By refusing to join RCEP, India is also saying it doesn't trust China

This article is occasioned by a link sent to me by the former editor of the Hindu Business Line and a very good friend, D Sampath Kumar (this link). It tells you why India was absolutely right in not joining RCEP.  Without India RCEP is as big a flop as that belt road thing has been. 

There has been a lot of uninformed and uni-dimensional criticism of India’s decision not to join. But as the article in the link above shows, the critics forget a very important aspect of the decision and it is that trade, amongst other things, is also about trust which is a byproduct of ethics. That’s why India, in refusing to join RCEP, is also saying it doesn’t trust China to abide by the rules.

The record of China’s trading and manufacturing ethics suggest that it has none, at least not as the rest of the world understands ethics. There are many other stories as well about how utterly unscrupulous China is. For them the end justifies all means which means coercive state power and military muscle. This is crucial to understand because for China RCEP is a means to get access to the Indian market.  

It is in this context that I think the critics are wrong when they seek to link joining RCEP and Indian economic reforms. It is being propounded is that RCEP would force India to reform the laws that govern Indian industry. But there is only a tenuous connection between the two. 

Besides, as my friends in industry and business who are directly competing with China tell me, you can’t beat the Chinese because they cheat at the macroeconomic policies level — currency manipulation for example — as well as at the micro level by sometimes even stealing your property, intellectual and physical. 

Hence the question I am asking the critics is this: do you seriously believe that even after major economic reforms, Indian industry can compete with China? For that matter can any country that believes in a modicum of fair trading?

But we do need reform

This is not to say that we don’t need reform. Far from it. Instead, it is to say that joining RCEP and internal reform are quite distinct and should not be confused — unless, of course we are willing to have a political and administrative system like China’s. 

This, in fact, highlights the other big mistake that the critics are making. Our constraints are not merely economic. They are also constitutional and political. They are what we have. So even if joining RCEP would lead to a lot of economic reform, what political and constitutional reforms would have to precede them? No one bothers to ask this question. 

Take just one example: can we repeal all labour laws? Even if the centre does so, can it ban the states from having their own labour laws? How would that square with the right to form associations? Or can we do away with its rights-and-entitlements based approach to governance so that labour can be made as totally subservient to capital as it is in China? 

If the answers to such questions are no, the critics should give us all a break. Trade, as someone once said, is 90 percent political and only 10 percent economic.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel