RCEP: A Catalyst For Deepening India-ASEAN Partnership
India should actively pursue implementation of the Regional Comprehensive Economic Partnership to consolidate its Act East Policy, which would serve to buttress its strategic eminence in its backyard.
Prime Minister Narendra Modi’s latest speech at Davos sends out a signal to the world that India is raising its status as an eminent power to determine the fate of the region and beyond. With a steady decline in the United States’ commitment to deliver public goods or services, noticeable through its measures including the Asia-Pacific Economic Cooperation summit, its withdrawal from the Trans-Pacific Partnership and the Paris Agreement among others, attests to the fact that the current liberal order is in a state of crisis.
A disrupting force that serves to accelerate this geopolitical crisis is the rise and assertiveness of China, which has brought about an eastward shift in the global strategic locus. In this regard, the India-ASEAN commemorative summit meeting held in New Delhi on the eve of the Republic Day marked a crucial juncture in Modi’s Act East policy.
Regional integration arrangements have formed the cornerstone of global economic liberalisation policies. These initiatives have both strategic and economic intentions. While on the economic front they seek to insulate economies from market uncertainties, on the strategic side, they help fortify alliances or partnerships among nations that benefit from it both domestically and internationally.
Presently, there are several sub-regional groupings in Asia that have a basis in certain economic imperatives. However, as India’s foreign policy is transitioning to a new phase, where Modi has repeatedly reiterated his Act East Policy as playing an integral role, the Regional Comprehensive Economic Partnership (RCEP) rightly attracts attention.
The establishment of the Act East Policy at the Twelfth ASEAN-India summit telegraphed the administration’s clear intention to engage with its Asian neighbours and enhance, as Modi pledged, security, defence and economic cooperation. After highlighting “India’s relationship with the ASEAN as a key tenet of the foreign policy and the foundation of the Act East policy” at the Fifteenth ASEAN-India summit, India’s eastward push makes good strategic sense. For a nation with great power aspirations, Modi’s Neighbourhood First and Act East Policy are policies that underscore the need to develop clout in its own region, particularly when its broader backyard boasts of hosting two-thirds of the world’s population, a rising military power and a significant portion of the world’s wealth.
The RCEP therefore presents a decisive platform to influence India’s strategic and economic status in the Indo-Pacific region and bring to fruition its Act East Policy. The RCEP, forged during the ASEAN summit in 2012 among the 10 ASEAN member states and its six free trade agreement partners, was built upon the premise of broadening and deepening engagement among parties and facilitating participation to promote economic development in the region. While the arrangement is ambitious as it involves binding the major economies of the world, including Australia, China, Japan, Republic of Korea and New Zealand, into a trading bloc, it leads to consolidation of the India-ASEAN trade partnership.
While India-ASEAN relations is in ascendency with “ASEAN being India’s fourth largest trading partner”, the RCEP provides ample opportunities for India. First, the RCEP agreement would complement India’s existing free trade agreements with both the ASEAN states and some of the member nations. This would positively benefit India’s economic position as the “fastest growing economy”, as suggested by the International Monetary Fund prior to Prime Minister Modi’s speech at Davos, since it would allow it to expand its trading association with countries like Australia and New Zealand, with which it has no formal trading partnership due to its absence in the APEC and Transatlantic Trade and Investment Partnership.
Second, the RCEP will facilitate India’s integration into sophisticated regional production networks. The arrangement is expected to harmonise the trade-related rules, investment and competition regimes of India with those of other countries in the group. Defending globalisation and outlining India’s initiatives to preserve a globalised framework at Davos, Modi listed the changing domestic scenario in terms of imports and foreign direct investment, where he cited instances of reformation of the tax structure (example being the goods and services tax), undertaking bold foreign direct investment reforms and incorporating measures to resolve major policy bottlenecks in terms of investment and economic infrastructure; the RCEP stands commensurate with India’s position as an advocate of an open economic order. This was visible in Secretary Teaotia’s statement at the Nineteenth RCEP meeting held in Hyderabad in July 2017; she said, “RCEP offers a positive and forward looking alternative in the face of growing protectionism across the world.”
Moreover, the RCEP has the potential to expand multi-sectoral business opportunities due to its composition of elements including trade in services, investment, economic and technical cooperation, intellectual property, e-commerce and small and medium enterprises, to name a few, that would provide Indian companies to access new markets. This buttresses the potential of the RCEP to deliver new economic opportunities including job creation.
Despite the potentialities, the RCEP agreement is not without its challenges as the participating nations have shared both similar and diametrically opposite positions on the variables of the deal, including tariff reduction in goods and liberalisation of services and trade, among others.
Another major apprehension involves China, as most have equated signing of the RCEP as equivalent to signing a free trade agreement with China. That would flood the Indian market with Chinese products, some fear. But barring these challenges, the RCEP offers an optimal opportunity for India.
The Way Forward
The RCEP, once formalised, has the potential to emerge as the most effective and the largest free-trade bloc in the world. If it comes to fruition, it would cover half of the world’s population and a third of its gross domestic product. Along with the potential to supply ample business opportunities in the region, the RCEP mutually benefits both India and ASEAN through the prospect of greater economic integration and openness. This is visible through recognising the centrality of the ASEAN in the emerging regional economic architecture, which would suitably facilitate India’s broader vision of a free and open Indo-Pacific.
Indian External Affairs Minister Sushma Swaraj had said at the ASEAN-India Pravasi Bharatiya Divas conference, “For India, ASEAN leadership and centrality is essential to peace and prosperity for a rapidly changing Indo-pacific region.” Thus, to favourably place Prime Minister Modi’s vision of an open and economic order as part of his support for an international order premised on rules, the implementation of the RCEP is a priority for the country to consolidate its Act East Policy, which would serve to buttress its strategic eminence in its backyard.
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