Think tank Global Trade Research Initiative (GTRI) Wednesday said that the World Bank’s suggestion for India to reconsider joining Regional Comprehensive Economic Partnership (RCEP) is based on flawed assumptions and outdated projections.
For developing countries like India, policy decisions must be rooted in real-world data and a thorough understanding of the long-term implications, it said. This comes a day after the World Bank in its India Development Update said India should reconsider its position on the RCEP.
The rising trade deficits among RCEP members and the over-reliance on China-centric supply chains underscore the importance of a cautious, well-researched approach, GTRI said.
“India’s decision not to join the RCEP was strategically sound and the core concerns that led India to opt out of RCEP in 2019 remain valid and have only been reinforced by subsequent developments,” it said.
India had exited the RCEP in 2019 after its concerns related to high trade deficit with China remained unmet despite entering negotiations in 2013.
The RCEP bloc comprises 10 Asean group members (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam) and their six free trade agreement (FTA) partners – China, Japan, South Korea, Australia and New Zealand.
India already has several functional FTAs with 13 out of 15 RCEP members, except New Zealand and China so the “gains from RCEP were likely to be incremental at best, especially given China’s opaque trade practices and its history of flooding markets with subsidized goods”.
Negotiations with New Zealand stalled due to concerns over the dairy sector, and with China, India has a limited trade agreement under the Asia-Pacific Trade Agreement (APTA).
India’s defict with China exceeded US$ 85 billion in FY24.
“If India had joined RCEP, the deficit would have been much worse due to zero tariff imports,” said Ajay Srivastava, co-founder, GTRI, adding that the RCEP gains to China over others will increase as full concessions take place and the economic benefits of the pact are disproportionately skewed toward China, further validating India’s apprehensions about unfair competition.
As per the report, India’s non-participation in RCEP proved insightful when the Covid
-19 pandemic exposed the vulnerabilities of overreliance on China-centric supply chains. The global shift toward “China Plus One” strategies highlights the risk of depending heavily on a single country for critical supply chains, it said.
“The World Bank should focus on thorough, data-based analysis that considers the specific challenges and economic conditions of developing countries before offering solutions based solely on economic models, which should be just one factor,” GTRI said, adding that only then will their recommendations truly support sustainable growth and fair trade for all.
