By Chris Sevcik, Director of International Trade Services, WTCGP
The RCEP is a free-trade pact among 16 countries: the ten ASEAN members and India, China, Australia, New Zealand, Japan and South Korea. RCEP member states make up almost half of the world’s population at 3.4 billion people and their combined GDPs account for about 39% of total global GDP at 49.5 trillion dollars. The region includes some of the fastest growing economies in the world, and as they continue to grow, it is projected that the region’s GDP will be 250 trillion dollars by 2050.
The RCEP is not finalized. Currently India has reservations on joining the RCEP. In the past, some citizens in India perceived that some of their prior trade deals were not ideal for India and the current government is keen on ensuring that this perception is not mirrored this time. Members of the RCEP would like to see India join as they are one of the largest economies in the region and are poised to be a major growth area for years to come. Regardless of India’s involvement, other RCEP member states have expressed that they are ready to move forward with or without India’s involvement. India understands the benefits that this trade deal could bring to their economy and they are cautiously moving forward; however, they are acting as a stronger negotiator in this new deal.
China needs better access to Indian markets more than India needs access to China markets. India is standing its ground and not offering many concessional tariff lines to China in order to try and stem an onslaught of Chinese duty-free goods. While this may work today, factories have been moving from China to Southeast Asia and have recently increased due to the US-China trade dispute. These factories will have preferential trade agreements with India and this may serve as a backdoor for Chinese goods in the future. The rules of origin will be an area of contention as negotiations continue.
The RCEP has been described as China’s answer to the Trans-Pacific Partnership, TPP. The TPP was led by US efforts while the RCEP is led by China and the plans outline the different leading countries’ stances. The TPP was more ambitious and included regulations on labor, intellectual property and state-owned companies in addition to providing market access for goods and services. The RCEP does not address issues such as regulations on labor, intellectual property or state-owned companies and focuses more narrowly on standardizing tariffs in the region while improving marketing access for services and investment.
The RCEP should increase regional trade when complete. There are issues with the plan currently and India is working on ensuring that their interests are upheld in the final agreement. When the agreement is finalized, this new trading block will represent the largest and fastest growing countries and region in the world. Understanding this agreement will better ensure companies of their future success.