India is missing from the world’s biggest trade bloc which has just been formed – 15 countries representing 2.2 billion people have signed on to a Regional Comprehensive Economic Partnership (RCEP). Talks on RCEP began in 2012 and it has now created a bloc which accounts for about one third of the world economy.
This is a massive new initiative for global trade.
India and the USA have missed out – India because of concerns for farmers produce, and the USA because President Trump pulled the pin on the concept.
India is the mystery case in the region because opting out of RCEP is not going to help its economy. Concerns over lower tariffs hurting local producers won the day and India moved out of the deal.
Did India also withdraw because the relations between India and China are sour, with border disputes and other issues on the rise?
But India could ultimately join RCEP – the doors for India to join the bloc will remain open in future, according to the participant countries.
Otherwise, India looks like being one of the two big losers in this move.
The RCEP group is composed of the 10 Southeast Asian (ASEAN) countries along with China, South Korea, Japan, New Zealand and Australia.
Vietnam “hosted” the final deal online and said the deal will help to lower trade tariffs between the participant countries, over time, and is less comprehensive than the Trans-Pacific Partnership (TPP).
“RCEP will soon be ratified by signatory countries and take effect, contributing to the post-COVID pandemic economic recovery,” said Nguyen Xuan Phuc, prime minister of Vietnam.
The actual legacy of President Donald Trump’s “America First” withdrawal from multilateralism and deals like TPP and RCEP could be a declining US role in world trade.
In contrast, China could be the big winner – experts say that this pact is a testament of China’s strong influence in the region.
The RCEP will lower or eliminate tariffs on various goods and services, although the scope of the agreement—essentially an extension of free trade under existing frameworks—is limited.
So, what is the biggest benefit of RCEP? The pact will create so-called rules of origin, which make it easier for companies to set up supply chains spanning multiple countries.
This is super important – it will be much easier to manufacture and sell goods in the region once RCEP comes into force.