Not becoming a member of the RCEP is a strategic mistake that can result in India’s isolation from globalization
At the ASEAN summit on Sunday, the Regional Comprehensive Economic Partnership (RCEP), which includes ten ASEAN members as well as China, Japan, South Korea, Australia and New Zealand, is to be signed. With the COVID-19 pandemic raging around the world and seriously affecting many economies, the signing of the agreement will significantly boost regional economic integration, stabilize supply and industrial chains, and boost countries’ confidence in the recovery of economic growth.
India will not join the RCEP. The Indian government argues that such an environment would place India in an unfair position if it did join, given that China has an advantageous position in the deal and India has an exploding trade deficit with China. However, most international observers believe that it is the work of some interest groups in India who are trying to hinder India’s participation for their own interests, while Indian Prime Minister Narendra Modi and the Bharatiya Janata Party made concessions to gain their support. In addition, Modi is promoting the “Make in India” policy, which is characterized by strong economic nationalism, in order to promote domestic production.
However, given India’s foreign policy, particularly the economic sanctions the country imposed on China last year, not joining the RCEP could, after careful consideration, be an important strategic decision. After the COVID-19 epidemic broke out in China in early 2020, many Indians thought India had a chance to develop its manufacturing industry and overtake China. The Indian government has introduced preferential land and tax measures and has lobbied multinationals in China to move their production chains to India. In September, Japan, India and Australia agreed to launch an initiative to build resilient supply chains in the Indo-Pacific region.
The physical collision in the Galwan Valley in June provided an excuse for India’s “desinization” process. While the Trump administration is pushing for a “decoupling” from China, India is pushing its economic “desinization” process even more provocatively. Judging from the statements of some Indian senior officials and strategic elites, New Delhi has great hopes that a cold war, even a hot war, will break out between China and the United States. She believes India would gain a remarkable development opportunity from a serious confrontation between China and the US. By moving closer to the US, India hopes western countries, including the US, Europe and Japan, can provide it with capital and technology to help develop its manufacturing industry so that it can build a value and industrial chain that will replace China can . India not only does not want to join the RCEP, but also does not want Japan to participate. India does not want the RCEP to be signed at all.
Nevertheless, the deal should be sealed soon. History will prove that the Modi government made a grave strategic mistake. Although the RCEP contains a clause that leaves the door open for India to come back on board later, the threshold for future accession will be higher and India may never have the opportunity to return.
By missing the RCEP, India is losing its last chance to integrate into the globalization process. The Modi administration had hoped that Trump’s re-election would lead the US to continue the trade war with China and the resulting decoupling process. Therefore, before the US elections, India had actively promoted the development of its strategic partnership with the US. Since the Basic Exchange and Cooperation Agreement was signed, a de facto alliance between India and the United States has formed.
After Joe Biden takes office, the direction of US China policy will not change significantly, but a Biden administration will pursue very different diplomatic approaches than the Trump administration. Despite ongoing efforts to contain China, there will be more channels of dialogue and opportunities for cooperation between the US and China under Biden. This is by no means what the Modi government wants to see.
The Biden administration is likely to join the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) to revitalize the US economy. CPTPP is a regional economic integration agreement with higher thresholds. If India can’t even meet the criteria to join the RCEP, it won’t exceed the CPTPP thresholds either. India dreamed of building its own economic sphere of influence and leading the regional economic integration of the countries of the South Asian Association for Regional Cooperation. It can be said that, given its level of economic development, India cannot achieve such ambitions at all.
For other RCEP members, India’s opt-out could be a good thing. The Indian market looks huge but is fairly closed and conservative with low actual consumption. Also, organizations in which India is a party and has a large say are often poor in efficiency and do not function well. It is fair to say that India is incapable of accomplishing anything but is good at spoiling things. Leaving the RCEP means India will be isolated in the next round of globalization and regional economic integration, but for other RCEP members it means they will face fewer obstacles in promoting regional economic integration.
The author is Secretary General of the Research Center for China-South Asia Cooperation at the Shanghai Institutes for International Studies, Visiting Fellow of the Chongyang Institute for Financial Studies, Renmin University of China and Distinguished Fellow of the China (Kunming) South Asia & Southeast Asia Institute. firstname.lastname@example.org