Recently, U.S. President Trump caused the G-7 meet in Quebec to end with deep fissures within the Western alliance.
In this context, India must re-examine its position on global and regional trade architecture swiftly to leverage its growth potential.
What is the significance of RCEP?
Considering the evolving world trade dynamics, simply relying on WTO or on existing trade connections is clearly an ineffective approach.
Hence, deals like “Regional Comprehensive Economic Partnership” (RCEP), could prove critical for countries.
Notably, RCEP is considered a major economic integration plan involving “ASEAN-10, China, South Korea, Japan, Australia, New Zealand and India”.
Significantly, well trafficked trade routes pass through Southeast Asia, and the region’s economies are growing and vibrant.
The RCEP grouping is also diverse as it includes both commodity exporters such as Australia and Indonesia and services hubs such as Singapore.
Yet, despite these obvious advantages, Indian officials have expressed doubts on whether the RCEP will actually be in India’s interest.
But, India needs to recognize that, if the RCEP deal proceeds without India, then, being left out would hit India’s trade competitiveness in the region.
Should India go ahead with RCEP?
The main concern for India about RCEP is the involvement of China, which already accounts for 60% of India’s burgeoning trade deficit.
While the fear of cheap Chinese imports is real, it shouldn’t be allowed to cripple the entire trade negotiations.
Rather, India must reserve its right to place emergency anti-dumping measures if excess influx tends to occur.
Additionally, studies show that Indian exporters aren’t taking full advantage of even the currently existing FTAs, which is a concern.
Hence, better educating exporters and aiding them to access new markets that open up to them would be a better alternative than chucking trade deals.
The rise of protectionism in U.S. (one of the few countries with which India has a trade surplus), implies that India needs to diversify its export markets.
As other markets must be found, RCEP is no longer an optional for India, and hence shouldn’t be overlooked.
What is the way ahead?
India needs to recalibrate from its current short-sighted approach, if it has to reap the potential of further integrating into the global system.
India’s exports as a proportion of its GDP have stagnated, and for India to revive its exports and create jobs at home, it must reform structurally.
Transformation of the domestic productive base and rendering it more competitive and export-oriented is the only rational option.
