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Asia’s Regional Comprehensive Economic Partnership (RCEP): the RCEP Train Left the Station, and India, Behind
Biggest story at ASEAN was convergence of moves toward Asia integration, leaving Delhi out for now
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A pan-Asia high-speed train has left the station – and India – behind. The Regional Comprehensive Economic Partnership (RCEP), which would have been the largest free trade deal in the world, was not signed in Bangkok. It will probably be signed next year in Vietnam, assuming New Delhi goes beyond what ASEAN, with diplomatic finesse barely concealing frustration, described as “outstanding issues, which remain unresolved.”

The partnership uniting 16 nations – the ASEAN 10 plus China, Japan, South Korea, Australia, New Zealand and, in theory, India – would have congregated 3.56 billion people and 29% of world trade.

Predictably, it was billed as the big story among the slew of high-profile meetings linked to the 35th ASEAN summit in Thailand, as RCEP de facto further integrates Asian economies with China just as the Trump administration is engaged in a full spectrum battle against everything from the Belt and Road Initiative to Made in China 2025.

Chinese Vice Foreign Minister Le Yucheng was blunt:

“It’s the 15 nations that have decided to move forward first.” And he added “there won’t be any problem for the 15 nations to sign RCEP next year,” when Vietnam takes over as the chair of ASEAN.

It’s not hard to figure out where the “problem” lies.

Mahathir ‘disappointed’

Diplomats confirmed that New Delhi came up with a string of last-minute demands in Thailand, forcing many to work deep into the night with no success. Thailand’s Commerce Minister, Jurin Laksanawisit, tried to put on a brave face:

“The negotiation last night was conclusive.”

It was not. Malaysian Prime Minister Mahathir Mohammad – whose facial expression in the family photo was priceless, as he shook hands with Aung San Suu Kyi on his left and nobody on his right – had already given away the game.

“We’re very disappointed,” he said, adding: “One country is making demands we cannot accept.”

ASEAN, that elaborate monument to punctilious protocol and face-saving, insists the few outstanding issues “will be resolved by February 2020,” with the text of all 20 RCEP chapters complete “pending the resolution of one” member.

RCEP dwells across a large territory, covering trade in goods and services, investment, intellectual property and dispute resolution. The Indian “problem” is extremely complex. India in fact already has a free trade agreement with ASEAN.

RCEP, in practice, would extend this agreement to the other big boys, including China, Japan and South Korea.

New Delhi insists it is defending farmers, dairy owners, the services industry, sectors of the automobile industry – especially hybrid and electric cars, and very popular three-wheelers – and mostly small businesses all across the nation, which would be devastated by an augmented tsunami of Chinese merchandise.

Agriculture, textile, steel and mining interests in India are totally against RCEP.

Yet New Delhi never mentions quality Japanese or South Korean products. It’s all about China. New Delhi argues that signing what is widely interpreted as a free trade agreement with China would explode its already significant US$57 billion a year trade deficit.

The barely disguised secret is that India’s economy, as the historical record shows, is inherently protectionist. There’s no way a possible removal of agricultural tariffs protecting farmers would not provoke a social cataclysm.

Modi, who is not exactly a bold statesman with a global vision, is between a heavy rock and a very hard place. President Xi Jinping offered him a “100-year plan” for China-India partnership at their last informal, bilateral summit.

India is a fellow BRICS member, it’s part of the Russia-India-China troika that is actually at the center of BRICS and is also a member of the Shanghai Cooperation Organization.

Geopolitically as well as geoeconomically, it hardly makes sense for India to be out of RCEP – which means excluded from East Asia and Southeast Asia integration. The only feasible solution might be an elaborate bilateral India-China deal within RCEP.

Questions remain whether both players would be able to work that out before the Vietnam summit in 2020.

Putting it all together

India was only part of the story of the summit fest in Thailand. At the important East Asia Summit, everyone was actively discussing multiple paths towards multilateralism.

The Trump administration is touting what it calls the Free and Open Indo-Pacific Strategy – which is yet another de facto China containment strategy, congregating the US, India, Japan and Australia. Indo-Pacific is very much on Modi’s mind. The problem is “Indo-Pacific,” as the US conceives of it, and RCEP are incompatible.

ASEAN, instead, came up with its own strategy: ASEAN Outlook on the Indo-Pacific (AOIP) – which incorporates all the usual transparency, good governance, sustainable development and rules-based tenets plus details on connectivity and maritime disputes.

All the ASEAN 10 are behind AOIP, which is, in fact, an original Indonesian idea. It’s fascinating to know that Bangkok and Jakarta worked together behind closed doors for no fewer than 18 months to reach a full consensus among the ASEAN 10.

The biggest story in Thailand was, in fact, the convergence of myriad moves towards Asia integration. Chinese Prime Minister Li Keqiang was lavishly praising the prospects of integrating Belt and Road with something called the Master Plan of ASEAN Activity, which is the connectivity part of AOIP.

South Korea’s Moon Jae-in jumped in extolling the merits of his Southern Policy, which is essentially northeast-southeast Asia integration. And don’t forget Russia.

At the ASEAN business and investment summit, Russian Prime Minister Dmitry Medvedev put it all together; the blossoming of the Greater Eurasian Partnership, uniting the Eurasia Economic Union, ASEAN and Shanghai Cooperation Organization, not to mention, in his words, “other possible structures,” which is code for Belt and Road.

Belt and Road is powerfully advancing its links to RCEP, Eurasia Economic Union and even South America’s Mercosur – when Brazil finally kicks Jair Bolsonaro out of power.

Medvedev noted that this merging of interests was unanimously supported at the Russia-ASEAN summit in Sochi in 2016. Vietnam and Singapore have already clinched free trade deals with Eurasia Economic Union, and Cambodia, Thailand, Indonesia are on their way.

Medvedev also noted that a trade and economic cooperation deal between China and Eurasia Economic Union was signed in late October. Next is India, and a preferential trade agreement between the union and Iran has also been signed.

In Thailand, the Chinese delegation did not directly address the United States’ Free and Open Indo-Pacific strategy. But Medvedev did, forcefully:

“We are in favor of maintaining the effective system of state-to-state relations which was formed on the basis of ASEAN and has shown a good track record over the years.

“In this regard, we believe the US initiative is a serious challenge for ASEAN countries, since it can weaken the association’s position and strip it of its status as a key player in addressing regional security problems.”

Summits come and go. But what just happened in Thailand will remain as another graphic illustration of myriad, concerted moves leading towards progressive, irreversible Asia – and Eurasia – integration. It’s up to Modi to decide when and if to hop on the train.

(Republished from Asia Times by permission of author or representative)
 
• Category: Economics, Foreign Policy • Tags: China, India, New Silk Road, Russia 
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  1. Lin says:

    First of all, I wouldn’t blame the Indians.
    Some basic facts:
    –Lots of daily household items,pots and pans… sold in india are imported from china. China nominal GDP is 5 times that of india and population is about 2-2.5% more. So india has ‘wage advantage’ and should be a power house in the lower segments of manufacture. Fact is indian wage is low but productivity is even lower.
    –Agriculturally, india has warm climate and good rainfall but again grain productivity is low. The funny thing I just read from a hindu nationalist site that because of their dharmic spiritual practice of not having factory farms.,India can’t compete with countries like Vietnam, Australia.
    –The educated hindu upper caste can do lower segment ‘service trade’ with English speaking countries because of the anglo colonial legacy and their low wage. Here they can compete.
    ……………..
    The underlying reality:
    –Because of caste elitism, the big bulk of Indians are low ‘skilled’. If one can write his/her name in his/her native language, that person is classified as not illiterate.
    –East Asian countries jump-started their economy with labor intensive industry(like apparel making) then proceded to more advanced segments. The Indians have missed the boat(The last big boat departure was taken by china followed by 2 smaller boat departures taken up by Vietnam and Bangladesh) because the robots are taking over:
    https://www.wired.com/story/inside-speedfactory-adidas-robot-powered-sneaker-factory/
    (China is a developing country but yet push very hard on robotics.
    https://siepr.stanford.edu/news/robots-china-manufacturing
    IMO, if Vietnam and Bangladesh can pull their acts together, they could procede to the next phase. I wish them well)
    –Unemployment/underemployment is the BIGGEST problem in india. India govt grossly understates the numbers.
    https://www.reuters.com/article/us-india-unemployment-railways/more-than-25-million-people-apply-for-indian-railway-vacancies-idUSKBN1H524C
    ….
    Conclusion: Free trade is overall bad for India.

  2. Yee says:

    India not joining RCEP is understandable. Neither its agriculture nor industry are competitive. Its only “advantage” is population.

    However, to turn this population “useful”, India’s low productive businesses need to die and replaced with more advance model of production. China went through this painful transformation with tens of million workers lost their jobs. Most things in this world have a price.

    India’s biggest illusion is seeing itself as rival of China, and hinge their hope on gaining favours from the US… Perhaps they’re being fooled by the official narrative that “American money build up China”, while in fact, 80% of foreign investments in China are from other Asian countries, and Europe has bigger investments in China than the US has.

    India competes with Southeast Asia. The sooner they know their place, the better they make policies. High in ambition but low in capability would only lead to failure.

    • Replies: @Showmethereal
    , @Lin
  3. Biff says:

    The biggest story in Thailand was

    Bad traffic the dignitaries caused. Why is it they have to hob-knob in the ritziest hotels, while spending other peoples money? Because it’s other peoples money!

  4. @Yee

    Yes Chinese state companies laying off millions happened because China can do that. Politicians in India have to worry about elections…. And deadly riots!
    Correct also.. Very few US dollars comparatively built China. Manufacturing in China was serving US interests by producing at a lower cost to fatten corporate US profits – but the money invested was not American. People on this side of the globe dont get that.
    As to India competing with ASEAN… I have to look it up and calculate myself – but in spite of being less than half the population – ASEAN was recently said to have a bigger economy than India. So yeah India competing with China is nonsensical hubris.

  5. when Brazil finally kicks Jair Bolsonaro out of power.

    It’s not gonna happen.

  6. Lin says:
    @Yee

    China went through this painful transformation with tens of million workers lost their jobs

    **Which industrial segments laid off their workers by the millions?
    **Over how many years or since when?
    ……….
    Some background:
    –The only industries in china that laid off large number of workers I read were smoke stacks in N-E Chinese provinces
    Chinese steel industry(> 50% of world total) seems is still growing, though slowly. Sure it’ll eventually shrink to size after certain amount of stock has accumulated and then depend more on recycling, just like other industrialised nations.
    — And the number of young people joining the work force is decreasing because of decline in fertility rate. China is spending big on robotics.
    –Overall Chinese state owned factories are very careful to maintain employment.
    …………..
    Pls link to some useful and valid data.

  7. nymom says:

    India is complicated. They have so much potential but never quite seem to live up to it. Why this is, I am not really sure.

    There was an article about why India was destined not to be as successful as it should have been; but it has subsequently disappeared from the internet. Sadly I forgot what the reasons were the author cited.

    But I remember thinking at the time I read it that it was complicated and sad. I happen to love animals and I really really liked the thought of a nation that was mainly vegetarian.

    • Replies: @Lin
    , @Macon Richardson
  8. Lin says:
    @nymom

    I must tell you vegetarianism is holocaust on the plant kingdom !!
    Do you believe a holy carrot has the same basic rights of a holy cow? If you do, one should eat more beef because a cow is the nutrient equivalent of 10s of 1000s of carots !! Eating a cow can save the lives of 10s of 1000s of carrots. Carrot Juice is murder !!

    Beware, one day a powerful walking super-sapien plant from outer space will descend on Earth and have all vegetarians roasted over slow fire !!

    • Replies: @nymom
  9. nymom says:
    @Lin

    I can live with that…

  10. Yee says:

    Lin,

    “Which industrial segments laid off their workers by the millions?
    **Over how many years or since when?”

    It’s called “下岗潮”, in the 90s.

    Close to 30 million workers lost their job. It’s not just some particular industry, but widespread in almost all industries.

  11. @nymom

    India is complicated. They have so much potential but never quite seem to live up to it. Why this is, I am not really sure.

    No, India is not at all complicated. It has little potential and fully lives up to that lack. Therefore, there is little reason for you to ponder the issue.

    • Agree: Change that Matters
    • Replies: @Lin
  12. Lin says:
    @Macon Richardson

    It has little potential and fully lives up to that lack

    Seems ‘potential’ could be rhetorical.
    As I mentioned at other threads, india actually has lower popn density than Holland but the latter is the 2nd biggest food exporter in the world. IMO their main problems:
    –Caste elitism; consequence:
    ** the average Indians are poorly educated and have low skill
    –Excessive sense of insecurity with the following consequence:
    **Refuse to admit to obvious reality; and denial: Many hindus elite claim their over-population is actually ‘demographic dividends’.
    **Poor sense of prioritization of objectives, eg ignore basic manufacture but claim to be an I.T. powerhouse.
    ………………………………….
    I actually support Hindutva. I posted the followings to response to an anti-Hindutva article:
    https://www.sabhlokcity.com/2019/10/my-next-centrepiece-toi-article-time-to-call-out-hindutva/
    ……

    Mr. Sanjeev Sabhlok.
    How you should Learn to Stop Worrying and Love Hindutva.
    …..
    What bind a country together?
    It could be(broadly or loosely or for the majority)
    1)Same race
    2)Same language
    3)Same religion
    4)Same sense of historical lineage and destiny:
    ….
    India is very racially complex, has 16 ‘official languages'(members of indian parliament from southern states insist on speaking English I read) and there’s certain amount of north-south animosity(The extent I don’t judge), little wonder indian nationalism has evolved into hindu nationalism.
    The indian subcontinent has poor pre-Mughal historiography(the first serious pan-subcontinent historian I read was a muslim scholar accompanied a muslim conqueror king) and had been conquered by muslims, then by the anglos. Now Hindutva can make the followings possible:
    1)’Rewrite’ indian ‘history’, like replacing ‘Aryan invasion/migration’ by ‘Out of India’.
    2)Hindu nationalists need enemy, now they can blame the custom of forcing Dalits to handle human excrements on the muslim invaders. Other examples abound.
    3)To promote hindu pride by making certain hindu mythology ‘official’ like, as you mentioned, the elephant god Ganesh was the outcome of advanced ancient hindu science of transplanting an elephant head onto a human torso, or ancient india had atomic weapons, cars, airplanes, spacecrafts..
    Now it doesn’t matter if the constructed ‘history’ is real or not, as long as the majority of hindus believe in it, it has life of it’s own.
    …………
    Mr. Sanjeev Sabhlok, you’ve my admiration of being a rational person but I must remind you that the alternative to Hindutva is total overhaul of indian culture which is nigh impossible, save a total revolution.

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