India’s exit from rcep is fully justified
India has finally taken a call after years of negotiations not to join the Regional Comprehensive Economic Partnership. The RCEP aims at simplifying trade and giving the 16-member group of mostly Asian nations easier access to each other’s markets. The announcement has serious implications, considering the other 15 nations have gone ahead with operationalising the regional pact. At home, a consensus has emerged with industries, traders and even political parties against India signing up based on fears that an ‘open access’ regime would lead to China dumping cheap goods at the cost of local producers and farmers.
China is understandably angry at being denied access to the world’s third largest economy, and has alleged that India pressed new demands at the last minute. However, India’s claims have been pending for some time and are thoroughly justified. These include demanding an import cap from China, which would have allowed us to raise tariffs in case Chinese imports went beyond an agreed threshold. The RCEP was also not receptive to a free flow of human talent across borders—IT professionals, teachers and medical personnel—which is India’s strength.
The votaries of free trade have a point. Rejecting RCEP has been a lost opportunity for India to lower trade barriers and allow Indian consumers to benefit from competition and more affordable goods and services. The long-term result of protectionism, these critics warn, will be to isolate India further, and leave more space open for a dominant China. However, realpolitik must take into account the prevailing situation and not be a slave of profound theories. India is currently reeling under a crushing slowdown that is killing businesses. An ‘open access’ regime that allows free imports without protecting local interests may prove to be a big hit against our own small industries, dairy farmers and IT start-ups. It is good ‘nationalism’ has prevailed for now; later, when our manufacturing becomes stronger, we always have the option of joining up.