RCEP and India's Strategic Trade Policy
Context:
India and New Zealand recently concluded negotiations on a Free Trade Agreement (FTA).
With this development, India effectively secures trade deals with all Regional Comprehensive Economic Partnership (RCEP) member countries except China
This is executing a strategy that is described by experts as RCEP minus China
Regional Comprehensive Economic Partnership (RCEP):
RCEP is a comprehensive free trade agreement being negotiated between the 10 ASEAN Member States and ASEAN’s free trade agreement (FTA) partners viz. Australia, China, India, Japan, Korea and New Zealand.
The agreement was signed in 2020 and came into force in 2022.
The agreement represents a major win for China, in its efforts to extend its trade partnerships and economic ties.
The fifteen countries of the RCEP have a combined 30% of the world's population, and about 30% of world GDP
India withdrew from the RCEP in November 2019, stating the agreement did not satisfactorily address its outstanding issues
The withdrawal was primarily driven by apprehensions regarding an FTA with China, specifically the fear that it would provide China with virtually duty-free access to the Indian market, harming domestic manufacturing.
RCEP Minus China Strategy:
By signing bilateral FTAs with 14 of the 15 RCEP members, India secures market access benefits similar to the grouping without the associated risks of a China-centric pact.
This approach allows India to maintain tariff control regarding China while preventing the indirect entry of Chinese goods that might have occurred through other members under RCEP's integrated structure.
Experts term this smart risk management noting it is superior to joining RCEP as it avoids systemic vulnerability.
India-China Trade Relations:
India and China interact under the Asia Pacific Trade Agreement (APTA)
Unlike an FTA which typically lowers most tariffs to zero, APTA is a preferential trade pact that provides lower tariffs only on a select few items
This limited framework is intentional.
A full bilateral FTA or RCEP membership would have diluted safeguards, whereas APTA keeps China limited to a narrow tariff framework.