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.