RCEP with India would cover 40 percent of global gross domestic product and over half the world population. It could become the most important trade zone in the world.2 India’s opting out is like a Brexit before entry.
India has been moving toward protectionism in recent years, and many Indian lobbies are terrified of competing with China.3 In theory, India could bargain for better entry conditions in the next six months and join RCEP when it is launched in 2020. India has a big market, and other Asian countries are anxious for it to join. Japan has said it is in no hurry to go ahead with an RCEP minus India.4
Yet, negotiating seriously better conditions from RCEP members within six months would be difficult. Doing a U‐turn now, within months of opting out, looks politically unfeasible, given the strong opposition from many political parties and lobbies that claim Indian industry and agriculture would be killed by cheap imports if it joins RCEP. A more gradual approach would be for India to spend the next five years carrying out reforms to make itself more competitive and then join RCEP. India has the highest import tariffs among potential RCEP members and should prune these within the next few years so that it could enter RCEP without any serious disruption.
After opting out of RCEP, Commerce Minister Piyush Goyal said India could instead strike FTAs with the United States and the European Union.5 That is daft. If RCEP conditions look tough, those demanded by the United States and the EU would be far tougher. President Trump has called India a “tariff king,”6 withdrawn duty‐free entry for $6.3 billion worth of Indian exports under the Generalized System of Preferences (though this may be renegotiated), imposed tariffs on Indian steel and aluminum, cracked down on H-1B visas used by Indian software engineers, and taken India to the World Trade Organization for unfair export subsidies.7 Negotiations with the EU for an FTA have dragged for years with no meeting ground. These are not realistic alternatives to RCEP. Besides, world growth in the next half century will be driven by Asia, not Europe or the United States, so RCEP is where India should be.