- The
Regional Comprehensive Economic Partnership (RCEP) is a trade pact between 16 countries. - Negotiations that lasted for seven years have concluded and India has decided to opt out of the pact.
- Indian industry fears that it will be outrun by foreign competition because of RCEP.
India has decided not to sign the Regional Comprehensive Economic Partnership (RCEP) after negotiations that lasted for seven years.
The free-trade agreement was being negotiated between Australia, China, India, Japan, New Zealand and Korea on one side and the 10 South East Asian countries— Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Myanmar, Brunei, Cambodia, Laos— on the other.
The idea behind RCEP is to make trade easier and tariffs lower for exporters from these countries. However, Indian companies are afraid that this agreement will give foreign players a free ride in the Indian market and put homegrown companies at a disadvantage.
But that is all free trade is all about—- increased competition, better deal for consumers, and weeding out the inefficient. But policies can’t entirely stand on ideology. It has to account for ground realities.
The five sectors in India that would have taken most of the hit from increased competition due to RCEP are textiles, dairy, steel, automobiles, and agricultural products.
Out of these five textiles and steel have already lost a lot of export competitiveness in recent years. Car makers have been crushed under collapsing demand at home— sales have been declining for months together. The entry of foreign companies would have further squeezed the space.
Dairy has been a big point of contention. India is the world’s biggest consumer of milk and milk products and many Indian political outfits— even those close to the government— have sought to keep dairy out of the RCEP.