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Rationalizing India’s Re-Think On RCEP In The Post-Pandemic World – Analysis

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It may be a coincidence that India has once again, been nudged to join the Regional Comprehensive Economic Partnership (RCEP) by ASEAN countries, almost at the same time that the US President Donald Trump announced that he would like to expand the G-7 grouping to G-11, including India. Both invitations are bulwarked on the recognition of India’s growing stature in the transforming world order. 

While changing the composition of G-11 does require the consent of other members, RCEP nations have already had India on the negotiating table since 2013, till this changed, when, on November 4, 2019 at the RCEP meeting in Bangkok, India decided to walk away from the proposed agreement. RCEP is a mega free trade agreement comprising 16 countries, which aims to cover goods, services, investments, economic and technical cooperation, competition and intellectual property rights. 

In the last week of April 2020, RCEP 15 countries including ASEAN and Australia, China, Japan, Korea, and New Zealand held a video conference to discuss outstanding issues, even as they hope to have the agreement signed in 2020. It was during this three-day conference that the joint statement reiterated the importance of including India in RCEP; including in it the words, ‘Recognizing India as a valuable original participant, the 15 RCEP Participating Countries (RPCs) would welcome India’s return to the RCEP negotiations.” 

Then, what are the immediate factors pulling India towards RCEP in the post-pandemic world? Have China’s assertive positions and muscular diplomacy for supremacy in the continental and maritime space created space for India’s inclusion? 

Several macro and micro factors would explain this.

First, ASEAN countries have been reaching out consistently to India, given the fact that ASEAN considers India as a balancer to China in the mega trade agreement. Moreover, ASEAN in April 2020, reaffirmed their commitment to continue working with India to address its outstanding issues, as instructed by RCEP Leaders at the 3rd RCEP Summit in November 2019 and invited India once again. With Vietnam having branded its chair for the year 2020 with the theme “Cohesive and Responsive ASEAN”, the writing on the wall is clear. ASEAN’s centrality will be lost without its cohesiveness. A cohesive ASEAN, is to India’s advantage.

Second, Japan had earlier stated that without India, RCEP will not serve much purpose, for obvious reasons. RCEP without India would create a China-led trading bloc. Additionally, the Prime Ministers of both countries agreed in their Summit level telecon on April 10, 2020, to further deepen Japan-India relations in the world after the COVID-19 outbreak; this was followed up by a virtual meeting in May of their foreign ministers, who also underlined the significance of deepening bilateral relations.

Third, Australia, too, has echoed the sentiments of Japan and ASEAN during the June 4, 2020 virtual meeting of PM Scott Morrison and his Indian counterpart. Even as nine pacts were signed as a part of the Comprehensive Strategic Partnership (CSP), the partnership has assumed a more critical function at the time of the global pandemic. Moreover, China’s threatening postures towards Australia, after the latter called for an independent enquiry into the pandemic, are helping to strengthen India’s bilateral partnership with Australia.

Fourth, there is an Indo-Pacific rationale; Japan, Australia and ASEAN countries together seek to unveil the message in RCEP that interests in the Indo-Pacific and Indian Ocean regions would be better served with New Delhi being part of the RCEP. This has been aptly articulated by Ms. Nirupama Rao, India’s former foreign secretary, in an interview on dealing with an insecure China (dated May 27, 2020), when she said, “Our naval and maritime cooperation with democracies like Japan, and a more energized Act East policy also should be in the line of vision of the Chinese, showing the strategic assets we can leverage in the Indian Ocean region.”

Fifth, prior to November 2019, China sought India as a key member of its push to the conclusion of RCEP, understanding that China’s growth is predicated on its economies of scale, required to reach markets as large as that of India. With China’s nosediving bilateral relations with the United States and Europe, China can ill afford to lose the Indian consumer. Moreover, with several countries threatening to decouple from the China-led supply chains and reduce their dependence on Chinese imports, this will mark the beginning of the end of China as a factory of the world and slow down it’s growth rate. India signaling its rethink of joining RCEP, may also force Beijing to reduce its aggression on India’s borders. India has already placed restrictions on the automatic route for inward Chinese investments; other measures to safeguard India’s trade interests could also be implemented. 

India would be in a better position to re-negotiate some outstanding issues with China and other countries. China has kept India’s $181 billion information technology industry off limits. Beijing has also dragged its feet on dismantling regulatory barriers to the import of Indian agricultural and pharmaceutical products. With it’s 5 G ambitions in the world being thwarted by several countries, China is not in an enviable position.

Sixth, it is not without reason that India’s former Chief Economic Advisor Arvind Panagariya on June 3, 2020 urged India to slash its import tariffs to 7% and join the Regional Comprehensive Economic Partnership, to better position itself to attract investments. In his words, “India should continue to engage with Asia Pacific partners and get into RCEP as it prepares to take over the multinational companies from China in the areas of textiles, footwear and other labor-intensive sectors,”.

Seventh, India must push for its pharmaceutical’s exports. The industry in India is worth about USD 37 billion, with exports accounting for about USD 18 billion. Interestingly, the prices of medicines in India are amongst the lowest in the world. Hence, India’s export basket shows that its pharma supplies are being increasingly demanded. In 2017-18, pharmaceutical products became India’s top traded commodity with Myanmar. India’s exports of pharmaceuticals to Myanmar in 2017-18 rose to USD 179 million, improving its percentage share in total exports to 18.5 %. During the pandemic, India reached out not only to SAARC countries, but also to most countries in ASEAN as well. More specifically, India has been providing assistance to most ASEAN countries in terms of distribution of medical and pharmaceutical supplies, as well as an exchange of experts and information sharing. Prime Minister Modi during the tele-conversation on May 1, 2020 with General Prayut Chan-o-cha, PM of Thailand expressed India’s readiness to facilitate the export of medicines and medical equipment, particularly Hydroxychloroquine, as requested by the Thai side.  India is being viewed as a significant partner for ASEAN countries as a trusted supplier of medicines. Hence, this is the time for India to leverage its strengths in this domain. 

Eighth, the digital space is another area for to push for greater India-ASEAN engagement. Banking in the ASEAN region is still to gain through the use of technology. India is gradually migrating to its own payment gateway RuPay which is more cost effective. The region may benefit by exploring such a framework. 

In addition to the above, India’s handling of the Covid-19 pandemic has been commended by the World Health Organisation (WHO) as well as by most western countries. While India has been cautious not to blame China, it has also reached out to its neighbors in South and South East Asia. Finally, what PM Modi told Mr. Morison on June 4, 2020 is instructive; “The world needs a coordinated and collaborative approach to come out of the economic and social side effects of this pandemic. Our government has decided to view this crisis as an opportunity.” True, one such opportunity lies in expanding trade and investment relations with all RCEP countries. If India is able to lure American companies leaving China, and given the government’s push to self-sufficiency, surely it is not autarchy that we seek. International trade, enhanced manufacturing capabilities and outreach will continue as important pillars of India’s ascent in the global arena.

Hence, there is enough bandwidth for India to leverage post-pandemic opportunities and for a re-think on joining RCEP and returning to the negotiating table. Finally, this situation must be assessed against the backdrop of India’s own evolving definition of her place in the changing global landscape. 

*Dr. Reena Marwah is Associate Professor, Jesus and Mary College, University of Delhi. Her most recent book (March 2020) is titled, Re-imagining India Thailand relations: A Multilateral and Bilateral Perspective, published by World Scientific, Singapore. 

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