With RCEP, Act East policy is at the crossroads

I ndia’s decision to dissociate from the Regional Comprehensive Economic Partnership (RCEP), the proposed free trade agreement in the Asia-Pacific region, has been a political call.

With RCEP, Act East policy is at the crossroads

Tough: It is going to be a complicated process for India to get back into the RCEP.

MK Bhadrakumar

MK Bhadrakumar 
Former ambassador

I ndia’s decision to dissociate from the Regional Comprehensive Economic Partnership (RCEP), the proposed free trade agreement in the Asia-Pacific region, has been a political call. Its portrayal as a template of India’s development strategy won’t fly. Simply put, domestic politics played a key role here and Prime Minister Narendra Modi made a safe choice in the face of the joint opposition from the RSS, Congress and the communist parties — although RCEP is quintessentially an international issue. 

The confusing trail that officials have left in explaining the crux of India’s walkout in Bangkok speaks for itself. The External Affairs Ministry sought to give the optics dollops of strident nationalism with a trace of geopolitics thrown into it. In a queer coincidence, senior officials of ‘Quad’ also met in Bangkok on November 4 to follow up the ‘strategic guidance’ of the grouping’s foreign ministers regarding the politics and security of the Asia-Pacific. 

Grandstanding is usually the forte of politicians, but we live in turbulent times where the projection of ‘muscular’ foreign policies before the domestic audience becomes top diplomatic priority. The commerce ministry, on the other hand, sought to convey to the international audience that the move in Bangkok rather means that India is taking ‘timeout’ and may still be willing to rejoin the RCEP. China seems supportive. Admittedly, from the Indian perspective, there were substantial differences and concerns over some provisions in the proposed agreement — involving equitable market access, the rules of origin, dispute settlement mechanisms and sensitivities of domestic industries. But, on the other hand, as Commerce Minister Piyush Goyal underscored, as recently as in early October, India cannot remain isolated in a globalised world. He said, “If India remains out of RCEP, we will be left isolated from this large trading bloc. The trade among RCEP countries is about $2.8 trillion.”

Indeed, on balance, the ministry has done the right thing in signalling an open mind — and this almost certainly would have the Prime Minister’s approval — since the RCEP is destined to become the principal vehicle for multilateralism, connectivity and regional cooperation, which ASEAN espouses — and India has repeatedly affirmed that it gives centrality to the Southeast Asian grouping in its Asia-Pacific strategies.

Clearly, India’s Act East policy is at the crossroads. This comes at a juncture when the China-ASEAN cooperation framework is set to upgrade to the so-called ‘3+X’ from the current ‘2+7’ framework that was in vogue since 2013. Whereas the ‘2+7’ emphasised a two-point political consensus, namely enhancing strategic trust and promoting economic cooperation, and seven cooperation fields, including trade facilitation, interconnectivity and security exchanges, amongst others, the proposed ‘3+X’ (X for ‘X factor’) means China-ASEAN will touch many fields while focusing on three pillars — political security, economy and trade, and people-to-people exchange. The framework will facilitate deeper cooperation in digital economy, artificial intelligence and cyber security, which would elevate the China-ASEAN cooperation to one of global substance. 

China has been the ASEAN’s number one trading partner for the past decade. Last year, the trade touched $580 billion, while mutual investment exceeded $200 billion. To be sure, the finalisation of the RCEP agreement signifies a major breakthrough in the China-ASEAN partnership in the 21st century. The RCEP will introduce a single and integrated set of trade rules for the Asia-Pacific, similar to NAFTA or the U, in turn engendering value chains regionally and fostering industrial collaboration. 

The RCEP, the world’s biggest free trade zone, will situate ASEAN at the core, since economic cooperation is the group’s main advantage. Put differently, economic cooperation will inevitably override geopolitics regionally. 

China understands this and Beijing has adroitly taken a course of  coordinating with ASEAN to the 

maximum extent but leaving it to the group to set the pace. This stands in sharp contrast to the US strategy to hustle ASEAN into its bandwagon to contain China in the region rather than cater to the group’s prioritisation of growth and development, which, of course, is dependent on regional stability. 

Thus, although ASEAN keeps good ties with Washington, it steers clear of the latter’s meddling in the South China Sea, which the Southeast Asian grouping tends to see as borne out of the US angst over being marginalised. The US stratagem to insert itself into the China-ASEAN negotiations over a Code of Conduct (COC) in the South China disputes by stepping up the show of force under the rubric of ‘freedom of navigation’ has also flopped. In fact, the first reading of the text to negotiate the COC is ahead of schedule. 

The text forms the basis of creating a system to resolve disputes in the South China Sea, which Beijing is eager to finalise by 2021. Clearly, China feels elated that the RCEP agreement has been reached at a critical juncture, just as the regional security paradigm is transforming. 

The RCEP will reset the geopolitical landscape. And India finds itself on the outside of a core piece of the regional architecture. The RCEP decision may only reinforce the impression that India is neither comfortable nor ready to join a multilateral trade agreement with other major economies. 

Such reputation delimits India’s partnerships with the Asia-Pacific countries. The spectre haunting India could be that the Southeast Asian countries may further squeeze the industrial spaces that India could have occupied. Realistically speaking, it is going to be a devilishly complicated process for India to get back into the RCEP. India’s decision on Regional Comprehensive Economic Partnership constitutes a retrenchment in geopolitical terms.

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