G Parthasarathy

India must keep RCEP option open

G Parthasarathy | Updated on November 17, 2019

Mind games ASEAN is hopelessly divided when it comes to its strategic relations with China   -  REUTERS

In the meantime, New Delhi must enter into FTAs with New Zealand and Australia, and persuade China to invest in the country

The remarkable rise of China’s power and influence was evident in the Bangkok East Asia Summit, despite the fact that, as in the past, the Chinese delegation was led not by the country’s supreme leader President Xi Jinping, but by its low key Prime Minister, Li Keqiang.

While Prime Minister Li’s presence symbolised Chinese commitment to larger causes in East and South-East Asia and the Indo-Pacific region, the Trump Administration showed its disdain for the ASEAN, through the absence of its President, Vice-President, or Secretary of State, leaving the door open for an unchallenged assertion of Chinese power.

There are, no doubt, loud American statements, purporting to show the determination to contain Chinese power. The withdrawal of the Trump Administration from participation in the Trans-Pacific (Economic) Partnership, however, has manifested the reality that despite Trump’s tough actions of economic sanctions on China, there is no clear American strategy to respond appropriately, to assertive Chinese power. This objective can be achieved only if the US works closely in regional and global forums with partners like Australia, Japan, Vietnam, Indonesia and India.

It was inevitable that in this background, China has become the de facto leader in a huge free trade area, extending across the eastern boundaries of the Indian Ocean and the Western Pacific, from India to the Philippines.

One cannot blame India for declining to join this partnership, given the serious challenges India’s economy faces at present.

Already facing a deficit of $57 billion in its trade with China, India needed to protect its economy against a certain surge in Chinese exports, if its current duties were reduced. New Delhi also has concerns of cheap goods of Chinese origin being diverted to India, through ASEAN countries, which enjoy free trade access in India.

Moreover, the grant of duty-free entry to dairy and agricultural products from New Zealand would constitute a challenge across rural India.

More importantly, the proposed free trade agreement (FTA) would only continue the denial of access to India by ASEAN, for services, including IT. While India already has free trade access in the exchange of goods to the economies of all ASEAN members, Japan and South Korea, it could compete on a level-playing field only if it separately signs FTAs with Australia and New Zealand. Negotiations on this issue should continue.

Must look ahead

It would, however, be fatal if we sat on our haunches, after saying “no,” to joining the RCEP. The reality is that countries like Japan and China fashion their economic policies to ensure the development of export-oriented industries. India is now heading towards a situation of continuing and eventually unsustainable trade deficits.

It should not be forgotten that the booming economies of today in East and South-East Asia, progressed rapidly and in a sustainable manner, by ensuring a suitable balance between export promotion and import substitution.

It makes little sense, for example, to keep exporting raw shrimps and aluminium, instead of packaged shrimps and value added aluminium products. This would require suitable incentives and disincentives for producing value-added products and joining global and regional value-added chains. The past belief that merely ending policies of import substitution and a “Licence, Permit, Quota Raj”, without a focus on developing a comprehensive policy for export promotion, would lead us into an era of sustained and accelerated economic growth, was misplaced. It would be useful if, in the light of the foregoing, we kept the option of joining the RCEP open, for at least the next five years. In the meantime, it would be necessary to move ahead in negotiating mutually beneficial FTAs with New Zealand and Australia, and working out arrangements with China for promoting Chinese investments in India, while ending their restrictions on our exports in key areas like IT and pharmaceuticals.

It may well be argued that with the advent of Trump’s America, the era of free and open markets is coming to an end. The reality, however, is that the Trump administration has focussed essentially on ending an era, when China sustained its economic growth was substantially based on American naiveté about Beijing’s aims and objectives, in the initial years of the China-US honeymoon, during the Nixon and Carter administrations. Unfortunately, the ASEAN is hopelessly divided when it comes to its strategic relations with China. While the ASEAN claims to stick by principles on issues pertaining to the Law of the Seas, most its members look on helplessly as China enforces its maritime boundary claims, using force.

Myanmar, Thailand, Singapore and others, who do not have to face up to any significant claims by China on their maritime boundaries, remain silent.

Malaysia’s Prime Minister Mahathir Mohammad, who remains vociferous in echoing Pakistan views on Jammu and Kashmir, remains silent when China uses force to coerce his ASEAN partners to accept its maritime boundary claims.

Chinese arrogance about India is manifested in an recent article in Beijing’s official mouthpiece, Global Times, which notes: “If India joins the RCEP, it would have to play second fiddle to China and Japan, given the size of their economies. This would put India in a tight spot. Hence, India’s vacillation is a way of highlighting its importance in the region.”

Backing ASEAN

Despite their differences, the members of ASEAN do maintain a façade of unity, when it comes to issues of regional economic cooperation. India has clearly and consistently backed its ASEAN friends like Indonesia and Vietnam by declaring that issues pertaining to maritime boundaries have to be resolved peacefully, according to the principles of international law.

It has set an example for others, by handing over a disputed Island to Bangladesh in accordance with the ruling of an International Tribunal. ASEAN members, therefore, know the imperatives driving India’s policies. But, given the concerns of most ASEAN countries about China’s growing arrogance and assertiveness, the presence of countries like India and Japan does help them to ensure that no single power can exclusively dominate the Indo-Pacific region.

The writer is a former High Commissioner to Pakistan

Published on November 17, 2019

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