Dhaka, Bangladesh
Economic isolation

OFF THE TRACK

Economic isolation

Govind Bhattacharjee

The Regional Comprehensive Economic Partnership (RCEP), a regional trade agreement involving ten ASEAN members and six of their neighbours ~ Australia, China, India, Japan, New Zealand, and South Korea ~ would account for half the world’s population and one-third of the global income. It would be the largest ever regional trade deal ever concluded ~ a deal that economists, Peter Petri from The Brookings Institution and Michael Plummer from Johns Hopkins, estimated as having the potential for global economic growth by close to $ 300 billion annually, if put in place by 2030. Negotiations for this massive trade deal which was first suggested by China in 2011 has been going on since November 2012. The final agreement was supposed have been signed by all the sixteen nations on November 4 in Bangkok, but India backed out at the last moment, with Prime Minister Narendra Modi stating clearly, “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.” He has very concrete reasons for saying so, though it is not sure if withdrawal was the best option for India. It was reminiscent of Donald Trump in 2017 withdrawing from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a 12-nation agreement covering not only trade but also labour standards, public sector undertakings and environmental protection, as against RCEP’s limited coverage offering only a gradual reduction or elimination of import duties among the partner nations. RCEP has been sneered as a “stapler”, signifying the wide divergence of interests among its members made to converge by the treaty that India considers unfavourable towards its own domestic interests. At the heart of India’s concerns is China, with which India ran a trade deficit of more than $53 billion in FY 2019. India rightly fears that any lowering of tariffs will make cheap Chinese goods swamp the markets in this country, killing domestic industries, apart from widening its yawning trade deficit with China. Not only China, but India also fears that its dairy farmers would not be able to compete with grain from Australia and milk and dairy products from New Zealand. Like China, these countries also enjoy an unbridgeable cost advantage over Indian industries due to their mechanisation of the farm and dairy sectors. Our civil society and Opposition parties have been unanimous in indicating the millions of possible job losses that might result, and not without logic. India ran a merchandise trade deficit with 11 out of the other 15 RCEP partners amounting to $107 billion in FY 2019. With ASEAN, it had signed a Comprehensive Economic Partnership Agreement (CEPA) in 2009. India also has bilateral free trade agreements (FTA) with Japan and South Korea and some members of ASEAN itself, like Malaysia, Singapore and Thailand. Under these treaties, both parties have agreed to eliminate import duties on most of the goods traded, often to India’s advantage.

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