India rules out joining RCEP, accuses China of non-transparent trade

India’s commerce minister rejected the idea of joining the Regional Comprehensive Economic Partnership, the world’s largest trade deal, maintaining that it is not in the country’s interest to be part of a free trade agreement with China.

“India is not going to join the RCEP because neither did it reflect the guiding principles on which ASEAN was started, nor is it in the nation’s interest to do a free trade agreement with China,” India’s Minister of Commerce and Industry Piyush Goyal told CNBC’s Tanvir Gill in an interview.

The RCEP deal was signed in 2020 by 15 Asia-Pacific countries — which makes up out 30% of global GDP — and came into force in January 2022. The countries are the 10 members of the Association of Southeast Asian Nations, and five of their largest trading partners, China, South Korea, Japan, Australia and New Zealand.

Negotiations for the RCEP started in 2013 and initially included India, which some members viewed as a counterbalance to China. However, in 2019, India chose not to join RCEP, citing unresolved “core interest” issues. Back then, India did not expand on what some of those core unresolved interests were.

Goyal noted that China, at that time, already had a free trade agreement with ASEAN, Japan and Korea.

“It was not in our farmers’ interest, RCEP did not reflect the aspirations of our small and micro medium industries and sector, and in some form, was nothing but a free trade agreement with China,” he said.

“When you see from the lens sitting outside the country, you don’t realize how difficult it is to compete against a non-transparent economy,” the minister continued, in reference to China. “Certainly nobody back home would like to have an FTA with [a] non-transparent economy, very opaque in its economic practices, where both trading systems, political systems, the economy — the way it is managed — is completely different from what the democratic world wants.”

Goyal also accused China of using the World Trade Organization’s policies to its advantage, flooding various economies with goods at low prices which often do not meet quality standards. 

From solar panels to cars to steel, China has recently been churning out more goods in an economy that has been slow to absorb, resulting in a surge of cheap exports to foreign markets. 

The minister also made a strong case for India to become a Taiwan “plus one” semiconductor country.

“China Plus One” is a phrase used to describe a supply chain strategy that sees companies diversifying manufacturing and sourcing, by continuing operations in the mainland while also expanding into other countries. This approach aims to reduce risks linked to complete reliance on a single country’s market or supply chain.

Spinning off that idea, Goyal thinks India can become an alternative place in the region for companies that want to diversify outside of Taiwan for semiconductors.

“We…