The China factor and India’s strategic thinking on RCEP


The negotiators from Japan worked hard to keep the RCEP agreement “open for accession by India” and also India may participate in RCEP meetings as an “observer”.

  • There is a strategic context to India staying out of the Regional Comprehensive Economic Partnership (RCEP) that goes beyond purely economic or trade arguments and implications.
  • And even though India made its decision a year ago, the recent escalation of tensions with China amid the ongoing standoff at the Line of Actual Control in Ladakh appears to have played a role in shrinking the space for any argument to join the RCEP.
  • India’s stance was based on a “clear-eyed calculation” of the gains and costs of entering a new arrangement, and that no pact was better than a “bad agreement”.
  • India was not about to step back from its Act East policy, nor was the decision on RCEP connected to its approach to the Indo-Pacific.
  • But, as the pandemic expanded and deepened, and China’s aggression spanned from the South China Sea to the India-China border, New Delhi took a series of economic retaliatory steps — mostly in the digital domain — to signal to Beijing that it can’t be business as usual. 
  • The RCEP situation is evidence that the tensions on the LAC — including the June 15 Galwan incident in which 20 Indian soldiers and an unspecified number of Chinese were killed — have had wide-ranging impact.

Costs and benefits

  • RCEP has now been signed without India. The negotiators from Japan worked hard to keep the RCEP agreement “open for accession by India” and also said that India may participate in RCEP meetings as an “observer”.
  • That Japan led the drafting of the Minister’s Declaration on India’s participation in RCEP is a reflection of the cooperation between India and like-minded countries — especially the Quad countries (Australia, the United States, Japan) — to have “resilient supply chains” in future. 
  • It is no secret that all Quad countries plus a few more — including New Zealand, South Korea and Vietnam — have been talking to each other to secure resilient supply chains, away from China. 
  • Japan and Australia, who have a difficult diplomatic relationship with China, have joined RCEP.
  • China is trying to overcome Covid-19 disruptions and resurrect the supply chain mechanism and possibly put pressure on [US President-elect Joe] Biden. 
  • The Indo-Pacific so far ran on twin tracks of economy and security with economy on a weak wicket. 
  • China is trying to strengthen the base while the US is focused on the security aspects. 
  • For India, RCEP hardly makes a difference as it has FTAs with ASEAN, and CEPAs (Comprehensive Economic Partnership Agreements) with Japan and South Korea already.
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