• CCI AD FROM 5th April 2021

Regional Comprehensive Economic Partnership (RCEP) Trade Agreement

Regional Comprehensive Economic Partnership (RCEP): its importance and implications

Over the past twenty years, countries around the world have increasingly embraced trade agreements at both the country-to-country (bilateral) level and amongst (often geographical) groupings of multiple countries (regional level). With rapidly integrating economies, governments are more frequently taking initiatives to form/reform their trading arrangements through direct negotiations. Given the protracted process of multilateral trade negotiations of WTO– as evidenced by the Doha Round – bilateral and regional trade agreements (such as Free Trade Agreements [FTA]) are setting the framework for trade liberalisation in the 21st century. The role of bilateral and regional trade agreements is increasingly important due to the emergence of the comprehensive trade agreements, such as the current Trans-Pacific Partnership (TPP) negotiations, which seek to have a greater impact on the international trading environment than existing FTAs. Moreover, the emergence of the comprehensive Trans-Pacific Partnership (TPP) agreement demonstrates that the recent global economic downturn has not inhibited progress towards greater trade liberalisation at a broader Asia- Pacific level.

Right Time for the Regional Comprehensive Economic Partnership

Having realised the importance of Regional Trade Integration, the Regional Comprehensive Economic Partnership (RCEP) initiative was conceived among the ASEAN Leaders in November 2011 during the 19th ASEAN Summit in Bali, Indonesia. The RCEP as a 16 Member Free Trade Agreement was launched by the Leaders of the ASEAN and their 6 FTA Partners viz., Australia, China, India, Japan, Korea and New Zealand at the 21st ASEAN and Related Summits in Phnom Penh, Cambodia. The negotiations for the RCEP are expected to be concluded by end-2015.

The Leaders established the RCEP as an ASEAN led process through which ASEAN would broaden and deepen its economic engagements with its FTA partners. The RCEP are likely to lead to greater economic integration, support equitable economic development and strengthen economic cooperation among the countries involved.

The Largest Regional Free Trade Agreement

The RCEP envisages regional economic integration leading to the creation of the largest regional trading bloc in the world amounting for almost 45% of the world population with a combined gross domestic product of $22 trillion. It aims to cover trade in goods, trade in services, investment, economic and technical cooperation, competition and intellectual property.

Significance for India

Joining the RCEP is important for India since it is not a part of the other two mega regional trade deals that are under negotiations—the trans-pacific partnership (TPP) and transatlantic trade and investment partnership (TTIP) which are led by the US. Form RCEP India’s interests lie especially on trade in textiles and pharma. It will also be helpful for India to remove technical barriers to trade like sanitary and phyto-sanitary measures of these products.

Under the new government at the centre, India is embarking upon providing a fresh push for manufacturing and services sectors and a refreshing review of reorienting its global engagement. It is expected that RECP will help India in accessing the region in a better way which will consequently help it in improving India’s manufacturing and services delivery efficiency and will make it more competitive.  

The RCEP has already completed five rounds of negotiations in the areas of trade in goods, services and investment and likely to complete the negotiations by 2015-end.

Huge Market for Man-made fibre textiles

The RCEP accounts for nearly 30% (USD 50 Bn.) of global trade in Man-made fibre textiles and this share is growing rapidly. Moreover, the shifting of production of textile products from the west to the east is increasing both intra and inter-national textiles trade in this region. Thus, there is substantial scope for India to gain from RCEP by ways of increase exports to these partner countries.

Region/

Country

Exports from India

(In USD Mn.)

Imports from World

(In USD Mn.)

India’s Share

 in %

ASEAN

458

23143

1.98

Australia

33

863

3.82

New Zealand

8

271

2.95

South Korea

35

3127

1.12

Japan

38

3177

1.20

China

70

13335

0.52

India needs to play safe

China is the leading member country of the proposed RCEP both in terms of production and export of textile products. India has both offensive and defensive interest with the member countries of RCEP in the textiles area. Exports of Textile products from India have scope to accelerate in countries like Japan, Australia and New Zealand. India also promises a huge textile market for all the member countries including China. However, while India will be maintaining a single schedule, hence, it will need to have adequate flexibility to address its sensitivities which may differ for each individual participating country which are also India’s competitors like China.