RCEP: The Biggest Trade Deal In The World

15 nations in the Asia Pacific region have signed a major trade deal and India is not part of it.

The Major Trade Deal — RCEP

On Sunday, fifteen Asia-Pacific economies signed the Regional Comprehensive Economic Partnership (RCEP), which is described as the world’s biggest trade deal. RCEP groups the 10-member Association of Southeast Asian Nations (ASEAN) which are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, along with China, Japan, South Korea, Australia and New Zealand.

Vietnam stated that RCEP will account for 30% of the global economy, 30% of the global population and reach 2.2 billion consumers. Based on 2019 data, their combined GDP totals roughly $26 trillion and they account for nearly 28% of global trade.

The members of ASEAN countries said this deal would eliminate tariffs and quotas on 65% of the goods that are traded in the region. In a joint statement, the partner countries said that the deal “will play an important role in building the region’s resilience through an inclusive and sustainable post-pandemic economic recovery process.”

How Will RCEP Help The Countries?

If we look at the members of the deal, we could see that Australia, China, Japan, New Zealand and South Korea are mainly technically advanced nations and have adopted high-end factories. However, this also makes the countries’ labour and production costs relatively higher than the smaller nations in ASEAN.

That’s where the RCEP comes in: The deal will lead to an investment interest surge in countries with lower-cost and lesser-skilled workers like Cambodia, Laos and Myanmar and will be of special interest to manufacturers from Australia, Japan, New Zealand, Singapore and South Korea, which have higher production costs. RCEP will also help companies by letting them export products anywhere within the bloc without meeting separate requirements for each country.

According to projections by International economics professors at Johns Hopkins University, RCEP will add $186 billion to the size of the global economy and 0.2% to the GDP of its members.

So, RCEP sounds like a win-win for everyone, then, why isn’t India part of it?

India & RCEP

In November last year, India decided to walk out of discussions over “significant outstanding issues”. According to a government official, as mentioned by The Indian Express, India had been “consistently” raising “fundamental issues” and concerns throughout the negotiations and was prompted to take this stand as they had not been resolved by the deadline to commit to signing the deal.

The reason is that India wanted to protect the interests of industries such as agriculture and dairy and to give an advantage to the country’s service sector. However, the present structure of RCEP still doesn’t address these issues and concerns, according to officials.

So, walking away from RCEP doesn’t sound like a bad decision and our country’s Minister of External Affairs feels the same. A day after RCEP was signed, he said, as quoted by TNN, “The effect of past trade agreements has been to deindustrialize some sectors. The consequences of future ones would lock us into global commitments, many of them not to our advantage. Those who argue stressing openness and efficiency do not present the full picture.”

Will this decision affect India? It might. India’s move to walk out from the deal could potentially leave the country with less scope to tap the large market presented by RCEP. There are also concerns that this decision could affect the Australia-India-Japan network in the Indo-Pacific. However, India has the option of joining the deal, as the new trading bloc has made it clear that the door will remain open for India to return to the negotiating table.

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