Academic journal article Indian Foreign Affairs Journal

The RCEP: Integrating India into the Asian Economy

Academic journal article Indian Foreign Affairs Journal

The RCEP: Integrating India into the Asian Economy

Article excerpt

The ten member states of the Association of Southeast Asian Nations (ASEAN) will kick off negotiations of a Regional Comprehensive Economic Partnership (RCEP) Agreement with their six Free Trade Agreement (FTA) partner countries, namely China, Japan, South Korea, Australia, New Zealand and India, early this year. The ambition of this ASEAN-driven initiative may lead to the creation of the largest FTA in the world. It is also noteworthy that the two largest developing countries - China and India, will be included for the first time in a regional free trade agreement1.

The development of the RCEP, which was first endorsed in Bali in 2011, was officially launched during the twenty-first ASEAN Summit held in Phnom Penh in November 2012. There has been a lot of discussion in the past year. Some debates focused on the competition between the initiative and the US-led Trans-Pacific Partnership (TPP). Moreover, will the RECP provide continuous momentum to the fast growing Asian economy? What will be the role of China in the regional bloc and will it bring threats to the regional security with its economic dominance and military presence? And moreover, marking its importance to Indian observers, will it bring India closer to Southeast and East Asian regional integration? This article analyses the initiative and explores possible implications for the region as well as for India in integrating with the Asian economy.

TPP or RECP - That is the Question

The close economic ties driven by various accelerated integration initiatives in the Asia Pacific region, particularly among the Southeast and East Asian countries, have contributed significantly to economic growth and shared prosperity in the region in the past decades. However, though proposals were made, for example, to create an East Asia Free Trade Agreement (EAFTA), based on the ASEAN plus 3 model, or the Comprehensive Economic Partnership in East Asia (CEPEA), based on the East Asia Summit (EAS) model, progress has been stalled due to complicated political and economic reasons. The ASEAN is determined to accelerate regional economic integration by developing an RCEP agreement by the end of 2015, among its ten member states and six dialogue partner countries with which the FTA is already in place. The strong political will behind the RCEP initiative is driven by the desire to push forward the stagnate integration process that is hindering economic growth after the global financial crisis in 2008, and to counter balance the influence of the US-led trade initiative - the Trans-Pacific Partnership (TPP), in the region.

Since President Barack Obama of the US announced his "Pivot to Asia" strategy in 2011, the TPP has been the centre of the US economic engagement in the region. This first trans-continental trade agreement soon caught attention amidst the initiatives of various, sometimes overlapping and competing, economic integration in East and Southeast Asia. However, the recently emerging RCEP driven by ASEAN seems to have received more enthusiastic responses in Asia and is regarded as a peer, if not a rival, to the TPP in competing for economic influence in the region.

According to the RCEP framework document released by the ASEAN Secretariat in 2011, the RCEP is planned to include the ASEAN plus 6 countries and may potentially expand to the US and Russia in the future if they conduct FTA negotiations with ASEAN2. It is also open to "external economic partners" after its conclusion in 2015. As such, the integration encompasses at least a population of 3.5 billion, with a collective GDP reaching US$ 32 trillion, comprising more than 28.4 per cent of the global GDP and 27.7 per cent of global merchandise trade.

In estimation of potential economic gains, the RCEP appears to have greater incentives for ASEAN member-states and their FTA partners. First, the RCEP will be the first ever FTA in the world with the membership of China and India, making the collective GDP of the RCEP exceed that of the TPP. …

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