India to host key RCEP meeting

• India would host the negotiations for mega trade deal RCEP which aims at liberalising norms for trade in goods and services and boost investment among 16-member countries.
• Hyderabad has been chosen to host the meeting.

About RCEP:

• The Regional Comprehensive Economic Partnership (RCEP) negotiations were launched by Leaders from ASEAN and ASEAN's free trade agreement (FTA) partners in the margins of the East Asia Summit in Phnom Penh, Cambodia on 20 November 2012
• The RCEP is an ASEAN-centred proposal for a regional free trade area, which would initially include the ten ASEAN member states and those countries which have existing FTAs with ASEAN – Australia, China, India, Japan, Republic of Korea and New Zealand. The RCEP will build on and expand Australia’s existing FTA with ASEAN and New Zealand, AANZFTA. It also complements Australia’s participation in bilateral FTAs with individual countries and the recently concluded Trans-Pacific Partnership Agreement (TPP).
• The 16 RCEP participating countries account for almost half of the world’s population, almost 30 per cent of global GDP and over a quarter of world exports.
• The objective of launching the RCEP negotiations is to achieve a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement that will cover trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement and other issues.

Analysis:

• For India, the RCEP offers ample opportunity. There are three immediate benefits that its trade policymakers should note. First, the RCEP agreement would complement India’s existing free trade agreements with the Association of South East Asian Nations and some of its member countries, as it would deals with Japan and South Korea.
• It can address challenges emanating from implementation concerns vis-à-vis overlapping agreements, which is creating a “noodle bowl” situation obstructing effective utilization of these FTAs.
• In this respect, the RCEP would help India streamline the rules and regulations of doing trade, which will reduce trade costs.
• It will also help achieve its goal of greater economic integration with countries East and South East of India through better access to a vast regional market ranging from Japan to Australia. The RCEP can be a stepping stone to India’s “Act East Policy.”
• This is particularly important because India is not a party to two important regional economic blocs: the Asia-Pacific Economic Cooperation and the Trans-Pacific Partnership. The RCEP would enable India to strengthen its trade ties with Australia, China, Japan and South Korea, and should reduce the potential negative impacts of TPP and TTIP on the Indian economy.
• Second, the RCEP will facilitate India’s integration into sophisticated “regional production networks” that make Asia the world’s factory. The RCEP is expected to harmonize trade-related rules, investment and competition regimes of India with those of other countries of the group. There would be a boost to inward and outward foreign direct investment, particularly export-oriented FDI.
• Third, India enjoys a comparative advantage in areas such as information and communication technology, IT-enabled services, professional services, healthcare, and education services.
• In addition to facilitating foreign direct investment, the RCEP will create opportunities for Indian companies to access new markets. This is because the structure of manufacturing in many of these countries is becoming more and more sophisticated, resulting in a “servicification” of manufacturing. India is well placed to contribute to other countries in RCEP through its expertise in services, not only consolidating the position of the region as the world’s factory but also developing it as the world’s hub for services.
• It is vital for India to ensure that the RCEP is truly comprehensive and does not just focus on market access for goods. Keeping these benefits in mind, India will need second-generation reforms of its domestic economic policies, including those that reform its factor markets, to make its trade more competitive. These reforms will help India better access other markets, and will mitigate some of the repercussions for the Indian economy of the other two mega regionals.

By: Vishal