What is RCEP?
Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) b/w the ten member states of the Association of Southeast Asian Nations (ASEAN), viz. Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, and the six states with which ASEAN has existing free trade agreements, viz. Australia, China, India, Japan, South Korea and New Zealand.
RCEP was set up in November 2012 at the ASEAN Summit in Cambodia.
Cumulatively, the grouping of 16 nations includes more than 3 billion people and has a combined GDP of about $17 trillion. It accounts for about 40% of world trade.
Key Features of the RCEP
The RCEP seeks to achieve a modern and comprehensive trade agreement among members. The stated goal of the negotiations is to “boost economic growth and equitable economic development, advance economic cooperation and broaden and deepen integration in the region through the RCEP.”
It would be a powerful vehicle to support the spread of global production networks and reduce the inefficiencies of multiple Asian trade agreements that exist presently.
At the launch of negotiations in 2012, the leaders of each relevant country endorsed the “Guiding Principles and Objectives for negotiating the Regional Comprehensive Economic Corridor”. The key points of the document are as follows:
(A) Scope of Negotiation
RCEP will cover trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement and other issues.
(B) Negotiations for Trade in Goods
Negotiations should aim to achieve the high level of tariff liberalisation, through building upon existing liberalisation levels b/w participating countries.
(C) Negotiations for Trade in Services
The RCEP will be comprehensive, of high-quality and consistent with WTO rules and all service sectors will be subject to negotiations.
(D) Negotiations for Investment
Such negotiations will cover the four pillars of promotion, protection, facilitation and liberalisation.
(E) Participating Countries
Participant will be ASEAN members and FTA partners. After the completion of the negotiations, countries other than 16 members may join.
What is the significance of RCEP for India?
- From India’s point of view, the RCEP presents a decisive platform which could influence its strategic and economic status in the Asia-Pacific region and bring to fruition its “Act East Policy.”
- 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. [India is not party to two major trade agreements: Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (TTIP)]
- The RCEP agreement would complement India’s existing free trade agreements with the ASEAN and some of its member countries. This consolidation 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.
- Gets India closer to ASEAN
Clubbing with the ASEAN has been a principal policy priority for both China and India. At present, while China has clubbed with the ASEAN+1, ASEAN+3 and ASEAN+6, India is clubbed only under the ASEAN+6 framework.
- 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.
What are the disadvantages of RCEP for India?
- India is known as the ‘pharmacy of developing countries’ because it supplies cheap generic medicines to them. India is able to do so because of favourable data exclusivity norms. However, Japan and South Korea have been pressurising the member nations of the group to extend the data exclusivity time. If this happens, people have to wait for another extended years to get access to generic medicines.
Data exclusivity is a kind of intellectual property protection wherein clinical trials and other data submitted by an originator drug company cannot be used or relied upon by a drug regulatory authority to approve generic version of that drug for a certain period of time.
- Study by Commerce Ministry indicates that it can lead to a revenue loss of 1.6% of the GDP.
- Joining the bloc can result in cheaper imports from China as China offers low price and better quality.
- Competition with Indonesia and Philippines can reduce the benefits of service trade within the bloc.
- Domestic issues may arise due to such alliance such as harm domestic manufacturing, leather industry etc.