Timing of RCEP (Regional Comprehensive Economic Partnership) is salient. Just two days to the first anniversary of public knowledge of Wuhan virus outbreak and commencement of second phase of Quad Joint exercise in the Arabian Sea, 15 countries signed RCEP. At a time when the loosely woven Quad, a constellation of democracies is taking shape to emerge as counter weight to China in the Indo-Pacific, members of Quad, Japan and Australia have acceded to China-led and China-driven RCEP. The ambiguity of these and other Indo-Pacific nations is incomprehensible.
In response to Chinese aggressive expansionism, Trump
administration has resurrected the Quad and even made FOIP, the major concept
of its foreign policy. After 12 years, The Quadrilateral Malabar exercises,
teeming solidarity and friendship began gaming exercises in the first week of
November as a strategic message to China the region. Barely the message would
have sunk into the CCP (Chinese Communist Party), RCEP saw light of the day.
China conceived RCEP in 2012, to counter growing influence of
the US in the Asia-Pacific. After eight years of negotiations, on November 15th,
10 ASEAN Nations, China, South Korea, Japan, Australia and New Zealand have
signed RCEP, the largest free trading arrangement. RCEP includes the second and
third largest global economies, makes up for one third of global population and
30% of Global GDP. India has been initial negotiating partner of RCEP. But last
year, India pulled out after RCEP failed to address its concerns.
Perturbed by the prospect of China writing trading rules for
the Asia-Pacific, Obama envisaged Tran-Pacific Partnership (TPP) comprising of
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru,
Singapore and Vietnam but excluded China. In 2017, Trump administration withdrew
from TPP. After US exit, Japan took the lead and formed Comprehensive and
Progressive Agreement for Trans Pacific Partnership (CPATPP). RCEP and CPATPP
have seven common partners in the Asia-Pacific region. RCEP’s conclusion has
given China a clear edge over the US in the region. Written with Chinese
characters, RCEP unlike CPATPP doesn’t include any provisions for labour and
environment.
RSCI
Reeling under the impact of the Wuhan pandemic, nations vowed
to decouple and restructure their trade supplies. Japan, Australia and India
launched Resilient Supply Chain Initiative (RSCI) in September to build
resilient supply chains. The moot point has been to diversify sourcing across
various sectors to minimise risk from disruption and enhance resilience. Wuhan
pandemic caused a disruption of global supplies sourced from China in the
initial stages of the outbreak. While China quickly recovered and restored
supplies, the impact has been felt across the globe. To avoid such recurrence
in future steering an alternate course for new geostrategic realm, countries
wanted to disengage and reposition supplies to countries which posed no
security threats. The larger objective of RSCI has been to build multi-country
initiative.
RSCI was spurred by strong security and political concerns as
well. Wary of Chinese history of using trade as a strategic weapon, nations envisaged
this new idea. The genesis of this proposal had its roots in the trade spats
with Australia, contesting claims over Japan’s Senkaku island and the prolonged
stand-off with India across the LAC. Coming in the wake of Japan offering
subsidies to companies relocating from China to South East Asia, India and
Bangladesh this proposal eventually shaped into an anti-China alliance symbolising
emergence of an initiative along geopolitical lines. It also pointed to
fashioning of new global economic order where strategic partnerships are
fortified by robust economic diplomacy.
In the backdrop of such alternative grandiose plans,
conclusion of China-driven RCEP has raised doubts over the strategic
perspectives of the signatories. ASEAN countries have been circumspect of
China’s ambitious hegemonic expansionism. Australia openly rebuked China’s
coercive diplomacy and mercantilist approach. Japan is raising alarm over
Chinese frequent incursions. Post-THAAD installation, China imposed trade
sanctions on South Korea. New Zealand and Australia are intimidated by China’s
growing influence in the Pacific Islands. Notwithstanding the growing
disaffections, nations displayed no compunctions to align their economic
fortunes with China.
A popular counter argument is now piquantly played in support
of signatories- stung by recession, swayed by perception of lower tariffs of
free trading regime like RCEP might fuel growth, countries have huddled to sign
the agreement. But all of them clearly missed the forest for the woods. With
India out of the deal, the gains are projected to be marginal. China is going
to be the major beneficiary of RCEP.
For all the devastation inflicted by the China-originated
Wuhan pandemic, countries are rewarding China by sourcing their supplies and
allowing access to their markets. By signing RCEP countries undermined China’s
hegemonistic behaviour and lent Beijing a strategic handle to mangle their
economies. They inadvertently created a benign external environment which will
act as driver for Chinese economy.
RCEP is China’s geostrategic tool
RCEP is China’s geostrategic tool. China has been stealthily
expediting RCEP negotiations, to deepen its integration with Asian economy and to
offset the damage suffered by the US trade war1. With India
and the US, the two major balancing forces staying away from RCEP, Beijing is
at the verge of evolving a China-centric Asian economic order. With India out
of the picture, China will opportunistically reassert itself in the
Asia-Pacific region, thwart the evolving Indo-Pacific fabric where India’s role
as major regional power is acknowledged.
With concerns of a smooth transition of power in the US
abound, roping in Japan and Australia, strong advocates of FOIP into RCEP,
Beijing has consolidated its influence over the region. Trump for all his
fallacies understood Chinese game plan and propped up the concept of
Indo-Pacific, renamed US Pacific Command as Indo-Pacific Command as a strategic
message to China. Went hammer and tongs after China over the mounting trade
surplus.
President elect Joe Biden’s ambiguous messaging is a reprieve
to China which is steadily cementing its position as a major economic and
military superpower of the region. Lured by economic gains, nations let China
scot free despite the havoc wrecked by China originated Wuhan pandemic.
Economic gains apart, China duped nations and successfully regained dominance
over the global supply chains.
Europe is slowly waking up to a reality of a 21st
Century, dominated by Sino-centric Asia. Manfred Weber, leader of the European
People’s Party, began advocating for a “new transatlantic agenda” and pronounced
the need for an urgent re-unification of the Western World to battle China3.
India withdraws from RCEP
India is privy to Beijing’s nefarious tactics since
independence. Still New Delhi went out of way to accommodate Chinese interests
and facilitated its global rise by openly pitching for its UNSC membership. In
reciprocation, India was handed over the most humiliating defeat, years of
creeping expansionist attempts and tumultuous encirclement.
China’s empty talk of “shared future” and tall claims
of “win-win cooperation” through various flagship initiatives remain a
myth. It is interesting that ASEAN, Japan, Australia, New Zealand which
expressed concerns and raised alarm over the pursuits of the hegemon have given
into the financial pressure.
By staying away from RCEP, India has made a point. The
open-ended Indo-Sino logjam across the LAC, during the pandemic has irrevocably
changed New Delhi’s approach towards China. Galwan clashes has hardened its
stance. Reiterating, business can’t be as usual, India upped ante against
China, banned popular gaming app PUBG mobile and 223 apps with Chinese links
citing security reasons1 and began decoupling.
India owes its present geopolitical profile to a formidable
growth trajectory in highly competitive sectors. There is a growing recognition
that, “international relations have increasingly come to be shaped by
economic relations”. In this context, New Delhi is facing strident
criticism from certain quarters for staying away from RCEP, believed to trigger
growth. Fears of India losing out of the economic race for failing to accede to
RCEP are abound. Some critics even alluded to this move as India’s regression
into a pre-1991 scenario.
Rebutting these concerns Foreign Minister Jaishankar said, “the
recent debate on RCEP offers lessons in foreign policy as much as in trade
domain. On the one hand, we should not go back to the old dogma of economic
autarky and import substitution. But at the same time embracing the new dogma
of globalisation without cost benefit analysis is equally dangerous…. We
negotiated till the very end, as we should. Then knowing what was on offer, we
took a call. And that call was that no agreement at this time was better than a
bad agreement.”4
With regard to cost benefit analysis, Ministry of Finance
report pointed that FTA with ASEAN countries has risen the trade deficits from
$5 billion in 2010 to $22 billion. While India’s abysmally poor manufacturing
is a major cause of concern, misuse of FTA route is found to be impacting the
domestic industry and widening trade margins.
Certainly, India has to buckle up its manufacturing sector to
stay competitive. Atma Nirbhar Bharat approach to enhance resilience of country
has all the attributes to revive the economy. To plug the loopholes of FTA,
India has notified Customs authority to stringently implement, “Rules of
Origin Under FTA”5. It is anybody’s guess as which
products are inundating Indian markets. Over the years India is paying hefty
price for the non-reciprocal FTAs which exempt service sector.
It is common knowledge that China leveraged initiatives are
devoid of “openness and efficiency”. Clarifying India’s stand,
Jaishankar, stated that India is not averse to free trade pacts which are “fair
and balanced” with EU as opposed to RCEP which would have “negative
consequences”. FTA with EU is no cake walk. Given, EU’s growing scepticism
and disenchantment with China, EU might be keen on exploring new alternatives
to cement trade ties with India. Besides, India is also swiftly working towards
conclusion of FTA with America.
Having ceded billions of dollars as trade deficit to China,
India has learnt its lessons the hard way…. Currently, 20 negotiations for
bilateral FTAs are underway. Clearly India is not ready to give into “agreements
that are FTAs by stealth with China”. RCEP is clearly not the end of the
road for India. RCEP will eventually take several months or years to come into
effect. At least six ASEAN members and three non-ASEAN members should ratify for
RCEP to kick in.
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