What does the absence of India mean for the world's largest trade pact?

BANGKOK: Although India withdrew at the last minute, China and 14 other countries agreed this week in Bangkok the plans for what could become the world's largest trade agreement: Regional Integral Economic Association ( RCEP ).

Its goal is to sign it next year to begin freeing trade between members that include the Association of 10 Southeast Asian Nations (ASEAN), Japan, South Korea, Australia and New Zealand.

What will RCEP do?

The exact details have not yet been published, but will progressively reduce tariffs in many areas.

Its sponsors say that, just as important, it will allow companies to export the same product to any part of the block without having to meet separate requirements and complete separate documents for each country.

For a producer of goods it is huge, said Deborah Elms of the Asian Trade Center. What we don't have now is much Asian trade for final markets in Asia. This configures it. ”

It gives companies an incentive to build supply chains within the region, even if they export abroad.

The agreement also touches the services and protection of intellectual property.

Does not

RCEP is not seen as such a “high quality” trade agreement as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), among 11 Asia-Pacific countries, because it does not cover or harmonize as much.

Tariffs are agreed between countries and not in all areas. For some countries, delicate topics such as agriculture will not be touched. It lacks provisions to liberalize state enterprises or protect workers and the environment.

What economic impact will it have?

Even once signed, the implementation would take months to begin and years to complete. Complexity makes accurate calculations difficult, economists say.

The 15 participating countries make up nearly a third of the world’s people (it would have been nearly half with India). RCEP members account for nearly a third of global domestic product, with India’s departure making less of a difference.

What does the absence of India mean?

India can join later and other countries, especially Indonesia and Japan, have been pushing for it to stay. But the prime minister Narendra Modi He was emphatic in rejecting the terms that the other members agreed.

While leaving India devalues ​​the pact, it also removes the biggest obstacle to its completion, said Anthony Nelson of Albright Stonebridge.

India's biggest concern is a wave of cheap products from China and elsewhere. For other countries, losing India means that they will not enter a market where it is very difficult to enter, but neither will they be able to include India so easily in supply chains.

Supporters of the agreement argue that India will lose the investment while its consumers will pay more than they should.

Southeast Asian countries also see India as a counterweight to China's growing dominance.

It is a missed opportunity for India, said Pavida Pananond of Thammasat University in Bangkok.

What does it mean for world trade?

Just achieving the agreement, even without India, is a boost for multilateral trade agreements on the bilateral type favored by the president of the United States, Donald Trump.

Trump’s tariff-raising trade war with China gave extra impetus to push ahead with RCEP, which had progressed only sluggishly since 2012.

Does this strengthen China against the United States?

China is already the biggest source of imports and destination of exports for nearly all the RCEP countries.

But at a time of growing concerns about the power of China, it consolidates its position more firmly as an economic partner with East and Southeast Asia. It will also be better able to shape the commercial rules of the region.

The additional symbolism for the rise of China at the expense of the United States came from the agreement that was agreed along with an ASEAN summit to which the Trump administration sent a lower-ranking delegation than all other countries.

In a rebuff to the Americans, they only met three of the region's leaders instead of the entire group of 10.

“China measures up commendably against the US diplomatic faux pas and India’s RCEP withdrawal,” said Siew Mun Tang of the Yusof Ishak Institute in Singapore.