On Monday, Commerce Minister Suresh Prabhu met his Chinese counterpart in New Delhi as part of the 11th India-China dialogue on economic relations, trade, science and technology. Beijing has reportedly sought to provide an impetus to talks on the Regional Comprehensive Economic Partnership or RCEP, a giant trade and economic agreement encompassing the member states of the Association of Southeast Asian Nations — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — as well as Australia, Japan, South Korea and New Zealand, besides India and China. Taken together, these countries account for over a quarter of world trade. If indeed the Chinese lobbying has given new life to India’s participation in the RCEP talks, then it is a welcome development. The government has, of late, demonstrated its wish to turn a page in its relationship with the government of the People’s Republic of China, moving on from the friction and war of words that reached a crescendo during the Doklam confrontation last year.
To be sure, there was nothing per se wrong with India’s stance on RCEP: The country would give in on trade liberalisation for goods, provided the others gave in on trade liberalisation for services. The US made an issue of trade in services during the Uruguay round, wanting to bring it into a trade discussion that in all previous rounds had focused on trade in goods. India in RCEP tried to do what the US pulled off with TRIPs in the Uruguay round. It did not work, but there was nothing wrong in trying. Unfortunately, the others were not willing to buy this and many of its partners were openly wondering whether it was worthwhile to move ahead on the RCEP without India, much as the Trans-Pacific Partnership or TPP was recently signed without the United States.
From that perspective, it’s perhaps time for India to move on. After all, trade agreements have positive effects on consumers and on competitiveness of producers by exposure to foreign competition. Naturally, there will have to be anti-dumping protection built in, given concerns — widely shared among other RCEP countries — about Chinese overcapacity. But if India is to develop its exports and bring Make in India to fruition, it should not ignore global supply chains. The RCEP countries are the heart of low-cost manufacturing and trade in the global economy, and also include major resource-rich countries such as Australia and services and financial hubs such as Singapore. This is a significant opportunity for India to embed itself in the world economy and boost its exports.
Many ministries in India reportedly expressed concern about the potential effects of the RCEP in a recent meeting of secretaries organised by the Prime Minister’s Office. An agreement with Australia or New Zealand will, for example, require India to open up its dairy sector to competition, and the agriculture ministry is resolutely opposed to this. Other sectors that are concerned about the agreement include the pharmaceutical industry. India and Singapore have been at loggerheads about services trade. Concerns regarding the effect on producer sectors are worth noting, but a better approach would be to ask the appropriate ministries what reforms are required in the sectors concerned to increase competitiveness.