Hindu Editorial Analysis: 19-January-2024

The Regional Comprehensive Economic Partnership (RCEP) is a free trade area comprising 10 ASEAN members and five dialogue partners, including China. Signed in November 2020, it came into effect in January 2022, covering about 30% of the global GDP and world population.

China’s Trade Surplus and Deficit Dynamics
  • Post RCEP implementation, China experienced a significant boost in its trade surplus with nations it previously had positive balances.
  • Simultaneously, there was a notable reduction in the trade deficit with countries where China had negative balances.
India’s Withdrawal from RCEP
  • India, a founding RCEP member, withdrew in 2019 due to unmet demands like tariff differentials, customs duty, MFN rule alterations, ratchet obligation exemptions, and recognition of India’s federal character in investments.
  • A primary concern was China’s presence and the potential widening of India’s trade deficit.
China Factor in India’s Withdrawal
  • India’s fear of worsening trade deficits with China, a significant trade partner, influenced its decision to exit RCEP.
  • Apprehensions centered around opening markets to cheaper Chinese goods without reciprocal access for Indian products.
Analysis of India’s Withdrawal
  • Early data suggests India’s decision was foresighted, protecting its domestic manufacturing, especially the MSME sector.
  • Opening up to RCEP, particularly China, could have adversely affected government initiatives like the Production Linked Incentive (PLI) scheme.
  • India’s focus on negotiating bilateral agreements with the US and the EU is viewed as strategic, ensuring the protection and growth of its economic interests.
Moving Forward: Indo-Pacific Economic Framework for Prosperity (IPEF)
  • India, along with other countries, is aligning with the U.S.-driven Indo-Pacific Economic Framework for Prosperity, showcasing a shift in its economic engagement strategy.
Benefits of RCEP
  • RCEP fosters economic growth and regional stability.
  • It encourages investments, enhances competitiveness, promotes innovation, and streamlines trade procedures and regulations.
Why In News

Recent observations highlight that the Regional Comprehensive Economic Partnership (RCEP) has significantly benefited China, fostering economic growth and strengthening regional cooperation. As a key participant, China’s increased trade ties and improved market access underscore the transformative impact of RCEP on its economic landscape.

MCQs about The Regional Comprehensive Economic Partnership

  1. What is the primary purpose of the Regional Comprehensive Economic Partnership (RCEP)?
    A. Military cooperation among member nations
    B. Facilitating trade and economic growth
    C. Cultural exchange programs
    D. Environmental conservation initiatives
    Correct Answer: B. Facilitating trade and economic growth
    Explanation: RCEP aims to facilitate trade and economic growth among its member nations, covering about 30% of the global GDP and world population.
  2. Why did India withdraw from RCEP negotiations in 2019?
    A. Lack of interest in international trade agreements
    B. Successful resolution of all economic issues
    C. Unmet demands including tariff differentials, customs duty, and others
    D. Fear of losing military autonomy
    Correct Answer: C. Unmet demands including tariff differentials, customs duty, and others
    Explanation: India withdrew from RCEP due to unmet demands, including tariff differentials, customs duty, alterations to the most favoured nation rule, and other considerations.
  3. What was a significant factor influencing India’s withdrawal from RCEP?
    A. Fear of political isolation
    B. Concerns about environmental impact
    C. Presence of China and potential trade deficits
    D. Desire for increased cultural exchange
    Correct Answer: C. Presence of China and potential trade deficits
    Explanation: India’s withdrawal was influenced by the fear that the presence of China in RCEP could lead to a widening of trade deficits with the country.

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