Liu Zongyi: Not joining RCEP a strategic blunder that will lead to India’s isolation in globalization

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Liu Zongyi: Not joining RCEP a strategic blunder that will lead to India’s isolation in globalization

2020-11-16

By Liu Zongyi           Source: Global Times               Published: 2020-11-13


The Regional Comprehensive Economic Partnership (RCEP), which includes 10 ASEAN members as well as China, Japan, South Korea, Australia and New Zealand, is set to be signed at the ASEAN Summit on Sunday. As the COVID-19 pandemic continues to rage on worldwide and many economies are taking a serious hit, the signing of the agreement will greatly promote regional economic integration, stabilize the supply and industrial chains, and increase countries' confidence in economic growth recovery.


India will not join the RCEP. The Indian government argues that as China has an advantageous position in the deal, and India has a ballooning trade deficit with China, such a context would leave India in an unfair position, were it to join. However, most international observers believe that it's the work of some interest groups in India, trying hard to obstruct India's participation for their own interests, while Indian Prime Minister Narendra Modi and the Bharatiya Janata Party made concessions in order to win their support. Furthermore, Modi is pushing ahead with the "Make in India" policy, which is characterized by strong economic nationalism, to encourage domestic production.


However, considering India's foreign policies, especially the economic sanctions it has taken against China in the past year or so, not joining the RCEP may be a major strategic decision made after careful consideration. After the COVID-19 epidemic broke out in China at the beginning of 2020, many Indians thought India had an opportunity to develop their manufacturing industry and overtake China. The Indian government has introduced preferential measures in terms of land and taxation, lobbying multinational companies in China to transfer their production chains to India. In September, Japan, India and Australia agreed to launch an initiative to build resilient supply chains in the Indo-Pacific region.


The Galwan Valley physical clash in June has provided an excuse for India's "de-Sinicization" process. At the same time as the Trump administration is pushing for "de-coupling" from China, India, in fact, is promoting its economic "de-Sinicization" process more provocatively. Judging from remarks by some Indian senior officials and strategic elites, New Delhi hopes for a cold war, even a hot war, to break out between China and the US very much. It thinks India would gain a remarkable development opportunity from serious China-US confrontation. By moving closer to the US, India hopes Western countries, including the US, Europe, as well as Japan, could provide it capital and technology to help develop its manufacturing industry so that a value chain and industrial chain that can replace China will be established. Not only does India not want to join the RCEP, but it also has no desire to see Japan take part in it. India doesn't want the RCEP to be signed at all.


Nonetheless, the deal is soon to be sealed. History will prove that the Modi administration has made a serious strategic blunder. Although the RCEP contains a clause leaving the door open for India to get back on board later, the threshold to join in the future will be higher and India may never have the opportunity to return.


Missing the RCEP, India will lose its last chance to integrate into the globalization process. The Modi government had hoped a Trump reelection would lead the US to continue the trade war with China, as well as the consequent decoupling process. Therefore, India had actively promoted the development of its strategic partnership with the US prior to the US election. A de facto alliance between India and the US has formed since the signing of the Basic Exchange and Cooperation Agreement.


After Joe Biden takes office, although the direction of the US' China policy will not undergo significant changes, a Biden administration will take completely different diplomatic approaches from the Trump administration. There will be more dialogue channels and cooperation opportunities between the US and China under Biden despite a continuing effort to contain China. This is by no means what the Modi government wants to see.


The Biden administration is likely to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to revive the US economy. CPTPP is a regional economic integration agreement with higher thresholds. If India cannot even meet the criteria for joining RCEP, nor will it pass the CPTPP thresholds. India has dreamed to build its own economic sphere of influence and lead the regional economic integration of the South Asian Association for Regional Cooperation countries. It's fair to say, given its economic development level, India is unable to realize such ambition at all.


For other RCEP members, India's opt-out might be a good thing. The Indian market looks vast, but it's quite closed and conservative with a low actual consumption level. Besides, organizations in which India participates and has a big say often have low efficiency and don't function well. It's fair to say India is unable to help achieve anything but is good at spoiling things. Opting out of the RCEP means India will be isolated in the next round of globalization and regional economic integration, but for other RCEP members, it means they will meet fewer obstacles in promoting regional economic integration.


The author is Secretary-General of the Research Center for China-South Asia Cooperation at Shanghai Institutes for International Studies, a visiting fellow of the Chongyang Institute for Financial Studies, Renmin University of China and a distinguished fellow of the China (Kunming) South Asia & Southeast Asia Institute.