RCEP: Why is India Not Part of the Biggest Trade Bloc?


Countries in Southeast Asia and Pacific region have joined hands to create RCEP, the world’s largest trade agreement. India had withdrawn from the deal negotiations last year. N13 explores what India is missing out on by deciding to sit out.

Fifteen countries in the Asia-Pacific region signed a pact early this week to create the world’s largest trade bloc. The pact named Regional Comprehensive Economic Partnership (RCEP) includes 10 Southeast Asian countries and China, South Korea, Japan, Australia and New Zealand. 

But India, one of the biggest players in the region, is not part of the deal. Despite being involved in the initial stages of discussions, the world’s largest democracy withdrew from the pact after estimating that the deal would do more harm than good to our farmers and manufacturers. But, was it a good decision to stay out of the world’s largest trade deal?

What is RCEP?

RCEP is envisaged at reducing trade barriers for countries in the Asia-Pacific region and making it easier to do business. It strengthens East Asia’s financial interdependence as the pact brings together 2.2 billion people. This makes up almost a third of the world’s population, economy and trade.

Negotiations over the RCEP deal began in 2012, and it was finally signed on Sunday via a video-conference. According to the Peterson Institute for International Economics (PIIE), the deal is expected to raise trades among members by $428 billion and reduce the same among non-members by $48 billion. 

It is expected that the pact would yield especially large benefits for China, Japan, and South Korea. The agreement is also an indication that Asia-Pacific countries are attempting to take a leadership role in world trade and to bring an end to the dominance of the West.

Contrary to popular belief, China was not the driving force behind the agreement. In fact, Japan and certain ASEAN countries like Singapore were the key players behind the pact.


The new economic deal is a huge rival to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which has 11 countries, including Japan and Australia. However, the biggest difference between RCEP and CPTPP is the presence of China in the former.

Trans-Pacific Partnership (TPP) was first mooted by former US President Barack Obama, who wanted to create an economic agreement with key countries by excluding China. However, the US itself withdrew from the deal in 2017 when Donald Trump took over the reins. The CPTPP was later formed by other member countries that wanted to see the pact succeed.

But RCEP is even bigger than CPTPP. According to PIIE, the latest agreement would raise global national incomes in 2030 by an annual $186 billion, while the CPTPP could target $147 billion. The presence of China adds more weight to the latest pact as it unites the Asia-Pacific region and also keeps the US, the financial powerhouse, out of the scene. 

Obviously, the US is not happy about the formation of RCEP. Reacting to the finalisation of the agreement, US President-elect Joe Biden has expressed concerns over China’s presence in the pact. He said the US must align itself with other democracies so that they write the rules governing global trade, instead of China. 

The decision by countries like Australia, Japan and South Korea to enter into such a big agreement with China has also worried the US. It shows China’s growing importance in the region and successful diplomacy with some of the key governments.

Read : Quad: The Anti-China Squad of India, US, Australia and Japan

India’s loss?

Economists have expressed surprise over India’s absence in the RCEP although New Delhi and Beijing have been engaged in border disputes in the recent past. India withdrew from the pact for the same reason that the Trump administration quit TPP — that the agreement would be unfavourable to the country’s business interests.

India does not want to lower its barriers to free trade over concerns about competition with Chinese imports. However, the countries that signed the pact early this week have kept the doors open for India to join any time. The member countries have suggested India could commit to a less aggressive opening of its market, but New Delhi believes any trade deal with China would affect the domestic market.

What is at stake?

Although the decision to stay out of RCEP is favourable to the domestic market, India might lose out on a lot of trade benefits, according to economic experts. Instead of saying no to the deal, India should have argued for a better agreement that benefits the domestic farmers and manufacturers.

Political experts believe Biden would push to re-enter CPTPP in a bid to counter RCEP. If the US does so, the world will have two central trade pacts. Being not part of either would deeply affect India’s exports and imports.

India, as an original negotiating participant, has the option to join RCEP if it wishes to. While non-members will have to wait 18 months to join the pact, India could join immediately. However, it is up to the government to decide whether to sign an agreement with China or to miss out on being a part of a power-centre that is forming in the Asia-Pacific region.

Additional read: RCEP: A new trade agreement that will shape global economics and politics

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