Policy Alert #198 | November 8, 2019

On November 4, 2019, at the 35th ASEAN (Association of Southeast Asian Nations) Summit in Bangkok, Thailand, representatives from the ten members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) as well as Australia, China, India, Japan, New Zealand, and South Korea met for final negotiations on the Regional Comprehensive Economic Partnership (RCEP), which has been in the works since 2012. Fifteen of the sixteen states announced that they “have concluded text-based negotiations for all 20 chapters and essentially all their market access issues; and tasked legal scrubbing by them to commence for signing in 2020.” India, however, opted out of the agreement due to “significant outstanding issues,” chiefly, its concern that Chinese imports through the deal will increase its trade deficit and harm its national economy. In this RPI Policy Alert, we review the Rising Powers’ responses to the finalization of RCEP and India’s decision to stay on the sidelines.

 

CHINA

In response to a question about the RCEP proceedings at a press conference, Chinese Foreign Ministry Spokesperson Geng Shuang answered: “Important progress has been made in the RCEP negotiations. […] We understand that the progress achieved doesn’t quite meet all parties’ expectations, but it is still inspiring that all parties made principled commitments on signing an agreement next year. It’s an encouraging message of East Asian countries’ support for multilateralism and free trade when faced with unilateralism and protectionism. Here we call on all parties concerned to continue constructive negotiations, work toward the shared goal, and achieve substantive, final results as soon as possible.”

• The state-supported China Daily hailed the progress made on RCEP at the summit: “This is East Asia and the broader region’s collective answer to the rampant unilateralism and protectionism coming from the other side of the Pacific Ocean. There is no better illustration of the countries’ unshakable commitment to multilateralism and free trade. There is no better way to help the region overcome the tide of troubles originating from the trade war between China and the United States.”
• In an op-ed, contributor for the nationalist Global Times Ai Jun blamed India’s political system for its failure to garner enough domestic support for joining RCEP: “Joining the RCEP could help India further integrate into the regional and global industrial chain, gain more economic profits by taking advantage of its large population as well as markets, and promote its domestic economic reforms. [Indian Prime Minister] Modi knows this. So does [Indian Commerce and Industry Minister] Goyal. But they are helpless in the face of domestic political pressure. India’s potential is trapped by its system.”
• The independent, Hong Kong-based South China Morning Post advocated leaving India to its own devices: “Stalling progress would result in the loss of real GDP gains. The 15 nations that have signed have left the door open to India; they need to push forward regardless to ensure they can reap the benefits amid so much economic uncertainty.”

 

INDIA

In a media briefing at the summit, Ministry of External Affairs Secretary (East) Vijay Thakur Singh explained India’s position on RCEP: “India conveyed its decision at the summit not to join the RCEP agreement. This reflects both assessment of the current global situation as well as of the fairness and balance of the agreement. India had significant issues of core interest that remained unresolved. In his remarks on the subject Prime Minister [Narendra Modi] highlighted that he was guided by the impact it would have on the lives and livelihoods of all Indians especially vulnerable sections of society. He spoke of Mahatma Gandhiji’s advice on recalling the face of the weakest and the poorest and then ask if the steps are of any use to them. India has participated in good faith in the RCEP discussions and has negotiated hard with a clear-eyed view of our interests. In the given circumstances we believe that not joining the agreement is the right decision for India. We would continue to persevere in strengthening our trade, investment and people-to-people relations with this region.”

• The left-leaning Hindu criticized the decision to stay out of the deal: “[T]he fallout of India’s decision is that it has burnished its image as a protectionist nation with high tariff walls. With a market of 1.3 billion people, there is bound to be more pressure on India to open its gates. The smart way to handle this is to initiate reforms on the export front, bring down costs in the economy and, simultaneously, increase efficiencies.”
• In an op-ed in the liberal Indian Express, V.S. Sheshadri, vice chairman of Research and Information System for Developing Countries in New Delhi, warned that Indian foreign policy would weaken without RCEP: “Joining the RCEP would have given more substance to our Act East policy. The economic pillar of this policy has remained weak compared to those pertaining to political ties, strategic and security aspects and people to people relations. Opting out of the RCEP implies there is need for greater exertion now on strengthening connectivity, trade and investment bilaterally. Concepts like Indo-Pacific will otherwise lose traction for us.” 
• The liberal Hindustan Times was more forgiving waiting it out, but argued that the country needed to make progress to join the agreement eventually: “Protectionism is good as long as it serves the objective of boosting competitiveness. Thus far, India’s record on this isn’t great. Its high walls have usually served to make Indian industry and the economy complacent at best and downright uncompetitive at worst. That will have to change.”
• The center-right Times of India similarly called for the government to catch up and join the agreement: “India’s decision to withdraw from RCEP is the best possible course at this moment. However, two things need to be kept in mind. Isolationism in economic matters will only lead to stagnation. The RCEP option remains on the table as other members have made clear that India can join at a later date. Therefore, the government now needs to work on a set of reforms which will make the Indian economy, including agriculture which records a trade surplus, more competitive.”
• The pro-government Daily Pioneer welcomed Prime Minister Modi’s choice to walk away: “Critics may argue that not being a part of the bloc is tantamount to not having an even footing in terms of preferential access and losing export competitiveness. Yet the fact remains that we cannot ignore our interests. […] India would not get too large a slice of the cake under China’s neo-imperial designs. It must, therefore, strengthen sub-regional cooperation like the BIMSTEC [Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation]. Pragmatism doesn’t mean we are shy, it means measuring our chances wisely.”

 

JAPAN

At a press conference, Japanese Foreign Minister Toshimitsu Motegi announced Japan’s response to the RCEP proceedings: “[A]t the Third RCEP Summit Meeting held in Bangkok, Prime Minister [Shinzo] Abe expressed the determination to continue to play a leading role to aim to achieve the world’s largest free and fair economic sphere that is future-oriented by the early conclusion of the negotiations with the [sixteen] countries, and realize the signing of the RCEP in 2020. […] Based on the Joint Leaders’ Statement, Japan will continue to play a leading role toward having the RCEP agreement signed with [sixteen] countries in 2020.”

• The centrist Japan Times equated Indian Prime Minister Modi to US President Donald Trump over his protectionist stance: “Couched in domestic terms, Indian Prime Minister Narendra Modi’s hesitance makes some sense. He faced harsh criticism by the opposition in India. But Modi just won national elections and his position is strong. He styles himself an economic reformer and a diplomatic activist. Turning his back on RCEP undermines both objectives. Like Trump, ASEAN now looks at him as less engaged with the region and inclined to big words rather than action. If New Delhi seeks to shape regional rules and order, it must be part of such deals. This is a retreat from that high profile.”
• The conservative Yomiuri Shimbun highlighted Japan’s interest for India to join the agreement: “Participation in the RCEP would likely boost India’s efforts to expand its exports in the field of information technology, which include software, an area in which it enjoys an advantage. There is also the possibility that participation would lead to Indian business operations in overseas markets, utilizing domestic personnel with IT-related expertise. It is important for Japan to emphasize such advantages and tenaciously urge India to return to the RCEP talks. […] If the RCEP takes effect without India, there are concerns that China will increase its influence in East Asia.”

RPI acknowledges support from the MacArthur Foundation and the Carnegie Corporation of New York for its activities.