Answer

The RCEP, one of the world’s largest free trade agreements, promotes economic cooperation among ASEAN countries and partners like Australia, China, Japan, South Korea, and New Zealand. India withdrew in 2019 from RCEP negotiations, citing concerns over domestic industry and trade imbalances, especially with China. However, evolving global trade dynamics suggest India may reconsider alignment with its economic and strategic interests.

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Factors India Should Consider in Re-evaluating its Stance on RCEP Amid Changing Global Trade Dynamics

• Shifting Global Supply Chains: With companies diversifying supply chains under the “China Plus One” strategy, India could benefit by joining RCEP to attract more manufacturing investments, competing with members like Vietnam.
  For example: Vietnam’s RCEP membership has enhanced its role in global supply chains, drawing in investment that India might otherwise attract.
• Strategic Indo-Pacific Engagement: Aligning with RCEP could support India’s Act East Policy and strengthen its presence in the Indo-Pacific, enhancing its role in regional trade and security.
  For instance: India’s Look East to Act East initiative prioritises economic and strategic partnerships with Southeast Asia, aligning with RCEP’s objectives.
• Growing Regional Integration: As RCEP members increase regional collaboration, India’s absence may isolate it from key regional markets and trade benefits, limiting its integration in Asia-Pacific trade networks.
  For instance: RCEP members like Japan and South Korea benefit from tariff reductions and increased market access that India currently lacks.
• China’s Increasing Economic Influence: RCEP enhances China’s trade ties with the region, and India’s participation could balance China’s dominance by leveraging alliances with Japan and Australia.
  For instance: With China as the largest trading partner for most RCEP nations, India’s entry could serve as a counterweight, promoting regional stability.
• Domestic Sector Competitiveness: Membership could incentivize reforms in India’s manufacturing sector, encouraging innovation and productivity enhancements to meet RCEP standards.
  For instance: RCEP membership could accelerate reforms, making sectors like electronics and textiles more competitive in global markets.
• Access to New Markets and Technology: RCEP participation would offer access to advanced technology and expanded export markets, critical for India’s growth in sectors like pharmaceuticals and IT.
  For instance: Japan and South Korea lead in technology that could bolster India’s industrial capabilities if engaged strategically.
• Long-term Economic Stability: Engaging in RCEP may promote greater economic resilience through diversified trade partnerships, which can stabilise India’s trade during global uncertainties.
  For example: ASEAN countries saw increased trade resilience through RCEP during the COVID-19 pandemic, an advantage India could gain by rejoining.

Factors India Should Consider in Re-evaluating its Stance on RCEP Given Emerging Protectionism

• Domestic Industry Protection: Protectionist trends demand safeguarding vulnerable sectors like agriculture and small-scale industries before joining RCEP, which may otherwise expose them to foreign competition.
  For example: Indian dairy and manufacturing industries raised concerns over cheap imports from China under RCEP, potentially threatening their viability.
• Tariff Flexibility: RCEP’s structure may limit India’s ability to adjust tariffs, potentially widening its trade deficit, especially with major economies like China.
  For example: India’s trade deficit with China has consistently exceeded $50 billion over the years, and joining RCEP without tariff flexibility could exacerbate this gap.
• Stable Geopolitical Relations: India’s RCEP involvement must weigh relations with China, as stable borders are crucial for sustainable trade.
  For instance: Bilateral tensions over the LAC influence India’s stance, as unresolved border issues impact its approach toward economic cooperation.
• Domestic Manufacturing Competitiveness: To handle RCEP competition, India must address min manufacturing, ensuring that it can sustain itself against RCEP’s advanced economies.
  For example: The Make in India initiative (2014) focuses on building competitive manufacturing sectors, a necessary step before rejoining RCEP.
• Impact on Agricultural Sector: As a major employer, agriculture requires protection from low-cost imports that may enter under RCEP, impacting local farmers’ incomes.
  For example: India’s previous FTAs with ASEAN saw increased imports in sensitive sectors, which could intensify under RCEP.
• Alignment with Domestic Trade Policies: India’s broader economic policies, such as Atmanirbhar Bharat, emphasise self-reliance, necessitating a balance between external trade and domestic industry development.
  For instance: RCEP’s requirements may challenge Atmanirbhar Bharat’s goals if not aligned with India’s policy of self-sufficiency.
• Global Trade Uncertainties: The rise of protectionist policies globally suggests India should proceed cautiously to ensure its involvement in RCEP doesn’t compromise trade autonomy.
  For example: Amid U.S.-China trade conflicts, protectionist policies indicate a need for India to prioritise domestic interests alongside any RCEP commitments.

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As global trade dynamics shift and protectionism rises, India’s re-evaluation of RCEP membership is a strategic decision with far-reaching implications. By carefully weighing factors such as domestic industry protection, geopolitical relations, and regional trade benefits, India can determine the best path forward. Joining RCEP with a balanced approach could enhance India’s role in the Asia-Pacific, align with long-term economic goals, and strengthen its global trade position.