After years of negotiations, India has decided not to join the China-backed mega Regional Comprehensive Economic Partnership (RCEP) over unresolved “core concerns”, with Prime Minister Narendra Modi saying the proposed deal would have an adverse impact on the lives and livelihoods of all Indians.

Modi conveyed India’s decision not to join the RCEP deal at a summit meeting of the 16-nation bloc on November 4, effectively wrecking its aim to create the world’s largest free trade area having half of the world’s population.

“The present form of the RCEP agreement does not fully reflect the basic spirit and the agreed guiding principles of the RCEP. It also does not address satisfactorily India’s outstanding issues and concerns. In such a situation, it is not possible for India to join RCEP agreement,” Modi said.

What is the RCEP?

The RCEP bloc includes the 10 ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and Australia, China, India, Japan, South Korea and New Zealand.

The RCEP negotiations were launched during the 21st ASEAN Summit in Phnom Penh in November 2012. The objective of launching the RCEP negotiations was to achieve a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement among the ASEAN member states and its FTA partners.

The agreement aims to cover issues related to goods, services, investments, economic and technical cooperation, competition and intellectual property rights.

If finalised, the RCEP would have become the world’s largest free trade area, comprising half of the world population and will account for nearly 40 per cent of the global commerce and 35 per cent of the GDP.

What were the concerns raised by India?

India has been raising the issue of market access as well as protected lists of goods mainly to shield its domestic market as there have been fears that the country may be flooded with cheap Chinese agricultural and industrial products once it signs the deal.

Several sectors including dairy, metals, marine products, electronics, chemicals, pharmaceutical, plastics and textiles have registered reservation on the proposed agreement.

India trades in more than 11,500 products. Certain sensitive sectors such as agriculture are mostly kept out of the purview of such agreements to protect the interest of farmers.

All the countries want India to eliminate customs duties on a maximum number of goods as the country’s huge domestic market provides immense opportunity for exports. But, the domestic industry has raised serious concerns over the presence of China in the grouping.

Sources said the unresolved issues included inadequate protection against import surge, lack of credible assurances to India on market access and non-tariff barriers, possible circumvention of rules of origin by certain countries and insufficient differential with China on trade.

Commerce and Industry Minister Piyush Goyal said the RCEP agreement was against India’s economic interest and national priorities. He said that India has consistently stood its ground to uphold its demands particularly over the trade deficit, stronger protection against unfair imports and better market opportunities for domestic goods.

How did traders react to the decision?

Industry, traders and farmers appreciated the Modi government’s decision not to join RCEP.

The Confederation of All India Traders (CAIT) said Chinese products, which are very low priced and of substandard quality, are creating a disequilibrium in Indian markets.

CAIT secretary-general Praveen Khandelwal appealed to the prime minister that after “this landmark move”, the government should now work diligently towards creating a more conducive environment for retail trade in India and also erase all anomalies and disbalances created by e-commerce companies.

The dairy industry had expressed apprehension that the 16-nation trade pact would severely impact dairy farmers because of cheaper imports from Australia and New Zealand.

Dairy major Amul MD R.S. Sodhi described the move as daring and landmark which will protect the interest of 10 crore farmers engaged in the production of milk and related products.

FICCI president Sandip Somany said the chamber fully supports the PM’s decision against joining the RCEP, as India’s several concerns remain unaddressed and various issues are unresolved so far in the proposed deal under negotiation.

What will happen to the deal?

After India opted out, the leaders of 15 RCEP countries issued a statement resolving to sign the free trade pact next year.

The RCEP countries said India has significant outstanding issues, which remained unresolved. “We noted 15 RCEP participating countries have concluded text-based negotiations for all 20 chapters and essentially all their market access issues and tasked legal scrubbing by them to commence for signing in 2020. All RCEP participating countries will work together to resolve these outstanding issues in a mutually satisfactory way,” according to the statement.

India’s final decision will depend on the satisfactory resolution of these issues, it said, keeping alive the hope of New Delhi’s return to the fold.

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