Biswajit Dhar

India exits RCEP 2020 | What Next ?

Biswajit Dhar is Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi

THE OBJECTIVES

• THE TRIGGER : The initiative to establish RCEP was taken by the member-states of the Association of Southeast Asian Nations (ASEAN) in 2011.
• AN ASEAN-LED PROCESS : That would allow ASEAN members to “engage interested ASEAN FTA partners in establishing a regional comprehensive economic partnership agreement”.

SOURCES : THE HINDU

THE GUIDING PRINCIPLES

• The “Guiding Principles and Objectives” , the de facto spoke of “progressively eliminating tariff and non-tariff barriers on substantially all trade in goods”
• The aim was to achieving “high level of tariff liberalization through tariff elimination on a high percentage of both tariff lines and trade value”.

SHARED VALUES

• MORE REFINED ENGAGEMENT : The ASEAN agreed for high quality agreement that would “substantially eliminate restrictions and/or discriminatory measures”.
• CORNERSTONES : RCEP negotiations on a framework for investment “to cover the four pillars of promotion, protection, facilitation and liberalization”.
• A COMPREHENSIVE AGENDA : It was, therefore, quite clear that the RCEP participating countries (RPCs) had given themselves an ambitious agenda of trade and investment liberalisation.

A COMPARISON WITH THE TPP

• BACKSEAT DRIVERS : Several commentators have observed that RCEP is not likely to usher in comprehensive economic integration in East Asia.
• SPECULATIONS : It appears that this view has arisen by comparing RCEP with the Trans-Pacific Partnership (TPP), which would have been the world’s most extensive FTA in terms of market opening.
• MARKET CYNICISM : But there have always been doubts whether the TPP was promoting “free trade” or a highly discriminatory “managed trade”.
• TRADE CONCERNS : The TPP included several regulatory issues including the controversial labour and environmental standards.

• LIBERAL MARKET : In contrast, RCEP includes traditional market access issues, following the template provided by the World Trade Organization (WTO).

SOURCES : GZERO

• MULTI-ANGULAR REFORMS : RCEP also includes issues that are currently being discussed by several groups of WTO members as a part of their agenda to “reform the multilateral trading system”.
• INITIAL ALTERATIONS : The issues like electronic commerce, investment facilitation, were first step towards a multilateral agreement on investment.
• TRUST IN SMALL ENTERPRISES : RCEP is enabling environment for the participation of small and medium enterprises in global trade .
• LIGHTNING MOMENTUM : While India has been opposed to the inclusion of all these issues in the WTO, the formation of RCEP could provide serious momentum.

PROGRESS MADE AND PROBLEMS

• MAKING ADVANCES : In case of trade in goods, RCEP members have taken big strides towards lowering their tariffs.

• LONG TERM COMMITMENT : The 10th year of implementation of RCEP, China also committed to reduce tariffs on almost 90% of its imports from these two RCEP members to 5% or less.
• EXCLUSION LIST : Less than 4% of its products figure in the exclusion list, implying that their tariffs will not be reduced.
• AGGRESSIVE MARKETS : Vietnam’s tariff offers to China look similar: average tariffs would drop from 10% in 2014 to 2% by the 10th year, and nearly 90% of its imports from China will be tariff-free.

• MAXIMUM EXPORT SUBSIDIES : Malaysia has had the lowest levels of protection and this will be reduced as it implements its commitments under RCEP.
• COMMERCIAL LIBERALIZATION : In contrast to their market access commitments under goods, commitments made by RCEP members for services trade liberalisation do look shallow in terms of the coverage of the sectors.

• LEVEL PLAYING FIELD : RCEP members have allowed relatively limited market access only to individuals in managerial positions or those having high levels of skills.
• UNFAIR TRADE PRACTICES : The areas of investment and electronic commerce, in both of which India had expressed its reservations on the template adopted during RCEP negotiations, the outcomes are varied.
• The text on investment rules shows that it is a work-in-progress.
• DISPUTE REDRESSAL MECHANISM : The rules on dispute settlement procedures are yet to be written in.

• ELECTRONIC COMMERCE : RCEP members have agreed not to “prevent cross-border transfer of information by electronic means where such activity is for the conduct of the business of a covered person”.
• PRIVACY AND PROTECTION :  A member can deny transfer of information if it is necessary to “achieve a legitimate public policy objective or unjustifiable discrimination or a disguised restriction on trade”.