Why is it in the news?
- 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.
More about the news
- 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.
Regional Comprehensive Economic Partnership (RCEP)
- 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.
- 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.