RCEP
1. Context
Recently, India decided to hold off on signing the Regional Comprehensive Economic Partnership (RCEP) until “significant outstanding issues” were resolved, even as all other 15 countries involved in the negotiations stated that they were ready to sign the mega trade deal in 2020.
2. Regional Comprehensive Economic Partnership (RCEP)
- The Regional Comprehensive Economic Partnership (RCEP) is a significant free trade agreement (FTA) that was signed on November 15, 2020.
- It is a comprehensive trade pact involving 15 countries from the Asia-Pacific region, including 10 member states of the Association of Southeast Asian Nations (ASEAN) and five of ASEAN's trading partners: China, Japan, South Korea, Australia, and New Zealand.
- The purpose of the deal is to create an “integrated market” spanning all 16 countries. This means that it would be easier for the products and services of each of these countries to be available across the entire region.
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3. Key features of the RCEP:
- Economic Scope: RCEP is the largest free trade agreement in the world in terms of economic significance. It covers a vast region, comprising approximately 30% of the global population and accounting for about 30% of the world's GDP. This agreement aims to promote economic integration and facilitate trade and investment among member countries.
- Tariff Reductions and Market Access: RCEP seeks to eliminate or reduce tariffs and other trade barriers among its member nations. This reduction in trade barriers is expected to create more opportunities for businesses to access larger markets and promote economic growth.
- Rules of Origin: RCEP establishes rules of origin to determine the country of origin of goods. This is crucial to prevent non-member countries from benefiting from the preferential trade provisions and ensures that only products manufactured within the RCEP member countries can avail of the agreed-upon trade benefits.
- Trade in Services: The agreement also addresses trade in services, promoting greater access and liberalization in sectors such as telecommunications, finance, professional services, and e-commerce, among others.
- Intellectual Property Rights: RCEP includes provisions related to the protection of intellectual property rights, which is important for fostering innovation and creativity within member countries.
- Investment: The agreement aims to improve investment opportunities and create a more predictable and secure investment environment among member countries. This includes provisions related to investor-state dispute settlement (ISDS) mechanisms.
- Economic Cooperation: RCEP promotes economic cooperation in various areas, such as customs procedures, trade facilitation, technical barriers to trade, and economic and technical assistance for less-developed member countries.
4. Outstanding issues in RCEP
- Tariff Reductions: Agreeing on tariff reduction schedules is another significant challenge. Each member country may have different priorities and sensitivities regarding the products they want to protect or liberalize. Negotiating tariff reductions requires balancing the interests of all parties involved to achieve a mutually beneficial outcome.
- Services and Investment: The liberalization of trade in services and investment is a contentious issue in many trade agreements. RCEP member countries have different levels of development and varying domestic regulations. Negotiating how much to open up services and investment sectors to foreign participation while safeguarding national interests can be challenging.
- Intellectual Property Rights: Balancing intellectual property rights protection with access to affordable medicines and technologies is a delicate matter. RCEP countries need to find a middle ground that promotes innovation while ensuring access to essential medicines and technologies for their populations.
- Investor-State Dispute Settlement (ISDS) Mechanism: The inclusion of ISDS in trade agreements has been a contentious issue globally. RCEP member countries need to agree on the scope and limitations of ISDS to protect investor rights while safeguarding the government's right to regulate in the public interest.
- Data Protection and E-commerce: With the increasing importance of digital trade and e-commerce, addressing data protection, privacy, and cross-border data flows is a crucial issue for RCEP members. Negotiating agreements on these issues requires balancing economic interests with the need to protect individual privacy and national security.
5. Concerns of India Including Civil Society, and Political Opposition regarding RCEP:
- Impact on Domestic Industries: India's domestic industries have expressed concerns that the Regional Comprehensive Economic Partnership (RCEP) could lead to increased competition for goods and services imported from other member countries. There are fears that cheaper imports could negatively affect certain sectors, potentially leading to job losses and economic challenges for domestic industries.
- Trade Deficit: India has had a persistent trade deficit with several RCEP member countries, especially China. Critics worry that the agreement may exacerbate the trade imbalance, leading to an influx of cheaper Chinese goods that could further widen the deficit and harm domestic manufacturing.
- Agriculture Sector: India's agricultural sector has raised concerns over the potential impact of RCEP on farmers. They fear that cheaper agricultural imports from other member countries could harm domestic farmers by reducing the prices and competitiveness of Indian agricultural products.
- Impact on Small and Medium Enterprises (SMEs): Small and Medium Enterprises (SMEs) form a significant part of India's economy. Some worry that increased competition from larger corporations in other RCEP member countries might pose challenges for Indian SMEs, limiting their growth prospects.
- Safeguarding Agriculture and Dairy: India's dairy and agricultural sectors have been vocal about protecting their interests in any trade agreement. They fear that certain provisions in RCEP could adversely affect the livelihoods of farmers and the dairy industry.
6. Why did India withdraw from the RCEP?
The following are the three main reasons for India's withdrawal from RCEP:
- The free trade agreement with the member countries might force them to dump cheap and low-quality products from countries like China, Thailand, South Korea, and Japan, etc., This will result in the occupation of the Indian market by foreign products while the Indian products will be out of the market.
- It will increase the number of imports and exports simultaneously, resulting in a decrement in the forex reserves in India.
- India's concern about its country of origin has not been seriously entertained by the RCEP.
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For Prelims: Regional Comprehensive Economic Partnership (RCEP), Association of Southeast Asian Nations (ASEAN), Investor-state dispute settlement (ISDS) mechanism, and Small and Medium Enterprises (SMEs).
For Mains: 1. Discuss the significance of the Regional Comprehensive Economic Partnership (RCEP) as a major free trade agreement in the Asia-Pacific region. Analyze its potential impact on trade, investment, and economic cooperation among member countries. (250 words).
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Previous year Questions1. The term 'Regional Comprehensive Economic Partnership; often appears in the news in the context of the affairs of a group of countries known as (UPSC 2016)
A. G20
B. ASEAN
C. SCO
D.SAARC
Answer: B
2. Consider the following statements about Regional Comprehensive Economic Programme (RCEP). (WBCS 2019)
1. It is an economic cooperation for China-led free trade.
2. It is a counter-cooperation for the America-led trans-Pacific partnership.
3. In the countries involved in this cooperation Indian Professionals will have a job market.
Select the correct answer using the codes given below:
A. 1 and 2
B. 1 and 3
C. 2 and 3
D. All of the above
Answer: D
3. Recently launched Regional Comprehensive economic partnership, RCEP is the largest regional trading block at present. Which of the following countries is NOT a member of this free trade agreement? (Haryana Civil Services, 2021)
A. Australia
B. New Zealand
C. Brunei
D. Bangladesh
Answer: D
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Source: The Indian Express
