Why India Walked Away From RCEP

Why India pulled out of the world's largest trade bloc in 2019, the fears about Chinese imports behind the decision, and the debate over whether it was right.

The Regional Comprehensive Economic Partnership, or RCEP, is a free trade agreement among 15 Asia-Pacific countries, including China, Japan, South Korea, Australia, New Zealand and the ten ASEAN nations. Together they account for about a third of world GDP. India took part in negotiations for years, but in November 2019 it announced it would not join.

India’s concerns

Chinese imports: India already ran a very large trade deficit with China. Cutting tariffs on Chinese goods, it feared, would flood Indian markets and hurt domestic manufacturers.
Dairy and farming: New Zealand and Australia are strong dairy exporters. Indian dairy farmers, many of them small, opposed opening up.
Weak safeguards: India wanted stronger mechanisms to raise tariffs if imports surged, and protection against goods being routed through partner countries.
Services: India wanted more openings for its services and professionals, which it felt the deal did not provide.
Past experience with FTAs that increased imports more than exports.

The case for joining

Critics of India’s decision argue:

RCEP countries form huge, integrated supply chains. Staying out makes it harder for India to become part of them.
Exporters in RCEP countries get lower tariffs within the bloc, leaving Indian exporters at a disadvantage.
Competition could have pushed Indian firms to become more efficient.

What happened next

RCEP came into force in 2022 without India. India shifted to bilateral deals with countries such as the UAE, Australia and the UK, while keeping China at a distance. After the 2020 border clashes with China, India also tightened rules on Chinese investment.

The debate continues

Some economists argue that joining global supply chains is essential for India to become a manufacturing exporter. Others argue that India must first strengthen domestic industry. The RCEP decision sits at the heart of this debate.

The small manufacturer's fear

A small maker of kitchen appliances in Gujarat already struggles to compete with cheap Chinese imports. If tariffs had been cut under RCEP, he fears, his products would have been undersold. For him, staying out felt like protection.

Thinking RCEP was mainly about China

RCEP includes 15 countries, but for India, fears about Chinese imports were the biggest concern.

Key takeaways

RCEP is a 15-country Asia-Pacific trade bloc including China and ASEAN.
India left negotiations in November 2019.
Fears about Chinese imports, dairy and weak safeguards drove the decision.
Critics say staying out limits India's role in Asian supply chains.