The World Bank’s suggestion that India should re-consider joining Regional Comprehensive Economic Partnership (RCEP) for potential boosts in trade, investment and growth is a flawed one as other members of the grouping have seen their trade deficits with China zoom after the agreement became operational, according to trade policy think tank Global Trade Research Initiative (GTR).
The World Bank made the suggestion in its latest India Development Update released on Tuesday. The report’s assumption that India would gain significantly from joining RCEP, based on the study by Petri and Plummer (2020), is flawed. The study projected income gains of USD 60 billion by 2030 but neglected to highlight a crucial detail: the majority of these hypothetical gains would come from a rise in imports rather than exports, GTRI said.
The study acknowledged only modest gains in services, but failed to mention any gains to Goods exports or address the significant imbalances India could face in goods trade, especially against China.The report did not talk about the concerning increase in trade deficit of most RCEP members with China.
According to the analysis by GTRI, ASEAN’s trade deficit with China has jumped from $ 135.6 billion in 2023 from $ 81.7 billion in 2020. Also, the trade deficit of major ASEAN countries Singapore, Thailand, Vietnam, Philippines has steadily increased.
Japan’s trade deficit with China has increased to $41.3 billion in 2023 from $22.5 billion in 2020. South Korea may face a trade deficit for the first time with China this year.
“This pattern suggests RCEP gains to China over others will increase as full concessions take place and the economic benefits of RCEP are disproportionately skewed toward China, further validating India’s apprehensions about unfair competition,” it said.
“The rising trade deficits among RCEP members and the overreliance on China-centric supply chains underscore the importance of a cautious, well-researched approach.”
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. By staying out of RCEP, India positioned itself to diversify its trade partners and reduce the risk of overdependence on China.
The RCEP members are 10 ASEAN member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam and their six trading partners China, Japan, South Korea, Australia, and New Zealand. It came into force in 2022.
The negotiations for RCEP started in 2012 and India joined the discussions in 2013. In 2019 it pulled out of the negotiations. Officials say that by joining the grouping India would have completely opened up its markets to China impacting local industry adversely. They say barring China, India already is in talks with or has trade agreements with other members of RCEP.
From: financialexpress
Financial News
