Upon leaving RCEP, has India left Asia?
NEW DELHI: While India's decision on Monday to stay out of RCEP It may have had some economic reason, the geopolitical ambitions of India have been affected. At the moment, China seems to be the big winner here, and with its trade and supply chain networks that are linked to ASEAN, it is looking to become the dominant power without control of Asia.
Evan Feigenbaum of Carnegie Endowment for International Peace (CEIP) tweeted soon after India's decision became public, “India seems to be dropping out of RCEP, meaning we are likely to have two large trade and investment“ blocs ”—TPP and RCEP —setting rules and standards for the economic area in this region but with NEITHER the US nor India included. US and India with a new thing in common — not necessarily a good one: now firmly united in being outside both TPP and RCEP. So, we get pan -Asian rules/standards without the “Indo” and without the giant economy across the “Pacific.” Can you have “Indo-Pacific” when you have neither? ”
India's decision was a difficult and deliberate decision at the highest level in government during the last months. It is unlikely that India's decision to withdraw at 11 am will send a positive signal in the region. There have been concerns that India's Indo-Pacific policy would be adversely affected because it is no longer at the trade table. This perception could be gaining ground in some of these countries, which means that India's reach will have to be more substantive in the coming days.
India will now seek bilateral trade agreements with key countries in the Asian region. The first is likely to be a trade agreement with Australia, although it may not be New Zealand. The sources said that India identified Indonesia, Vietnam, Australia, Japan and Singapore as its key economic partners in this region. The Asean FTA of India will continue, although even that is being renegotiated, as are those of Thailand and even South Korea. But the main sources indicated that in Asia, India would prefer to seek bilateral agreements for some time, as did Trump in the United States.
India’s presence within RCEP was something desired by almost all its Asean partners and Japan. Japanese prime minister Shinzo Abe personally intervened with Modi to persuade him to join RCEP. Other Asean countries have repeatedly weighed in with India to be part of the deal, to balance China.
India has been negotiated RCEP for the past seven years, out of which over five years has been in the Modi-led government. The Indian government has been conflicted about the RCEP for years, making the negotiations a less than optimum exercise. Meanwhile, the global economy has changed color, the Indian economy is struggling, which affects the way Indian governments see trade and investment as well.
But as the negotiations progressed, it became clear to Indian negotiators and their political leaders, many of whom spoke with the TOI, which was an unequal FTA between India and China, where China has refused to accept any of the big problems that India had. He was not helped by the fact that Indian officials negotiated very badly, making concessions that were indefensible, officials said.
The stumbling blocks included, according to official sources, inadequate protection against import surges, insufficient differential with China, possible circumvention of rules of origin and keeping the base year as 2014, nor was there any credible assurances on market access and non-tariff barriers. As recently as the Mahabalipuram informal summit between Xi Jinping and Modi, Indian officials briefing the media quoted the Chinese president agreeing to address India’s RCEP concerns. That too fell by the wayside.
We made a mistake, we should have left long before round 29, said an important government source. He said that India was, in many ways, the strange one: all ASEAN countries are part of the global supply chains, with more sophisticated systems than India. None of these countries have a problem with the results of China as India does, because at the end of the day, India is basically a big market. India could have taken steps to improve its systems, regulatory mechanisms and infrastructure behind its borders to become more trade friendly, but it did not.
Top level sources however said that signing the RCEP at this point would have forever kept India as a strategic subsidiary to China. “We cannot be showing strategic clarity on China in the security sphere but make ourselves a junior player in economy and trade,” sources said. “Today is India’s growing-up moment.”
The way in which India advances from here will determine its foreign policy in the most dynamic region of the world.