1. Why in news
1.1. 15 Asian Nations signed RCEP, forming world’s largest trading bloc.
1.1.1. India has decided to opt out of it.
2. What is it?
2.1. free trading agreement between
2.1.1. Australia,Brunei,Cambodia,China,Indonesia,Japan,Laos,Malaysia,New Zealand,Philippines,Singapore,South Korea, Thailand and Vietnam
2.1.1.1. together account for 30% of world’s population
2.1.1.2. 30% of global GDP as of 2020
2.2. biggest trade bloc in history.
3. provisions of RCEP?
3.1. • Either reduce or eliminate tariffs on a range of goods and services
3.2. • Set up rules on investment and competition
3.3. • Ensure protection for intellectual property.
4. benefit to India if it joins the RCEP?
4.1. 1. Benefit to consumers
4.1.1. Consumers can get cheaper and higher quality products
4.2. It will give opportunity to Indian firms to participate in global value chains and in attracting foreign investment
4.2.1. India’s exports afrer past FTA agreements increased
4.2.1.1. Ex- India’s exports to Thailand,Cambodia etc increased after India signed an Free Trade agreement with them
4.3. 3. Cheaper import of goods and industrial supplies will increase India’s productive capacity.
4.4. 4. Joining RCEP will create jobs and sustain economic growth.
5. Why did India not join the RCEP?
5.1. Experience with past Free Trade Agreements
5.1.1. After past Free Trade agreements India’s negative trade balance with several RCEP countries increased
5.2. Free trade agreement can cause deindustrialization in several sectors
5.2.1. ex-electronics and light manufacturing
5.2.2. Noticed in previous FTAs
5.2.2.1. no effort was made buy government to build a supportive infrastructure.
5.3. • Dismantling tariff barriers would prove costly for a number of industrial enterprises that are not globally competitive.
5.4. Protection to agriculture-
5.4.1. 1. Opening up agriculture markets to foreign products is disadvantageous to Indian markets
5.4.2. 2. Foreign agriculture goods can wipe out small ,family owned farms
5.4.3. 3. Dairy farmers will be under great stress caused by increased competition from industrialised countries
5.4.3.1. like Australia and New Zealand
5.5. • India’s service sector-
5.5.1. India is the 8th largest service sector exporter
5.5.2. Member countries in RCEP didn’t give any concession on cross border movement of professionals.
5.5.2.1. Which is essential for India’s service exports
5.5.3. In other service sectors,India is not ready to open up its market.
5.5.3.1. For Ex- E-commerce
5.5.3.1.1. lack of policy framework
5.5.3.1.2. lack of regulatory environment
5.6. Shift In strategy
5.6.1. India supposedly shifting its focus from Asia to that of USA,UK and European Union.
5.7. Possibility of Circumvention of rules of origin
5.7.1. Some countries would dump their products by routing them through other countries.
5.8. Unable to ensure counter measures like auto trigger mechanism
5.8.1. used to raise tariffs on products when imports from a country crossed a certain threshold.
5.9. Most favoured nations status obligations-
5.9.1. India wanted to exclude it from RCEP commitments as it didn’t want to give this privilege to certain countries,it has conflict with.
5.10. • Agreement would force it to extent benefits given to other countries for sensitive sectors like defence to all RCEP countries.
6. Is China a deciding factor for India to opt out of RCEP?
6.1. Soured relations with China
6.1.1. Galwan valley escalations
6.1.2. Commitments under RCEP would have made It difficult for India to take steps against it.
6.1.3. • RCEP had inadequate protection against surges in imports from China
7. How can the decision to not join RCEP affect India?
7.1. Impact trade ties with RCEP countries
7.1.1. they would prefer to do trade within the bloc.
7.2. RCEP countries account for $2 billion of world’s population.
7.2.1. It will prevent India from tapping the potential of the bloc.