Impact on South Asia of India’s opt-out from RCEP
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On November 15, 2020, 15 countries — members of the Association of Southeast Asian Nations (ASEAN) and five regional partners (Australia New Zealand, Japan and South Korea) — signed the Regional Comprehensive Economic Partnership (RCEP). A study by Brookings terms it “arguably the largest free trade agreement in history.”
It goes on to assert that RCEP, often labelled inaccurately as “China-led,” is a triumph of ASEAN’s middle-power diplomacy.
It was the ASEAN countries that spelt out in 2012 the manner in which the RCEP would be built and it was the ASEAN secretariat which since then has played the lead role perhaps with a helping hand from China to bring it to fruition.
What does the RCEP call for? It eliminates, by one estimate, about 90% of tariffs, over a period of 20 years after coming into effect (which will require all 15 countries to ratify it). According to the Economist, its coverage of services is patchy, and many member states like Japan will maintain high import duties on sensitive agriculture products. But it is a huge development that it brings together about 30 percent of the world’s population and GDP and represents a 27.4 percent share of global trade.
ASEAN already has a vast single market comprising 600 million people and the world’s third-largest labor force behind India and China.The bloc is projected to become the fourth-largest economy by 2030 with domestic consumption doubling to $4 trillion.
Clearly it will take time and a concerted effort before all expected benefits will flow, but one should note that a paper from the Peterson Institute for International Economics cites shows it will raise global GDP in 2030 by an annual $186bn. The Brookings Institution’s estimates of the gains and losses are that China stands to gain the most income from RCEP ($100 billion) by 2030, followed by Japan ($46 billion), South Korea ($23 billion), and Southeast Asia ($19 billion). Brookings also estimates that by opting out of the agreement, India will forego about $60 billion of income.
Li Keqiang, China’s prime minister, revelled in the signing, and called RCEP “a victory of multilateralism and free trade” and, more lyrically, “a ray of light and hope amid the clouds.”
Why did India opt out?
Some observers believe that it was driven by the Indian perception that the bloc would be dominated by China, with their relations deteriorated after incidents on the LAC.
Others however suggest the more acceptable explanation that India wanted to pursue its ‘India First’ its ‘Make in India’ and India’s ‘Self Reliance,’ both as a genuine BJP economic goal but also in the view of others as a way of strengthening the nationalism and ‘Hindu Rashtra’ goals that the BJP has set for itself under Prime Minister Modi.
This will mean that India’s oft stated ‘Look East’ policy, shorn of its economic dimension may come down to no more than the wholly military ‘Quad Coalition Project’ of the MALABAR naval exercise that concluded in November.
India, it can be apprehended, will now focus on South Asia and seek to strengthen its bid to be the hegemon of this region.
India has been internationally discredited, and it has blatantly disregarded the values the West, at least theoretically, holds dear. But it is the bulwark, the counter weight against China, and this weighs more heavily in the West’s policies than values.
Najmuddin A. Shaikh
So how will the region react? India’s relations with its neighbors, be it China or the SAARC countries, are fraught and all are looking for alternatives-- and China may wish to assist discreetly.
With Pakistan of course India has said it will not talk, since it attributes its massive problems in Kashmir to Pakistani interference rather than to the rejection of the Indian administration of Kashmir by the Kashmiri people. It has mounted over the last 15 years, a massive disinformation campaign against Pakistan as revealed in EU DisinfoLab’s elaborate report.
India has been internationally discredited, and it has blatantly disregarded the values the West, at least theoretically, holds dear. But it is the bulwark, the counter weight against China, and this weighs more heavily in the West’s policies than values.
Pakistan has to see what it can do to take advantage of its special relationship with China while maintaining as far as it can its relationship with the US, which continues to be the sole superpower both because of its military dominance and its control of the dollar.
In his video speech at the opening ceremony of the 17th China-ASEAN Expo (CAEXPO) and China-ASEAN Business and Investment Summit in China’s Guangxi Zhuang Autonomous Region, President Alvi said Pakistan has deep-rooted cultural and economic links with the China-ASEAN region and the country is deeply committed to further strengthening and diversifying these ties by exploring the feasibility of a China-ASEAN trade triangle that could propel three-way cooperation in trade, investment, culture and tourism.
This is the task the new situation in the region has created for Pakistan’s foreign policy and economic policy leaders. It is a difficult task but one that Pakistan must pursue consistently and with full determination.
-Ambassador Najmuddin A. Shaikh is a former foreign secretary of Pakistan, and served as high commissioner to Canada, ambassador to Germany, US and Iran. He is a former member of the board of governors of the Institute of Strategic Studies in Islamabad and a founding member of the Karachi Council of Foreign Relations.
