Trade Matters
World Bank suggestion to India to join RCEP misplaced, says think tank
This story was originally published at 18:10 IST on 4 September 2024
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NEW DELHI – India's decision to not join the Regional Comprehensive Economic Partnership, or RCEP, helped the nation to diversify its trade partners and reduce the risk of over-dependence on China, said Global Trade Research Initiative or GTRI, a trade-focused research group. "The World Bank's suggestion for India to reconsider joining RCEP is based on flawed assumptions and outdated projections."
The World Bank on Tuesday suggested that India should rethink its regional integration strategy and re-evaluate its decision to integrate itself with the world's largest regional trading agreement RCEP. In 2019, India had pulled out of RCEP, primarily due to concerns over cheap Chinese imports flooding the Indian market. The agreement includes the Association of Southeast Asian Nations, China, Japan, South Korea, New Zealand and Australia.
The study, on which the World Bank based its recommendation, projected income gains of $60 bln for India by 2030 but neglected that the majority of the gains would come from a rise in imports rather than exports, GTRI founder Ajay Srivastava said in the report.
The trade deficit of most of the RCEP countries has increased with China after they joined the grouping, GTRI said. ASEAN's trade deficit with China expanded to $135.6 bln in 2023 from $81.7 bln in 2020. Similarly, Japan's trade deficit with China rose to $41.3 bln in 2023 from $22.5 bln in 2020.
"This pattern suggests RCEP gains to China over others will increase as full concessions take place and the economic benefits of RCEP are disproportionately skewed toward China, further validating India's apprehensions about unfair competition," GTRI said.
Without any major tariff concessions to China, except for the Asia-Pacific Trade Agreement, India's deficit with China exceeded $85 bln in 2023-24 (Apr-Mar). If India had joined RCEP, the deficit would have been much worse due to zero tariff imports, the GTRI report said.
Besides, India already has a free trade agreement with 13 out of 15 RCEP members, except New Zealand and China. Therefore, any extra gains from the RCEP were likely to be incremental at best, especially given China's opaque trade practices and its history of flooding markets with subsidised goods.
Moreover, India's non-participation in RCEP proved insightful when the COVID-19 pandemic exposed the vulnerabilities of over-reliance on China-centric supply chains. "The global shift toward 'China Plus One' strategies highlights the risk of depending heavily on a single country for critical supply chains," GTRI said.
"In conclusion, the World Bank's suggestion for India to reconsider joining RCEP is based on flawed assumptions and outdated projections," Srivastava said in the report. End
US$1 = 83.97 rupees
Reported by Krity Ambey
Edited by Akul Nishant Akhoury
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