India will likely go for bilateral trade pacts for now — not mega deals like RCEP
SINGAPORE — India is unlikely to join the world’s largest free trade bloc anytime soon as New Delhi remains more inclined toward bilateral agreements, an economist told CNBC.
Fifteen Asia-Pacific countries signed the Regional Comprehensive Economic Partnership (RCEP) earlier this month — those countries combined represent about 30% of the global economy. They include: China, Japan, South Korea, Australia, New Zealand and the 10 member states of the Association of Southeast Asian Nations.
India was part of the negotiations that began in 2013, but last year, New Delhi declined to join RCEP saying issues surrounding its “core interests” remained unresolved. Other member countries have said the door remains open for India to rejoin.
The agreement is expected to eliminate most tariffs on traded goods, strengthen supply-chain linkages in the region, and includes standardized rules for investments into member countries. It also has provisions on areas such as e-commerce, competition laws and intellectual property rights.
“The common rules of origin under RCEP do boost its attractiveness as a supply chain destination and that poses a challenge to India’s ambitions of attracting supply chains relocating out of China,” Priyanka Kishore, head of India and Southeast Asia economics at Oxford Economics, told CNBC. Rules of origin refer to the criteria that helps determine the country or source of where the product originated from.
Under the common rules of origin agreement, when a product is created to meet RCEP’s originating criteria, the regulation is the same for all 15 member countries, according to the Asian Trade Center. That means the specific product can be shipped to any of the RCEP countries and receive the same preferential tariff treatment, therefore lowering the cost of exports and improving the ease of doing business.