Talks for the largest free trade area, comprising 16 nations, are well underway and will hopefully be finalised by the end of 2019, according to Economic Times reports.
Plans for the Regional Comprehensive Economic Partnership (RCEP) began in 2013 with the goal of creating a free trade zone among the 10 ASEAN nations of Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam. The group was then expanded to include India, China, Japan, South Korea, Australia and New Zealand.
Goods, services, investments, economic and technical cooperation, competition and intellectual property rights are under discussion for the RCEP. India is also hoping to include a revenue-sharing agreement with China on earnings from Bollywood movies screened in China.
Sudhanshu Pandey, an official in India’s Ministry of Commerce, told Reuters that India wanted to see more progress on services, which constitute more than 50 per cent of the GDP of most of the RCEP countries.
If this agreement comes to fruition, it will cover a huge geographical area that contributes 34% of global domestic product and 40% of world trade where nearly half the world’s population resides.
However, after five years and 24 meetings regarding the RCEP, the government of India recently hired three eminent consultants, to independently analyse the benefits and disadvantages of RCEP for India, Economic Times reported.
The impact of RCEP could result in India having to move quickly to reduce its bureaucracy, improve productivity and infrastructure to compete with less regulated countries in the new trade bloc, according to Dr John Glen, Visiting Fellow at the UK’s Cranfield School of Management.
“India tends to be an overly regulated economy. Initially, when you introduce a Free Trade Agreement (FTA) where your industry has been over-regulated – in some instances over-subsidised or heavily protected, the transition period from a non-FTA to an FTA can be painful because some of your local industries can be heavily damaged if you don’t adjust swiftly,” Glen explained.
One of the main concerns for India would be the lack of adequate infrastructure. Roads, rails, ports and air infrastructure will need to meet the demand for increased import and export trade, Glen said.
He added that India also needs to look at reforming local regulations as well as national and state laws to avoid delays in the development of new ports, airports and roads.
India’s potential within the RCEP is high, even if some industries will win and some will lose in an FTA at a micro level. “There will always be some tension between the winners and losers, but economies tend to win at the macro level. So, the Indian economy will win,” Glen explained. “The Indian economy, over a 5- to 10-year period, will grow faster than what would have otherwise been the case. Within that will be some winners and losers, but the economy as a whole will grow. And that’s the bit that India needs to get over at the moment. I think China, intellectually, philosophically, is way past that point. They understand that that’s the game that’s being played, as do many of the other players who are part of that broader economic partnership.”