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https://dailyasianage.com/news/203501/india-joining-rcep-but-bangladesh

Published: 01:47 PM, 03 November 2019

India joining RCEP but Bangladesh?

M S Siddiqui

The Regional Comprehensive Economic Partnership (RCEP) is a large trade negotiation among 16countries of Asia Pacific which aims to cover goods, services, investments, economic and technical cooperation, competition and intellectual property rights among these nations. RCEP is a proposed regional economic integration agreement among the 10 ASEAN countries and its six free-trade agreement partners-Australia, New Zealand, Japan, China, South Korea and India, which represent more than 3.5 billion people and about 40 percent of global GDP. The RCEP is one of the most significant mega-FTAs in the world, both economically and politically. RCEP negotiations cover trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce, and other issues. Moreover, India already implemented a free trade agreement with ASEAN, Japan and South Korea and negotiating similar pacts with Australia and New Zealand. There are apprehensions in India that RCEP agreement will lead to large-scale import of manufactured goods from developed members of RCEP particularly China which enjoys a trade surplus of more than 50 billion US$ with India. India is pressing ahead with talks to join a China-led free trade pact RCEP despite the fears of some domestic producers that the country would be flooded with cheaper Chinese imports. Indian producers fear cutting tariffs on dairy and other produce would open the door to cheap Chinese imports and threaten an agriculture sector that supports most of India's 1.3 billion people.

The nationalist Rashtriya Swayamsevak Sangh (RSS) has called for a nationwide campaign against the deal, saying any change in tariffs would cripple factories and farms at a time of slowing economic growth. Apart from agriculture products, critics say cheaper Chinese mobile phones, steel, engineering goods and toys could also flood the Indian market. Policy makers believe that the treaty would enable Indian industry to join global supply chains for high-end goods such as electronics and engineering. Greater access to overseas markets would help offset an economic slowdown in Indian economy. Negotiators for the 16-nation Regional Comprehensive Economic Partnership (RCEP) are in the Thai capital Bangkok on 12thOctober 2019 talks aimed at finalising the giant free trade zone by the end of the year. Textile and apparel (T&A) is often treated as one single industry, textile manufacturing and apparel manufacturing are heterogeneous in nature. Textile manufacturing mainly involves the spinning, weaving, and fabric finishing processes, is primarily based on sophisticated machinery for production. In comparison, apparel manufacturing, which includes the cloth cutting and sewing operations, primarily relies on wages of labour. This is a critical sector under the RCEP negotiation. In 2015, the sixteen RCEP members altogether exported US$405 billion worth of T&A (54%of the world share) and imported US$115 billion (31% of the world share) (WTO2017). Notably, many of these T&A products are made through a collaborative supply chain in the Asia-Pacific region. The regional supply chain is a distinct pattern of T&A trade in the Asia-Pacific, particularly among RECP members located in East and Southeast Asia. within regional RCEP, the T&A supply chain will be more competitive due to involvement of economically advanced Asian countries (such as Japan, South Korea, and China) supply textile raw material to the less economically developed countries in the region (such as Myanmar, Cambodia, and Vietnam. Based on relatively lower wages, the less-developed countries typically undertake the most labour-intensive processes of apparel manufacturing and then export finished apparel to major consumption markets around the world. Related trade flows also indicate the existence of this unique regional T&A supply chain among RCEP members. The WTO data shows that most East and Southeast Asian RCEP members import a substantial share of textiles and apparel from other RCEP members rather than trading with countries outside the region. For example, as much as 80.3% of textiles imported by ASEAN members, 39.9% in China, 75.2%in India, 86.5% in Japan, and 77.7% in South Korea came from other RCEP members in 2015 measured by value. Again, 81.0%of ASEAN members' apparel imports, 40.6% in India, 88.5% in Japan, and 78.3%in South Korea also came from RCEP members in 2015 measured by value (WTO 2017). The FTA will increase more internal trade because of more integrated supply chain within RCEP. The prospects of the market like China, India. Japan and ASEAN countries shall remain out of reach of Bangladesh. Additionally, apparel made by RCEP members are both consumed within the region and exported to other key consumption markets in the world, particularly the USA and the European Union(EU). These are major market for Bangladesh apparels and Bangladesh will face more challenge of competitive price from Cambodia, Vietnam, Myanmar and India. RCEP will facilitate to eliminate existing trade barriers between its members substantially, implementation of the agreement has the potential to facilitate the integration of regional T&A supply chain further and significantly shifts the current pattern of T&A trade in the Asia-Pacific

region. Within a free trade agreement each country within supply chain are specializes in certain portions of supply chain activities based on its respective comparative advantages so as to maximize the efficiency of the whole supply chain. The economic integration of this region was due to factors may have contributed to the formation of the regional T&A supply chain among RCEP members. First, East and Southeast Asian countries have a long history of forming a regional division of labour in manufacturing through a so-called flying geese model of shifting of industries to nearby low cost countries. The flying geese model explains how apparel manufacturing gradually moved from Japan to newly industrialized economies (like South Korea, Hong Kong, and Taiwan), to China and more recently to even less-developed ASEAN members. This is because of the hierarchy of economic development in the region, more advanced economies undertake relatively more capital and technology-intensive production process whereas the less advanced economies engage in relatively more labour-intensive productions. Additionally, free trade agreements (FTAs) have further strengthened the regional T&A supply chain in the Asia-Pacific. By the end of September 2016, there were 168FTAs in force between Asian countries. Through lowered tariff and non-tariff barriers, these FTAs significantly decreased the cost of trade between related countries and facilitated the integration of T&A supply chain in the region. Another challenge for Bangladesh that, India presume Chinese garments are making their way into India through the duty-free route under the South Asia Free Trade Pact and the Duty-Free Quota-Free window from Bangladesh although Bangladesh does not have Free Trade Agreement with China. The experts in India already concern of growing garment supply from Bangladesh. Bangladesh is very cool about FTA with China and silent about any bilateral or regional FTA. Bangladesh just decided to apply to EU for GSP+ facility while it will come from LDC status. It has no fear of possible impact of ever growing FTA within the global supply chain and an uncertain GSP+ benefit only from EU market will not serve help Bangladesh in EU market. If Bangladesh remains out of RCEP, it will be less competitive than competitors like Cambodia, Vietnam, and Myanmar and even India for export to all markets in all the regions. Bangladesh will be isolated and along in the business world. The writer is a legal economist Email: mssiddiqui2035@gmail.com