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The Regional Comprehensive Economic Partnership (RCEP) meeting was held at Bangkok recently. It took place under the shadow of US-China trade war and the economic face-off between Japan and South Korea. India had skipped the previous RCEP meeting held last month. Indian Commerce and Industry Minister Piyush Goyal participated in the crucial event. This was for stimulating India’s dynamism in global economic operations. Mr. Goyal participated in the ministerial meeting with a host of agendas of the country’s multilateral and bilateral negotiations with other member nations of the grouping.
RCEP comprises of ten members Association of South-East Asian Nations (ASEAN) and six other regional nations, viz., India, China, Japan, South Korea, Australia and New Zealand. It may be noted that the organization was formed to galvanize the prospects of a free trade regime in the entire ASEAN and its’ nearby region. The joint statement issued by the 16 participating nations after the 7th ministerial meeting emphasized on the prime agenda of establishing a free trade regime for the whole zone. Mr. Jurin Laksanawisit, the Deputy Prime Minister and Commerce Minister of the host nation, Thailand said that a final deal on a free trade regime is likely to be completed by next year.
It is significant to note that ASEAN is the second-largest economic block in the world after the European Union (EU). After the tepid outcome of South Asian Association for Regional Cooperation (SAARC), especially on the economic front; India has increased its association and cooperation with ASEAN. Today, ASEAN members are among India’s largest trading partners followed by the USA. India’s bilateral trade with ASEAN nations jumped three-fold from US$ 21 billion in 2005-06 to US$ 96.7 billion in 2018-19. ASEAN countries have emerged as India’s top trading partner in 2018-19 with 11.47 percent share in India’s overall trade. India was ASEAN bloc’s sixth-largest trading partner in 2018.
Under these circumstances, if a free trade agreement takes place, India will get enormous opportunities on several fronts such as goods, services, investments, intellectual property and government procurement. It needs to be emphasized that engagement with ASEAN is at the core of India’s ‘Act East’ policy. Also, ASEAN is India’s gateway to the wider Indo-Pacific region. As close partners, there are convergence of views both in India’s and ASEAN’s outlook for cooperation and trade. India enjoys robust trade ties with many countries of the region. However, the trade deficit with certain countries like Malaysia and South Korea needs to be addressed.
The foreign direct investment (FDI) inflows into India from ASEAN in the April-March 2018-19 period was substantial at $ 16.41 billion which is about 37 per cent of the total FDI inflow into India. FDI outflows from India to ASEAN in 2018 was $1.7 billion, placing India as ASEAN’s sixth-largest source of FDI.
The Indian Minister for Commerce and Industry, Piyush Goyal, on the side-lines of the RCEP meeting also held discussions with counterparts from Japan, Singapore, China, Indonesia, Australia, New Zealand, the Philippines and Thailand.
The India- ASEAN Free Trade Agreement (FTA) was implemented in January 2010. At that time, trade was mostly centralized on certain commodities like palm oil, rubber, coffee, black tea and pepper. There was widespread apprehension in India that the FTA would drastically increase import of these goods from ASEAN countries and would ultimately hurt Indian industries in the sectors. These products were either declared as special products with very restricted tariff reduction or as products in the exclusion list–thus keeping them completely outside the ambit of the agreement. The economic rationale for this FTA has come under review.
However, India’s decision to review its free trade agreement (FTA) with ASEAN would not be affecting the talks on the Regional Comprehensive Economic Partnership (RCEP), which are expected to be completed by the year-end. A final deal on the RCEP could be a reality early next year. Indian Commerce Minister Piyush Goyal said, India holds a significant place in the global economy and New Delhi will put forth ideas for stable growth in trade and investments.
Script: Manohar Manoj, Economic Journalist