India opposes rejoining RCEP over China concerns

May 21, 2020: Indian Prime Minister Narendra Modi announced India’s decision to quit the Regional Comprehensive Economic Partnership grouping, which includes the 10 ASEAN nations, in November 2019, and a new deadline for India to consider a new offer on market access expired on May 15, 2020.

Neither the Commerce and Industries Ministry nor the Ministry of External Affairs would confirm that they had even replied to the RCEP letter by May 15.

A senior Ministry of External Affairs (MEA) official indicated that global post Coronavirus concerns over China had strengthened India’s opposition to the grouping.

“If anything the COVID-19 experience, and the experience of countries that have been overly dependent on imports from China or one country would have reinforced and revalidated the decision to stay out of RCEP,” said Ashok Malik, policy advisor in the MEA.

The remaining 15 countries in the RCEP negotiations are the 10 ASEAN members, Japan, China, South Korea, Australia and New Zealand. They have stated their intention to sign the agreement in November 2020, with or without India. Now it is without India. The text has been negotiated in secret, and will not be released until after it is signed.

While past Indian comments on the RCEP have focused on the big trade deficit with China, and possible impacts on agriculture, the main message now is about the Modi government’s ‘Make in India’ policy, which is only moving to Level 2 out of 10 Levels. The RCEP is not compatible with ‘Make in India’.

Australia and Japan have been leading the effort to bring India back into the group. India is the only country in the group with which Australia does not already have a free trade agreement.

Australia and India launched negotiations for a Comprehensive Economic Cooperation Agreement in May 2011. There have been nine rounds of negotiations, the most recent of which was held in September 2015. India put these talks on ice to enable it to focus on the RCEP, and it became apparent that India did not agree with Australia’s proposal for Investor-State Dispute Settlement in the proposed FTA, nor with Australia’s offer on temporary migrant worker visas.

India’s absence from the RCEP means there will be little new market access opportunities in the RCEP for Australian exporters, making it hard to justify Australia signing the agreement.