The decisive move by Indian PM Narendra Modi to withdraw India from the RCEP trade pact now clears the way for it to be signed probably in Vietnam sometime in early 2020. The trade deal will still be one of the world’s biggest representing over 30% of GDP and will see the 15 participating Asia – Pacific economies integrating closer together over the coming years.
The ASEAN summit has ended with a decision and a result for the historic Regional Comprehensive Economic Partnership Agreement which has arrived at an agreement but which has seen India parting ways with the project. It will be signed early in 2020 and gives a fillip to Thailand’s economic efforts to battle its way forward in the midst US-China trade war and increasingly contentious trade conditions. This summit saw a realistic appraisal of the world and the ASEAN region with the US-China trade war, despite talk of a possible mini deal between the protagonists, dominating the landscape and for which there are no easy or positive answers.
The ASEAN summit on Monday announced a ‘conclusive’ agreement on the Regional Comprehensive Economic Partnership with negotiations complete on all 20 chapters involved in the deal except for legal work to allow for a signing of the deal in Vietnam sometime in early 2020.
However, the big news from the summit has been the withdrawal of India from the agreement which has been confirmed by an Indian government spokeswoman.
India will not be participating in the RCEP
Ms Vijay Thakur Singh of the Indian Ministry of External Affairs told a press briefing in Bangkok on Monday that India had informed the other delegations and leaders to the summit that it would not be joining the agreement at this time.
Having come under intense pressure over the weekend including a meeting with Thai Prime Minister Praryut Chan ocha who urged India to move forward, Indian Prime Minister Narendra Modi was quoted as saying that he could not in good ‘conscience’ accede to India’s participation in the trade pact which had made rapid progress under Thailand’s leadership of the ASEAN bloc.
Opposition at home in India strongly held
The move has been greeted with acclaim by many in India who feared the effects the trade deal would have had on India’s retail and industrial sectors.
Many had also begun to see it as something that would strengthen Chinese power in the region economically as the countries to the pact integrate more closely together.
The move was even greeted warmly by the leader of the opposition Congress Party defeated so comprehensively by Mr Modi in this year’s general election.
Congress leader, Randeep Singh Surjewala, described the outcome as a ‘victory for all fighting for protecting national interests’ while many of Mr Modi’s political allies held a similar point of view and breathed a sigh of relief.
Confederation of Indian Industry had a more ambiguous view, but accepted risk to many Indian firms
The Confederation of Indian Industry, however, warned that the pact may have been an opportunity for India while accepting that the threat to many Indian firms from lower-cost external competition was a real one.
Vikram Kirloskar, the President of the body said that the day must come in India when business leaders look beyond the national interest to a wider world and an Indo Pacific market that will soon develop and grow as the RECP pact weaves the economies of the 15 countries who have signed up to it together.
A personal and well-deserved victory for the Thai Commerce Minister Jurin Laksanavisit
The conclusion of the agreement is a personal victory for Thailand’s Commerce Minister Jurin Laksanavisit who worked hard to bring the deal together and was frustrated in the last few weeks by India’s last-minute misgivings.
Deal includes Japan and South Korea as well as China
It must be noted that the trade deal, while it includes China and the ASEAN bloc also includes Japan and South Korea as well as Australia and New Zealand. There are some concerns that the trade pact could tilt the balance of power in the region towards China but the greater body of opinion is that this outcome is a win for a multilateral type approach to world trade deal which will help spur growth and open up export markets to emerging economies such as Thailand.
Talk of a US Chinese mini deal – unlikely to break the real deadlock between the tow super powers
The move comes as there is speculation of a mini trade deal between the United States and China although, in recent days, China has again brought forward surprises, this time demands for the removal of US tariffs on ฿350 billion of Chinese exports to America who is seen as an additional complication.
Expert commentators who have become more sceptical, are also warning that even if the deal is agreed, it is unlikely to lead back to the former relationships between the two parties prior to the trade war.
Determination of this US administration on trade
The determination of this US administration to right the balance of trade in favour of the US runs deep and Thailand, as well as other Asian economies, is also in its sights despite the warm words from US Commerce Secretary Wilbur Ross who is in Bangkok this week.
Mr Ross played down the recent suspension of Thailand from the US Generalised System of Preferences pointing out that there was still time for discussions on the matter.
At the same time, US embassy officials again highlighted the non-scientific basis on which US pesticides will ban in Thailand from December 1 st. They insist that they are not harmful to human health in spite of a similar ban in other countries, notably in Europe.
US Commerce Secretary Wilbur Ross leads US investors to Thailand looking for opportunity
The US delegation led by Mr Ross brought US business leaders interested in doing business in Thailand and investing in the kingdom.
The summit also led to barbed exchanges between the US and Chinese delegations in relation to the South China Sea dispute.
For Thailand, it all means that even as there are some small signs of a better fourth quarter for its economy, it still finds itself very much in troubled waters battered and torn in the waves of an increasingly disruptive tide as the US and China struggle for power in the Asia Pacific region and world trade suffers as the former global consensus retreats.
This is driven by growing populism in developed economies based very much on real concerns by voters who have found a voice.