Regional Comprehensive Economic Partnership (RCEP)

Four years after Indiawalked out of the Regional Comprehensive Economic Partnership (RCEP) agreement, neighbors Sri Lanka and Bangladesh are now considering their chances of membership in the 15-nation trading bloc.

Sri Lanka and Bangladesh are moving away from protectionist policies and see regional markets as crucial for their economies.
Bangladesh is expected to graduate from Least Developed Country status by November 2026, which may affect its access to global markets.
Joining RCEP could potentially increase Bangladesh’s exports by $5 billion and simplify trade agreements with RCEP member countries.

About

RCEP is a trade deal between the 10-member Association of Southeast Asian Nations (ASEAN) and five other nations: China, Japan, South Korea, Australia, and New Zealand.

Aims and Objectives

Lower tariffs, open up trade in services, and promote investment to support emerging economies in catching up with the rest of the world.
Simplify trade by allowing companies to export products within the bloc without meeting separate requirements for each country.
Includes provisions on intellectual property but does not cover environmental protections and labor rights.

Significance

RCEP will encompass approximately 30% of global GDP, amounting to $26.2 trillion, and nearly one-third of the world’s population, around 2.2 billion people.
It aims to eliminate around 90% of trade tariffs within the bloc.
RCEP will establish common rules in areas such as trade, intellectual property, e-commerce, and competition.

Why India didn’t join RCEP

India withdrew from RCEP due to concerns about the potential influx of Chinese goods and the existing trade imbalance with China.
India was also dissatisfied with the level of market access for its services sector.

Need for India’s Presence in RCEP

India’s participation was seen as crucial for building an inclusive economic architecture in the region.
RCEP would provide Indian companies with access to larger markets to showcase their strengths.
Rising U.S.-China tensions and the pandemic heightened the need for regional cooperation.

Challenges ahead for RCEP

The absence of the United States allows China to solidify its economic role in the region.
Economic benefits from RCEP may take time to materialize fully.
Smaller countries within ASEAN could face challenges, as the trade deal does not cover some of their major industries.
Least developed countries in Asia could see their benefits from inter-ASEAN trade eroded by RCEP.
Smaller ASEAN nations might lose certain trade preference benefits, affecting their exports to countries outside ASEAN.

AMIGOS IAS