The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement among ten member states of ASEAN. In this region, China is the major trade partner and India strongly believed that RCEP is biased in favour of China. In response to India's move to opt out, China announced that India is welcome to join RCEP whenever it is ready.
Tracing RCEP financial history
In the ASEAN summit in Cambodia in November 2012, the countries formally launched RCEP negotiations. RCEP has been severely criticised by free culture activists as being biased in favour of a few hegemonic countries. RCEP countries have more than 3 billion people which is about 45 percent of the world's population. The combined GDP of these countries is about $21.3 trillion which accounts for about 40 percent of the world trade. India has large trade deficit of about $105 billion with RCEP countries and hence wanted to protect its interests vis-a-vis other countries. More than 50 percent of India's trade deficit is with China.
The Government of India has clearly stated that it will not compromise on the interests of the Indian businessmen, particularly small businessmen, and the farmers of the country. The RCEP agreement in the current form does not reflect the intention of India. This is clearly a strong stand taken by India to protect the domestic business. The decision is mainly to protect and safeguard the interests of the poor and the farmers. The agreement is also detrimental to the government's 'Make in India' initiatives. India does not want other countries to take advantage of the adhesion agreement and flood the Indian market with foreign products. India wanted different levels of tariff concessions for China especially to protect Indian business. Further, India was not comfortable with 2014 as the base year for tariff reduction in the agreement. India also feared that while India's local market will be prone to flooding by foreign suppliers the reverse may not be true. India may face tough challenges to approach Chinese and other markets in the region.
The world is divided into various trade blocks. RCEP countries enjoy one of the largest trade block. It may not be very prudent on India to walk away from RCEP agreement. On the other hand, India has to put its best negotiating hat to win brownie points in the agreement that are critical to it. India may rope in some of the best trade attorneys to win this deal for them. As in the news, a day after that India is in talks with the US to enter into a free trade pact with that country. India is aware of the fact that it may not be able to do business in isolation. It may have to align with one of the trade blocks. Now that China has also softened its stand to get India on board, India should not lose sleep and immediately start negotiating on the agreement.
Sensitising legal caveats in the agreement
India's current stand was welcomed internally by various business houses like CII. But India is aware that it has to align with one of the trade blocks to do business. The best is to align with RCEP countries, being the largest trade block in the world. Hence, India has to soften a bit and negotiate and win the points it needed most and ink the agreement along with other RCEP countries. India is a bigger market and the other RCEP countries cannot ignore the requirement of India. India may want to negotiate to have different tariff concessions for different markets. India may also need to have equal weightage given to it so that it can approach foreign markets for its domestic production in India. India should also negotiate to have an exit clause even if it signs the agreement.
The exit clause should be both for convenience and for a cause. There should not be any penalty on India exiting from the agreement. At any point of time if India feels that the balance of trade is not favourable or if any of the countries in RCEP is not acting in its favour then India should be able to step out without any penal provision. India should also have a dispute resolution within the agreement so that any warring nations can approach the arbitration/mediation process to resolve the dispute peacefully. The agreement should be for a fixed period so that the agreement can be reviewed in frequent intervals.
K Satish Kumar, is a keynote speaker, author, the Global Head of Legal and Chief Data Protection Officer of Ramco Systems. Among the many awards he has received, the coveted are “Top 50 Legal Leaders 2019' by Legal IP Gorilla in Singapore, “GC PowerList India 2018” by London based Legal 500 , “Legal Counsel of the Year -2018” by INBA. He is actively involved in many pro bono activities through Chennai Lawyers. The author can be reached at email@example.com. The views expressed are personal.