India may suffer an irreparable loss and even lose its position as a "key strategic actor" in the Asia-Pacific region if it decides to leave the Regional Comprehensive Economic Partnership (RCEP), according to a Singapore-based think-tank on Thursday.
The Regional Comprehensive Economic Partnership (RCEP) is a mega trade pact aims to cover goods, services, investments, economic and technical cooperation, competition and intellectual property rights.
Trade ministers of the 16-member RCEP bloc, including India and China, will deliberate upon issues hindering the negotiations of the proposed world's biggest free trade accord during the two-day meet, starting here.
The bloc comprises 10 ASEAN members (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam) and their six FTA partners - India, China, Japan, South Korea, Australia and New Zealand.
"The dithering on the RCEP has also cast strong doubts over India's sincerity in engaging with the region through the much-hyped 'Act East' policy, besides bearing high economic and political costs," said a report, published by the Institute of South Asian Studies (ISAS) of the National University of Singapore (NUS).
Modern free trade agreements (FTAs) like the RCEP are not just trade deals, but also important strategic and geopolitical understandings, Amitendu Palit, Senior Research Fellow and Research Lead (Trade and Economic Policy) and author of the report.
He said that India's reservations to the RCEP are part of its larger reservations on FTAs and free trade in general.
Over the last three years, India has put on hold several FTAs it was negotiating, including those with the European Union (EU), Australia and Canada.
"The India-EU FTA negotiations are likely to be abandoned and those with Australia and Canada are expected to see the same fate," Palit said.
According to him, the ostensible reasons for these FTAs being held up are the tremendous aversion to imports across government departments and industries and the firm belief that India's existing FTAs have deluged the country with imports.
"Such beliefs exist, notwithstanding studies showing the low utilisation of India's FTAs by both exporters and importers," Palit wrote in the report.
It is impossible to figure out how FTAs could have contributed to surging imports if they were hardly being used much in the first place, said Palit.
Disengaging from the RCEP, as well as other FTAs is not just economically damaging for India, but it would be paying a high strategic cost for disengagement, according to the paper.
It is evident to most that India's engagement with the world, while robust in foreign policy and diplomatic overtures, is not matched by its engagement in trade, he added.
In this respect, India's trade policy outlook seems to have remained stuck in the notion of disengagement characterising its view of the world during the era of non-alignment, while its foreign policy has moved much ahead.
The divergence between its foreign and trade policy outlooks is stark and can prove costly, he noted.
"Backing out of the deal at this stage would undo years of hard work put in by successive Indian governments and agencies in positioning India as a key strategic actor in the Asia-Pacific," he said in the report."It would be an irreparable loss. If India decides to leave the RCEP, it must do so fully prepared for the high economic and political costs it would incur by its decision," he cautioned.