India’s potential exit from negotiations for the Regional Comprehensive Economic Partnership (RCEP) would deal a heavy blow to the bids by 16 Asian and Oceanian countries to create a giant free trade pact covering half the world’s population and a third of global trade and gross domestic product. While China appears ready to proceed with the talks without India, Japan needs to take the lead to bring the South Asian country back into the fold to reach a successful conclusion of the RCEP negotiations and maintain the momentum for expanding free trade.
At the summit held in Bangkok last week, leaders of the countries participating in the RCEP negotiations — Japan, China, South Korea, India, Australia, New Zealand and members of the Association of Southeast Asian Nations — failed to wrap up the talks by their year-end target due to objections by India, which reportedly fears increased imports from China through the pact would damage its domestic industries.
A joint statement by the RCEP leaders said 15 participants — not including India — “have concluded text-based negotiations” on all 20 fields of discussions and “tasked legal scrubbing by them to commence” for signing the deal in 2020. It noted that India “has significant outstanding issues, which remain unresolved,” that all RCEP participants will work together to resolve those issues “in a mutually satisfactory way” and that “India’s final decision will depend on satisfactory resolution of these issues.”
A senior Indian official said that New Delhi cannot join the RCEP under its current terms. China has indicated that the 15 other countries engaging in the negotiations can proceed to sign the deal without India, while adding that talks with New Delhi will continue and stated that India is welcome to join the pact later. In Tokyo, Hiroshi Kajiyama, minister of economy, trade and industry, said that Japan shares the goal of all 16 countries concluding the pact next year, indicating Tokyo’s caution toward a deal excluding New Delhi.
More than six years have passed since the RCEP talks were launched, negotiating cuts to tariffs on agricultural and industrial goods, liberalization on services trade and investments, as well as creating common rules on e-commerce and protection of intellectual properties. Along with the massive scale of the economies combined, the RCEP will be Japan’s first economic partnership pact involving China, its largest trading partner, and South Korea, the third-largest.
India’s concern over the deal has focused on an anticipated increase in cheap imports from China, with which the nation incurred a $53.6 billion trade deficit in 2018. While the government of Prime Minister Narendra Modi has pursued a pro-RCEP policy, there reportedly is growing concern in New Delhi that the increase in Chinese imports that would follow a reduction in tariffs or their elimination under the pact could negatively impact domestic manufacturers and possibly further hamper the growth of the Indian economy, which hit 5 percent in the April-June quarter — the slowest rate since Modi took office.
The latest RCEP summit highlighted India’s deepening isolation among the negotiating countries as it became clear that its position stood in the way of concluding the pact. Some of the participants have reportedly begun to talk about reaching a deal without India.
However, India’s departure will accordingly reduce the scale of the pact, thereby diminishing its impact. The exit of India with its 1.3 billion population will likely boost the influence of China, which continues to build up its economic as well as military power in the region, within the RCEP group — a prospect that Japan or ASEAN members do not want.
The fact that Japan has cultivated deeper relations with India in recent years — and that it has promoted multilateral free trade regimes by taking the initiative to revive the Trans-Pacific Partnership following the exit of the United States as well as concluding an economic partnership agreement with the European Union — are all the more reason why Tokyo should lead the efforts to persuade New Delhi to return to the RCEP talks.
Moving the RCEP negotiations forward carries all the more weight as the U.S. administration of President Donald Trump keeps pushing his “America first” protectionist agenda and the trade war between the U.S. and China continues to cast uncertainties on the course of the world economy. Successfully concluding the RCEP pact would maintain the momentum for realizing multilateral free trade agreements, while India’s departure from the deal would mark a severe setback for the region-wide effort. Getting India to return to the RCEP talks and reaching a prompt agreement would show that free trade makes more sense. Japan should take on that task.