RCEP & India Series (Article- 01)
Is India competitive enough to join RCEP? 
The Answer is NO. Why? 

By:

Vijay SARDANA
Advocate, High Court Delhi
Techno-Legal &Techno-commercial Trade Policy Expert

Member on Corporate Boards & various Expert Committees

Disclaimer: Views are personal.

RCEP represents the future of the global economy due to growing purchasing power, large and young population. Europe is stagnating economy. The US is tapering off. Africa has limited purchasing power. Latin America is not very attractive due to geographical location and less population density. India is a huge potential, but suffering from internal challenges due to outdated laws responsible for slow pace decision making, lack of corporate governance, missing global quality standards, massive adulteration, the slow judicial system and missing innovations. All this leading to the high cost of the transaction and lower margins in the business hence discouraging fresh investments. The fact is, as of today, India is not ready to join the RCEP Agreement. This is the harsh reality. 

IMPORTANT: Many of you may think I am very critical and negative in approach. I recognise the fact that boundary disputes with China and its aggressive violation of the sovereignty of India should not be encouraged. The access to the Indian market should not be allowed to any country who is not keen to respect the sovereignty of India.

I am fully aware that there are many positives in India but this discussion is in the context of RCEP, hence the focus has to be on economic issues and factors responsible for hurting global competitiveness of India in various sectors of the economy.

Why India has to move out of the RCEP?

The RCEP was initiated in November 2012, but till 2020 India failed to achieve much on the performance parameters of global competitiveness. The fact is the majority of Indian industries of all shades including small, medium and large companies and the agriculture and livestock sectors as well cannot compete with many RECP member countries. Considering the political priorities of short-sighted political leaders with short-term vested interests, outdated laws and policies responsible for inefficacy and corruption, no respect for performance and excellence, poor quality education system, lack of innovation and missing quality focus, infrastructure gaps and local trade union politics has deprived India in last 70 years to capitalise on her strengths. Now, the same issues will not permit India to join any free-market system with open arms and take the advantage of RCEP. The signing of RECP means opening the flood gates of imported goods, services including human resource. Hence, the decision is right that India has not signed the RCEP.

What RCEP has proposed to achieve?

The Parties to the RCEP Agreement launched the Negotiations for the Regional Comprehensive Economic Partnership based on the guidelines adopted by the Heads of State or Government of the Member States of the Association of Southeast Asian Nations (hereinafter referred to as “ASEAN” in this Agreement) and Australia, China, India, Japan, Korea, and New Zealand at Phnom Penh, Cambodia on 20 November 2012 which endorsed the Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership.

The PREAMBLE of the RCEP agreement says:

1. Desiring to broaden and deepen economic integration in the region, strengthen economic growth and equitable economic development, and advance economic cooperation, through this Agreement, which will build upon existing economic linkages among the Parties;

2. Aspiring to strengthen their economic partnership to create new employment opportunities, raise living standards, and improve the general welfare of their peoples;

3. Seeking to establish clear and mutually advantageous rules to facilitate trade and investment, including participation in regional and global supply chains;

4. Building upon their respective rights and obligations under the Marrakesh Agreement Establishing the World Trade Organization done at Marrakesh on 15 April 1994, and the existing free trade agreements between the Member States of ASEAN and their free trade partners, namely Australia, China, Japan, Korea, and New Zealand;

5. Taking account of the different levels of development among the Parties, the need for appropriate forms of flexibility, including the provision for special and differential treatment, especially for Cambodia, Lao PDR, Myanmar, and Viet Nam as appropriate, and additional flexibility for Least Developed Country Parties;

6. Considering the need to facilitate the increasing participation of Least Developed Country Parties in this Agreement so that they can more effectively implement their obligations under this Agreement and take advantage of the benefits from this Agreement, including the expansion of their trade and investment opportunities and participation in regional and global supply chains;

7. Recognising that good governance and a predictable, transparent, and consistent business environment will lead to the improvement of economic efficiency and the development of trade and investment;

8. Reaffirming the right of each Party to regulate in pursuit of legitimate public welfare objectives;

9. Recognising that the three pillars of sustainable development are interdependent and mutually reinforcing and that economic partnership can play an important role in promoting sustainable development; and

10. Further recognising the positive effect that regional trade agreements and arrangements can have in accelerating regional and global trade and investment liberalisation, and their role in strengthening the open, free, and rules-based multilateral trading system.

Based on the above mentioned agreed guiding principles, the agreement is finalised with the following objectives in mind:

The objectives of this Agreement are to (a) establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership framework to facilitate the expansion of regional trade and investment and contribute to global economic growth and development, taking into account the stage of development and economic needs of the Parties especially of Least Developed Country Parties;

(b) progressively liberalise and facilitate trade in goods among the Parties through, inter alia, a progressive elimination of tariff and non-tariff barriers on substantially all trade in goods among the Parties;

(c) progressively liberalise trade in services among the Parties with substantial sectoral coverage to achieve substantial elimination of restrictions and discriminatory measures concerning trade in services among the Parties; and

(d) create a liberal, facilitative, and competitive investment environment in the region, that will enhance investment opportunities and the promotion, protection, facilitation, and liberalisation of investment among the Parties.

The signing of RCEP: What it means for India?

To remain relevant and to take benefit of RCEP, India must review and change the way policy-making happens in India. Priority has to be performance and competitiveness. Domestic political compulsions, time-consuming decision-making process, the very slow judicial system, political protection to economic offenders like food adulterators and IPR violators have no place in the world market. Please ask yourself, are these not harsh realities of India? Moving out of RCEP has exposed our soft underbelly and is a warning sign about the competitiveness of our economic activities. We should learn from this about the direction of policy reforms.

With this background, in up-coming articles, let me analyse various aspects of RCEP Agreement and identify the areas where India should focus to take the benefit of Asian markets with or without RCEP. It is not difficult. because where there is a will, there is away. 

Based on my own experience, I will also share the way forward and how India can address these issues of competitiveness in a time-bound manner.

India can become an important global economic power provided Indian political class seriously focus on housekeeping in a timebound manner.

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