RCEP Minus China

Context- India is in a position to reap the benefits of RCEP without actually joining it. With the conclusion of negotiations, India-New Zealand FTA, India has FTAs with all other countries in RCEP except China. This strategy of having one-to-one FTA with other member nations of RCEP, has given India market access without surrendering tariff control to China.

What is RCEP and why did India back out from it?

The Regional Comprehensive Economic Partnership (RCEP) is a comprehensive free trade agreement between the 10 ASEAN Member States and ASEAN’s free trade agreement (FTA) partners- Australia, China, India, Japan, Korea and New Zealand.

India’s Back-out from RCEP

In November 2019, just as the soon-to-be members of RCEP were about to finalise their agreement, Prime Minister Narendra Modi announced that India would not be a part of the grouping in its current form.

Reasons behind India backing out of RCEP

Chinese fear of Dominance in Indian Market- India did not join the grouping  because of the apprehensions related to entering into an FTA with China. The fear was that this would provide China virtually duty-free access to the Indian market.

Threat to Domestic Manufacturing (MSMEs)- Micro, Small and Medium Enterprises (MSMEs) form the backbone of India’s manufacturing sector. These firms were seen as vulnerable to competition from more advanced RCEP economies like China, Japan, and South Korea. The government worried this could undermine initiatives like “Make in India.”

Concerns of Farmers and the Dairy Sector- Indian farmers and dairy producers strongly opposed RCEP. Countries like Australia and New Zealand are highly competitive in dairy and agricultural exports. There was fear that cheap imports could hurt rural livelihoods, especially small farmers and cooperatives.

Inadequate Safeguard Mechanisms- Safeguards offered under RCEP were insufficient and slow, limiting India’s ability to protect sensitive sectors.

Rules of Origin Issues- RCEP lacked strong legal safeguards against “rules of origin” certification to prevent “trade circumvention”. India feared that goods made in China could enter India via other RCEP countries by minimal value addition.

Limited Gains in Services and Movement of Professionals- RCEP offered minimal commitments on- market access for services and movement of Indian professionals (Mode 4 under WTO terminology). India felt the agreement was imbalanced, favoring goods over services.

What is the ‘RCEP minus China’ strategy of India and what are its advantages?

The “RCEP minus China” strategy refers to India’s idea of engaging economically with RCEP countries without being part of a trade bloc that includes China, which India sees as both an economic and strategic challenge.

This is not a formal policy name, but a strategic approach discussed by Indian policymakers and analysts after India exited RCEP in 2019.

India’s preference for RCEP minus China Strategy

Reducing China-Centric Trade Dependence- By signing bilateral FTAs with 14 of the 15 RCEP members and keeping China limited to a narrow APTA framework, India secures market access without surrendering tariff control.

Addressing strategic & Geopolitical Concerns- Border tensions and regional rivalry make economic dependence risky. “RCEP Minus China” aligns with India’s strategic autonomy doctrine.

Protecting Domestic Industry- Without China, trade agreements become more manageable for MSMEs and farmers. It allows India to negotiate sector-specific safeguards.

Better Bargaining Power in Bilateral FTAs- India prefers bilateral FTAs where it can- demand stronger rules of origin, secure better terms for services and mobility of professionals and tailor agreements to its development level.

Conclusion

“RCEP minus China” strategy provides for economic integration without strategic vulnerability. It seeks trade openness with trusted partners, while avoiding a framework where China’s dominance could harm India’s industry, security, and policy autonomy.

Additional Notes

Source – TH