The RCEP Minus China Strategy

India and New Zealand concluded negotiations on a Free Trade Agreement (FTA), and once implemented, India will have trade agreements with all Regional Comprehensive Economic Partnership (RCEP) countries except China. 

About Regional Comprehensive Economic Partnership (RCEP)

• Overview: The Regional Comprehensive Economic Partnership (RCEP) is a mega free trade agreement between ASEAN countries and five FTA partners.
• Composition: RCEP is a 15-country trade bloc comprising 10 ASEAN members– Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, and five partners– Australia, China, Japan, South Korea, and New Zealand.

Rationale behind India’s Exit from RCEP

• Strategic Misalignment: India found that RCEP did not adhere to its guiding principles, particularly regarding trade fairness and national interests, as highlighted at the Bangkok Summit (November 2019).
• Risk of Duty-Free Chinese Goods: Chinese products could enter India through other RCEP countries, such as Vietnam, with minimal processing or relabelling, making duty enforcement challenging.
• Threat of Market Flooding: An FTA with China would require tariff elimination, opening the door to a massive inflow of Chinese goods into India.
• Competitive Pressure on Domestic Industry: According to experts, Chinese manufacturing is highly efficient and low-cost, creating a risk of import dumping that Indian industries, including steel, engineering, and MSMEs, may not withstand.
• Potential Industrial Impact: Without protective tariffs, domestic firms could lose competitiveness, leading to factory closures and job losses.

Free Trade Agreement (FTA) Vs Asia Pacific Trade Agreement (APTA)

• Free Trade Agreement (FTA): Under an FTA, tariffs on most items are reduced to zero, resulting in high exposure to imports from the partner country. 
  • Example: The India–Australia Economic Cooperation and Trade Agreement (ECTA).
• Asia-Pacific Trade Agreement (APTA): APTA provides preferential trade with limited tariff reductions on selected items, that allows countries to retain control over most taxes while benefiting from trade preferences. 
  • Example: Both India and China are current signatories to APTA.

RCEP Minus China Strategy

• Core Idea: India maintains bilateral FTAs with 14 of the 15 RCEP members, deliberately excluding China to retain tariff sovereignty and preserve domestic policy space.
• Risk Management: By signing selective FTAs (excluding sensitive sectors like dairy and steel) with 14 members and keeping China under the limited APTA framework, India achieves market access while maintaining control over tariffs, exemplifying smart risk management.

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Recent and Ongoing Trade Agreements

• India–Australia ECTA: The India–Australia Economic Cooperation and Trade Agreement came into effect in December 2022. 
  • The agreement was an early-harvest deal, and negotiations are underway to expand its scope.
• India–New Zealand FTA: Negotiations on a free trade agreement with New Zealand, the final non-China RCEP country, concluded recently (December 22, 2025).

Conclusion

India’s approach reflects a preference for controlled liberalisation and strategic autonomy in trade policy, rather than blanket commitments that could expose the domestic economy to asymmetric competition.

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