India giving RCEP free trade pact a needful second look – Asia Times

” India should be a part of RCEP and CPTPP”, according to B V R Subrahmanyam, CEO of the National Institution for Transforming India ( NITI ) Aayog, the Indian government’s top public policy think tank and nodal agency for catalyzing economic development.

Speaking recently to the Associated Chambers of Commerce and Industry of India ( Assocham ), Subrahmanyam said inclusion in the Asia-centric trade blocs” …will be best for India’s micro, small &amp, medium enterprises sector…40 % of India’s exports are from MSMEs. Great corporates are not great producers”.

The NITI Aayog CEO even claimed that higher taxes prevented India from fully exploiting the expanding supply chain growth away from China. ” I do n’t think we have captured the’ China plus one ‘ opportunity as much as we could have”, he added.

The American government participated in the negotiations that ultimately led to the 15-member Asia-Pacific free trade agreement, which has the highest GDP in the world. But, it decided against joining on the idea it would set American company and agriculture at a net-net downside.

However, as the world business environment enters a precarious new time, perceptions appear to be shifting in New Delhi. &nbsp,

India’s first role in forming RCEP, which took power in January 2022, gives the rest to widely held notions the union is, at its base, a China-led program aimed at rewriting the rules of international business to Beijing’s advantage.

In actuality, RCEP originated in August 2011 at the ASEAN 3 ( China, Japan, South Korea ) conference, which adopted a joint Japanese-Chinese proposal known as the” Initiative on Speeding up the Establishment of an East Asia Free Trade Area ( EAFTA ) and Comprehensive Economic Partnership in East Asia ( CEPEA )”.

All of the Asia-Pacific governments were involved in the lengthy procedure of RCEP’s growth, and all, barring India, signed it on November 15, 2020. The RCEP includes Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, South Korea, Singapore, Thailand and Vietnam

RCEP will remove taxes on about 90 % of traded commodities within 20 years and regulate many customs, purchase, intellectual property and e-commerce rules. Covering almost 30 % of the world economy, it is also the first trade agreement linking Japan, China and South Korea.

The benefits of RCEP were summarized by the New Zealand authorities because:

  • Greater certainty and lower difficulty are enhanced by a second set of trade and investment regulations that apply to the entire RCEP place.
  • the possibility for our manufacturers to enter local RCEP-wide value chains.
  • More business exposure opportunities, specifically for companies and investment into China and some ASEAN member state.
  • Less red audio for manufacturers, and more refined trade, and
  • New guidelines on federal procurement, competition policy and electronic business, which will help New Zealand producers take advantage of increased business possibilities.

Operate could do the same for India.

The CPTPP ( Comprehensive and Progressive Agreement for Trans-Pacific Partnership ) is a separate free trade agreement comprised of 11 countries around the Pacific Ocean, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The US was instrumental in developing the Trans-Pacific Partnership ( TPP ) under President Barack Obama but abandoned under Donald Trump in January 2017; it became effective at the end of December 2018.

The Indo-Pacific Economic Framework for Prosperity ( IPEF ) promoted by the US government as an alternative to the CPTPP is long on feel-good jargon but short on measures to lower tariffs and improve US market access for its 13 other participants: Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. In May of this year, IPEF was launched.

In the words of the Office of the United States Trade Representative ( USTR ),” This framework will advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for our economies. Through this program, the IPEF partners aim to lead to assistance, security, happiness, development and peace within the region”.

According to the USTR, this will be accomplished through” …negotiations on the following pillars: ( 1 ) Trade, ( 2 ) Supply Chains, ( 3 ) Clean Energy, Decarbonization, and Infrastructure, and ( 4 ) Tax and Anti-Corruption. Because of its flexibility, IPEF partners are not required to participate in all four pillars. Neither India nor China participated.

Then, in November 2023, Biden abandoned the IPEF trade pillar. And as a result, Trump, the new president, intends to raise tariffs across the board as well.

Robert Lighthizer, a former US trade representative who served under the first Trump administration and is now expected to serve under the second, outlined the bipartisan US embrace of protectionism in an essay that the Financial Times published on November 1:

” In the last three decades, millions of jobs have been lost, many of which are highly paid in the manufacturing sector. We have seen median wages stagnate…. Communities across America have been destroyed … We have run up giant&nbsp, trade deficits every year for decades. We are losing the future innovation that comes with manufacturing because of this, which sends trillions of dollars of our wealth overseas.

After distinguishing nations that “adopt industrial policies that are designed to increase their standard of living from those that adhere to free trade,” Lighthizer comes to the conclusion that” countries that consistently run large surpluses are the protectionists in the global economy.” Others, like the US, that run perennial huge trade deficits are the victims”.

Never mind that outsourcing to low-cost foreign suppliers has long been a key factor in the rise in economic growth and the rise in living standards in Germany, Japan, South Korea, China, and other nations.

Additionally, the US itself prospered for the majority of its history and established its own industrial base behind a wall of tariffs as high as 40 %. And unlike quotas and sanctions, tariffs are a market-based instrument that simply change price incentives. In any case, Trump has decided to change, and other nations must follow suit.

India has the world’s fifth-largest national economy in US dollar terms, ranking between Japan and the UK, but the third-largest in purchasing power parity terms, behind only China and the US. The Economist Intelligence Unit predicts a 6.9 % increase in GDP for all of them this year, and it is outgrowing them all.

If participating in regional trade agreements gave its own companies comparable access to new markets, India might eventually replace it as a source of demand with more than four times the population of the US.

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