Asia Pacific

India's exit from RCEP leaves Japan and China unsure about future direction of free trade pact

Bloomberg, Kyodo

India’s exit from the Regional Comprehensive Economic Partnership (RCEP) regional trade talks appeared to leave China and Japan at odds over whether to press ahead with the remaining members — or to try to find a workaround that includes Prime Minister Narendra Modi’s government.

Japan will call on India to reconsider its plans not to join the free trade agreement of Asian and Oceanian countries, Chief Cabinet Secretary Yoshihide Suga said in Tokyo Tuesday.

“Japan hopes to continue playing a leading role toward the signing of a RCEP agreement of 16 countries including India,” Suga told a news conference.

India announced Monday it was withdrawing from the China-backed RCEP, citing the deal’s potential impact on the livelihoods of its most vulnerable citizens. China said that the 15 remaining countries decided to move forward first and India is welcome to join RCEP whenever it is ready.

Japanese trade minister Hiroshi Kajiyama said Tuesday that Tokyo will work toward a deal that includes India. This would keep the world’s largest democracy within the RCEP framework and be in line with Prime Minister Shinzo Abe’s policy of bolstering ties with India in order to balance Beijing’s growing power.

“Our country wants to play a leading role toward reaching an early agreement between all 16 countries, including India, with the aim of signing it in 2020,” Kajiyama, who wasn’t present at the latest negotiations in Bangkok, told reporters in Tokyo.

China has sought to accelerate the RCEP deal as it faces slowing growth from a trade war with the U.S. An agreement would further integrate Asia’s economies with China just as U.S. President Donald Trump’s administration urges nations in the region to shun Chinese infrastructure loans and 5G telecommunications technology.

On Monday in Bangkok, leaders of the 16 countries negotiating RCEP gave up on concluding the talks by the end of the year due to opposition from India.

In a statement released the same day after their Thailand summit, the leaders of the RCEP pledged to sign an agreement on creating the world’s largest free trade area in 2020. The original target had been 2015.

“We noted 15 RCEP Participating Countries have concluded text-based negotiations for all 20 chapters and essentially all their market access issues; and tasked legal scrubbing by them to commence for signing in 2020,” the statement said.

But “India has significant outstanding issues, which remain unsolved,” it added, suggesting that it and other RCEP members failed to reach agreement in key fields such as tariffs.

If the free trade area, which would cover half of the world’s population, is put into practice, trade and investment activities among RCEP nations would intensify on the back of measures like the elimination and reduction of tariffs.

In India, there is concern that the deal will result in an influx of cheap agricultural and industrial products, including smartphones from China, further increasing its trade deficit.

Covering a third of the world’s economy, the RCEP has a history of missed deadlines with varying degrees of ambition among the 16 members. Talks began in 2013 with the initial goal of wrapping them up in 2015.

The RCEP brings together Australia, China, India, Japan, South Korea and New Zealand, as well as the ASEAN states of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

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