The 27th round of negotiations over the Regional Comprehensive Economic Partnership (RCEP) will continue between 22 to 31 July in Zhengzhou, China. There are growing concerns over whether India will accept zero tariffs on the majority of imported goods from China. RCEP negotiations illuminate the crossover between politics and economics in the Indo-Pacific.
Indian efforts in the region
The election of Modi in May 2019 has brought revitalised prospects of a more active regional policy approach. India is rejecting older versions of its foreign policy, namely Nehruvian non-alignment. Instead, it is seeking to be more proactive and engage its neighbours through initiatives, such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). In 2015, Modi made a compelling speech in Washington that India was committed to free trade and open markets. But to what degree does India’s proactiveness extend to regional economic engagement?
Overall, India seems to have made a promising impression on free trade in the last ten years. Thus far, governments have finalised FTAs with the Republic of Korea, Japan and Malaysia. India has opted to negotiate at the bilateral level. It excluded opportunities at the regional level, relying heavily on its trade agreement with ASEAN. Since the beginning of RCEP negotiations in 2012, India sought to integrate its economy within the region by negotiating trade of goods and services concurrently.
While India seeks regional economic engagement, especially in terms of increasing exports, Malaysia’s Prime Minister has called for the RCEP agreement to be finalised without India. The primary source of India’s reluctance derives from the perception that China may overflow India with goods. The other factors underpinning India’s hesitance is its trade deficit with China totalling $63.1 billion as well as significant deficits with South Korean and Australia. It appears India is biding time to reach the best trade agreement possible, especially in respect of liberalising the skilled worker regime.
Historically, India has applied a painfully incremental approach towards negotiating free trade agreements. For instance, Minister Of State for commerce and industry Nirmala Sitharaman cancelled a three-day meeting with ASEAN economic ministers in 2014. Though signed a year later, India demonstrated confusion over signing a trade agreement on services with ASEAN. Currently, negotiations between India and Australia are also stalled due to concerns that the agreement may adversely affect India’s agricultural sector.
An opportunity not to miss?
For India to become more regionally involved, it must remain focused on obtaining advantages from the RCEP agreement. This means having a succinct understanding of the benefits of regional trade. By reducing trade barriers, New Delhi would encourage its industries to become more competitive and innovative. It would particularly encourage sectors to apply international standards, as well as sanitary and phytosanitary restrictions.
Regional trade can also be a measure to counteract the negative implications of geo-economic trends. In addition to the US-China trade war, Trump has begun to denounce India’s tariffs. By entering the RCEP India, can diversify its economic undertakings and advance its status through a closer relationship with regional counterparts.
Economic-Security Nexus in the Indo-Pacific
The RCEP negotiations have brought an Indo-Pacific approach to economic and political engagement. This vastly is different to the Transpacific Partnership (TPP) which could be interpreted by some states, namely China, as an arm of the US pivot in the “Asia-Pacific”. The RCEP – with the inclusion of China – does not carry connotations of expanding geopolitical influence and containment.
The RCEP is a test of economic diplomacy, but in future, it may likely drive future cooperation between ASEAN and ‘plus six’ countries in the security domain. Other strategies have lacked continuity, such as the Quadrilateral Security Dialogue between India, Australia, the US and Japan. For now, a security partnership of this magnitude is unlikely to be activated in the near future. This is evidenced by the exclusion of Australia from the Malabar exercises.
The role of ASEAN in managing maritime issues in the Indo-Pacific is increasingly more prominent. Indonesia, for one, is working closely with India to strengthen security ties. In 2018, India and Indonesia revealed a ‘Shared Vision of India-Indonesia Maritime Cooperation in the Indo-Pacific’ complemented by trade amongst Nicobar and Andaman Islands of India and regions in Sumatera Islands of Indonesia. The meeting also highlighted their desire to boost infrastructure, reiterating the close overlap between security and economic interests. Simultaneously, ASEAN cooperates with China at a strategic level having held their first naval exercise in 2018. This close yet complex relations hold important implications for the security of the region, particularly as the South China Sea dispute remains in question.
The Evolution of ASEAN
ASEAN has developed an ‘Indo-Pacific’ outlook. The ‘ASEAN way’ based on consensus needs more political support to deal with the complexities of the Indo-Pacific, including the South China Sea dispute. It is clear that individual states, such as the Philippines, cannot individually negotiate over security gains due to China’s economic might. For that reason, future success will depend on supporting ASEAN’s ‘centrality’, and here both India and Australia can play influential roles.
There are competing approaches towards the region, particularly given China’s commitment to the Belt and Road Initiative (BRI). But economic cooperation can lay the foundation for regional stability if there is a political aspiration. New Delhi, while remaining firm in RCEP negotiations should account for the benefits that institutional partnerships can deliver in areas of economic development and security as a whole.
