will have to prepare itself more fully to take advantage of such
pacts. Domestic reforms will be the need of the hour. This is an age when the whole raison d’etre of
economic globalisation is being challenged. India needs a strategy that brings together the economic
and political aspects of its strategic thinking. In rejecting the RCEP, New Delhi seems to be
signalling that despite the costs, China’s rise has to be tackled both politically and economically.
How the rest of East and Southeast Asia responds to India’s move will determine the future balance
of power in the Indo-Pacific.