India opting out of RCEP is not an act of courage but cowardice

Topics RCEP | RCEP deal | Asain trade

I travelled for one such meeting (summit with ASEAN) to Cambodia in the PM’s special plane (the year was 2003). During the flight Vajpayee asked me whether I had seen the speech which had been prepared for him. The PMO used to prepare his speeches based on inputs received from various ministries, specially the ministries of commerce and external affairs. The final version was not shown, even to me, and was a trade secret of the PMO. So, I frankly told Vajpayee that I had not seen the final draft.”

“He immediately told his officials to show it to me. ‘It is a good draft, but what is news worthy in the speech?’ I asked the PMO officials, who looked at me in surprise. I told them that ASEAN already had free trade agreement (FTA) with China, Japan and South Korea, which were its summit partners. Should India as the fourth summit partner not offer to have an FTA with ASEAN? The suggestion was accepted by Vajpayee and commerce secretary Deepak Chatterjee, who was on the same flight, was asked to draft a few sentences to include the offer in Vajpayee’s speech. As expected, it became the highlight of his address.”

This is an extract from my recently published autobiography Relentless and I am quoting it here to emphasise that both Vajpayee and I were very keen to expand India’s trade and economic relations with all friendly countries in the world while at the same time protecting and safeguarding our core national interests. When I took over as minister for external affairs I found to my horror that we were nowhere compared to China when it came to trade, specially as far as the developing countries of Asia, Africa and Latin America were concerned. So, if China’s total annual trade with country X were three billion US dollars ours would be three million dollars. Since trade and economic relations formed an important point of the agenda of my discussions with my counterparts from these countries or their regional groupings, I would explore all avenues to augment them. I discussed the state of affairs with Vajpayee and given the confidence we had in our own economy, it was decided that we should freely offer to conclude preferential and free trade agreements with regional trading blocs and the larger countries. India would deal with the world with a newfound confidence and self-assurance. And our confidence was not misplaced. 

India had stood up and squarely faced the challenges posed by the opening up of the Indian economy after the liberalisation of 1991. Ten years later came a bigger challenge when under the WTO agreement India had to remove all quantitative restrictions (QRs) with effect from April 1, 2001. As finance minister I had to make an announcement to this effect in my Budget speech of February 28 of that year. I recall with some amusement today the apprehensions which existed in certain quarters of our business community then. A senior political leader came to see me with a delegation of the poultry industry. They told me that US was sitting on huge mountains of frozen chicken legs waiting to export them to India and how its unrestricted imports will ruin the poultry industry in India. A group of businessmen from the two-wheeler industry warned me that China had already stocked lakhs of two-wheelers in the customs free zone of Dubai and was waiting to ship them to India and how that would destroy the two-wheeler industry in India. Similar fears were expressed about apples and dairy products from Australia and New Zealand and any other items of imports from various other countries. Indian industry was in the grip of an all-pervading panic.

QRs had to go on April 1, as it was a sacred international commitment. I took the concerns of Indian industry and agriculture on board and and made whatever provisions were necessary and legally feasible to safeguard our interests. A special cell was set up in the ministry of commerce to monitor the imports of sensitive commodities and products into India. We were ready with other measures too to meet any surge in imports of sensitive items. But we survived; Indian industry and agriculture once again stood up and faced the challenges boldly. It helped them come of age.

Illustration: Binay Sinha

I was therefore disappointed when India decided to opt out of the RCEP. It is not an act of courage but of cowardice. We had all the time in the world to negotiate and get a good deal for ourselves. After all, did we not do so during the more difficult negotiations in the Doha Round or even later WTO negotiations? We cannot wear our negotiating failure as a badge of honour, can we?

RCEP embraces 15 countries, the original 10 of ASEAN and its summit partners, namely, South Korea, Japan, China, Australia and New Zealand. India is the other summit partner of ASEAN and its second largest. Goh Chok Tong, then prime minister of Singapore had once compared ASEAN to an aircraft of which India and China were the two wings. That truly represents the importance of India for ASEAN and the whole Indo-Pacific. Today, we as one of the wings of the ASEAN aircraft have decided to voluntarily detach ourselves from that aircraft.

The 15 countries of RCEP together account for 3 billion people and 20 per cent of the global GDP. Manmohan Singh had once described the area extending from Japan to India as an ‘arc of prosperity’. It is tragic that the Congress party today is competing with the ruling party and others to claim credit for India staying out of the RCEP. The government of course is claiming it to be an act of courage of a strong prime minister. The fact of the matter is that by opting out of the RCEP, India has shot itself in the foot and missed a golden opportunity to be an important player in the affairs, not only of this region but globally.

The argument that India would have had to play second fiddle to China under this arrangement is completely misplaced, as is the belief that it would have led to an upsurge in imports from China. For the record, our current trade deficit with China is not because of some FTA we have with them. It is the result of our own deficiencies and if there are any trade curbs that China has in place for imports from India, it is the duty of our negotiators to have them removed. There are strong rules in place about the country of origin and therefore the fear that China would have inundated us with imports through third countries is also misplaced. So is the view that an FTA with the US could make up for it. The fact of the matter is that some people in India are forever afraid of coming out of their mother’s womb. That is not the sign of a strong nation which is willing to go out and meet the world.
/> The author is a former Minister of Finance



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