RCEP Deal: Positive signs but India must insist on services being part of the package

In the backdrop of rising protectionism, the Regional Comprehensive Economic Partnership ministerial meeting over the weekend at Tokyo bucked the trend. RCEP, a gathering of Asean and six others including China and India, accounts for 30% of global trade. In Tokyo, the ministers promised to aim for a broad-based deal by the end of the year. The overall approach of RCEP members is positive because it proves that a substantial bloc believes that lowering trade barriers is a necessary condition for economic prosperity. Also, unlike other platforms, RCEP is averse to some non-tariff barriers such as an insistence of labour standards that are out of sync with a country’s stage of development. However, one fundamental difficulty is that China is opaque about the manner in which it uses other non-tariff barriers, often for extraneous strategic reasons.

India is keen on pushing the RCEP process along. But it is essential to ensure that a final deal safeguards India’s interests. India has a competitive advantage in services, particularly in software. Therefore, India has pushed for a comprehensive deal which lowers barriers to trade in services, including movement of skilled personnel. The Narendra Modi government must insist on this being part of a final deal as it will be an important source of exports, particularly to China which has resorted to non-tariff barriers in inhibiting services imports.