For once, Prime Minister Narendra Modi sees eye to eye with a Gandhi—even if it is the Mahatma. In a strong statement straight out of the Modi textbook, the Prime Minister chose not to sign the RCEP (Regional Comprehensive Economic Partnership) on account of his conscience and Mahatma Gandhi.
“When I measure the RCEP agreement with respect to the interests of all Indians, I do not get a positive answer. Therefore, neither the talisman of Gandhiji nor my own conscience permits me to join RCEP,” said Modi yesterday. The trading bloc was to bring together 16 countries of the Indo-Pacific region that would account for almost half the population of the world and more than 40 per cent of international trade.
Bringing these diverse countries together with a common vision has not been an east task. The RCEP would encompass economies big and small as well as rival powers like China and Japan. First proposed in 2012, negotiating these concerns has been a challenge. Since December 2018, there have been 24 rounds of negotiations, supported by six inter-sessional Ministerial meetings, as well as Leaders’ discussions held on the margins of ASEAN summits.
As 15 others sign on, India is the lone exception. While signing on the agreement in the present form was opposed by both the left and the right (on the same page together in a rare moment), the criticism is that it would have made Indian markets vulnerable to cheap Chinese goods.
Of the RCEP, former Congress President Rahul Gandhi said, "’Make in India’ has become ‘Buy from China’. Each year we import Rs. 6,000 worth of goods from China for every Indian! A 100 per cent increase since 2014. RCEP will flood India with cheap goods, resulting in millions of job losses & crippling the Indian economy."
The BJP, in turn, responded in a tweet saying that RCEP negotiations began in 2012 under the UPA, and that the prime minister was ‘cleaning up’ their mess.
While industry experts have welcomed India’s decision to stay out of the RCEP, the questions raised about India’s future go beyond just the boundaries of economics to diplomatic territory. With Modi’s thrust on economics as a strong bond for diplomatic closeness, how does keeping out impact the Act East policy? It also brings into question the success of the informal summit between Modi and President Xi Jinping that was held in October. The bromance apart, President Xi could not manage to convince India to take the plunge, proving that a trust deficit remains that is still difficult to overcome.
With China proving able to marshal a diplomatic consensus among ASEAN, the question emerges over whether keeping out is more disadvantageous than staying within?
“The sentiment by many members is that they would rather have India in the tent rather than outside,” said Arun Mohan Sukumar, head of the Observer Research Foundation’s Cyber Security and Internet Governance Initiative. “ASEAN is not a monolith.’’
By not signing the RCEP, India has also kept its track record of not being open with trade agreements. Over the years, even within the World Trade Organisation (WTO), India has tended to be a tough customer when it comes to trade deals. But, India’s decision to stay away from RCEP might have more to it than just the China-factor. There are concerns of intellectual property rights (IPR), pointed out Sukumar. In addition, there is talk of South Korea and Japan pushing a line on data localisation. There remains genuine concerns within the dairy sector and sections of Indian industry.
Nonetheless, there seems to be some confusion over whether India has exited the agreement or whether negotiations can still be salvaged to get India a seat in the bloc. The Ministry of External Affairs Secretary (East), Vijay Thakur Singh, categorically stated that India had decided to quit the RCEP agreement as its concerns had not been resolved. However, the joint statement by ASEAN suggested that “participating countries will work together to resolve these outstanding issues in a mutually satisfactory way. India’s final decision will depend on satisfactory resolution of these issues.”
The confusion apart, not signing the deal is in keeping with India’s track record on trade deals, which is not very high. The industry, however, is not complaining.
Says Vikram Kirloskar, President, Confederation of Indian Industry, “India has been engaged in RCEP negotiations since the very beginning with an honest intent and hoping to have balanced outcomes across all key issues of negotiations—goods, investment and services. This was articulated and reiterated by Prime Minister just on the eve of RCEP Leaders’ Summit held at Bangkok."
Kirloskar added that despite having an unsustainable trade deficit with China, India went ahead to accommodate the demands of 5he other 15 members by scaling up its offer on tariff reduction on goods. But, "the same was not reciprocated by them on India’s key demands on services market access, safeguards in case of import surge and to prevent circumvention of Rules of Origin because of tariff differentials”.
The politics of the decision cannot be ignored. With a faltering economy, and with even the RSS-backed Swadeshi Jagran Manch putting up a stiff fight, domestic concerns could not be ignored. What is also a concern is that the government has spoken in different voices and it has not been able to convince its own departments and affiliates of the advantages of signing on. Now, the challenge for Indian diplomats begins. “India will have to convince the other members that it isn’t [taking] a protectionist stance,” said Sukumar.
