Four years ago, after hesitating again and again, India, which had been playing a "small abacus" in its heart, finally decided not to board the "Regional Comprehensive Economic Partnership" (RCEP), an "economic and trade express" that is mutually beneficial and win-win. Four years later, when neighboring countries such as Bangladesh and Sri Lanka were interested in participating in the free trade agreement, India was upset and even threatened.
According to India's "The Economic Times" (The Economic Times) reported on December 25 local time, Bangladesh is negotiating with the RCEP group composed of 15 countries, and may officially announce its plan to join the RCEP after the general election on January 7 next year.
On the same day, the Indian Business Circle reported that India is concerned about Bangladesh's interest in joining the China-led RECP, and is not only cautious about the situation, but is also reevaluating the FTA negotiations with Bangladesh. The report also quoted sources as saying that the Indian Ministry of Commerce plans to conduct this assessment before the two countries reach a free trade agreement to assess how Bangladesh's accession to the RCEP will affect Indian industry.
Data map: On August 3, 2019, the RCEP Beijing Ministerial Conference was held. The picture is from The Paper
"Bangladesh has reduced its overall imports [from India] and is considering joining the RCEP. We are cautious about this and we are watching the impact on [Indian] trade and industry. An official quoted by India's Economic Times said.
Bangladesh is India's largest trading partner in South Asia, the report said. In September 2022, the two countries decided to launch the Comprehensive Economic Partnership Agreement (CEPA), which aims to implement Bangladesh when it graduates from least developed country status in 2026. The official added that Bangladesh has received preferential treatment under the South Asian Free Trade Agreement (SAFTA), to which India is also a member.
The Indian Business Circle also pointed out that India's concerns stem from the fact that Bangladesh's imports from China have far exceeded those from India. The prospect of Bangladesh joining the RCEP has raised concerns about a further surge in India's imports from China, prompting India to assess the potential impact on its economic landscape.
In addition, India is also concerned that after Bangladesh joins both CEPA and RCEP, Chinese goods will flow into India through Bangladesh, thereby circumventing the principle of origin (ROO), "which may pose a huge challenge to Indian industry", which has prompted New Delhi to carefully evaluate the proposed free trade agreement. According to the report, in the 2022-2023 fiscal year, India's trade deficit with China is $83.19 billion, accounting for nearly one-third of the country's total trade deficit.
In fact, The Hindu also reported on October 15 this year that in addition to Bangladesh, India's other neighbor Sri Lanka is also considering joining the RCEP, and the Sri Lankan presidential secretariat confirmed in a statement issued in August this year that his government has submitted an application to join the RCEP, saying that it recognizes "the potential of this large trading area, including major economies such as China, Japan and South Korea".
Data map: On February 24, 2021, RCEP Qingdao Economic and Trade Cooperation Pilot Innovation Test Base. The picture is from The Paper
After eight years of negotiations, the RCEP was signed by China, Japan, the Republic of Korea, Australia, New Zealand and the 10 ASEAN countries on November 15, 2020, and reached the entry into force threshold on November 2, 2021. On January 1, 2022, RCEP officially entered into force.
The RCEP goal is for 15 member countries to cancel 90% of the tariffs on goods traded in the trade zone within 20 years, and the entry into force and implementation of the free trade agreement marks the official landing of the free trade area with the world's largest population, the largest economic and trade scale and the most development potential, which fully reflects the confidence and determination of all parties to jointly safeguard multilateralism and free trade and promote regional economic integration, and will make important contributions to regional and global trade and investment growth, economic recovery and prosperity.
According to a study by the United Nations Conference on Trade and Development (UNCTAD), RCEP countries account for 30.5% of the world's total GDP, far exceeding the North American Free Trade Agreement (28%), the European Union (17.9%), the African Continental Free Trade Area (2.9%) and Mercosur (2.4%), and will "create a new center of gravity for global trade".
It is worth noting that in the early stages of negotiations, the RCEP was initially expected to consist of 16 countries, including India in addition to the 15 founding members today.
Image from Wikipedia
On November 4, 2019, the third RCEP Leaders' Meeting was held in Bangkok, Thailand. At this meeting, the RCEP completed the main negotiations, and the leaders of 15 countries except India issued a joint statement on the RCEP, advocating that the negotiations should continue with the goal of signing in 2020.
However, it was also at this meeting that India, which had changed its attitude again and again, announced its withdrawal at the last minute of the negotiations and decided not to participate in the signing of the RCEP. At that time, Indian Prime Minister Narendra Modi believed that disagreements over tariffs, trade deficits with other countries, and non-tariff barriers were the reasons for India's decision not to sign the RCEP.
At that time, the Nihon Keizai Shimbun Network analyzed this: During the negotiations, because India has a huge trade deficit with China, if tariffs are lowered, it is worried that it will deal a blow to its domestic industry, so it has a strong sense of crisis; in the final stage of the negotiations, India also hopes to protect its various industries; and because its own economy has come to a standstill, Modi actually has to turn his attention to domestic problems such as high unemployment and poverty, which are more urgent than trade liberalization.
In response to these concerns, Geng Shuang, then spokesman for China's Ministry of Foreign Affairs, stressed that China has no intention of pursuing a trade surplus with India, and that the two sides can further broaden their thinking and continue to expand the cake of cooperation. In the spirit of mutual understanding and mutual accommodation, China is willing to work with all parties to continue consultations to resolve the problems faced in the negotiations with India, and welcomes India's accession to the agreement as soon as possible.
Now, India's Economic Times has also explained in its report that the reason why the Modi government "withdraws" is that it is worried about India's trade deficit with China, the circumvention of rules of origin and the unresolved basic tariff rate.
Data map: On November 4, 2019, Indian Prime Minister Narendra Modi attended the ASEAN Summit
Earlier, Chinese Foreign Ministry spokesman Wang Wenbin pointed out that RCEP is a milestone achievement in the economic integration of the Asia-Pacific region and a vivid example of shared development opportunities among countries in the region. Since its implementation, trade has become closer between countries, and intra-regional trade has become a key force to stabilize and drive the growth of foreign trade, and the region has continued to become a global investment hotspot.
Wang Wenbin said that the full entry into force of RCEP reflects the strong demand of regional countries to strengthen economic integration and achieve common development. As a staunch supporter of trade liberalization and facilitation and an important participant in regional cooperation, China will continue to work with relevant parties to promote high-quality implementation of the RCEP and inject new impetus into regional and global economic recovery.
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