RCEP and the Nimzo-Indian defence

Yesterday, I was listening to the car radio news bulletin spending quite a good chunk of time extolling the signing of the Regional Comprehensive Economic Partnership (ASEAN + 5). India was missing from the list of signatories. India walked out of RCEP negotiations a while ago. Naturally, it was not there to sign it. The Singapore Prime Minister expressed the hope that India would join one day.

My friend Dr. Ajit Ranade had suggested that India should join RCEP in an op.-ed. he wrote for Mint today. In my view, the first part of the article makes the case against India signing it:

India’s free trade agreement with ASEAN was signed in 2010. Since then, bilateral trade has more than doubled, making ASEAN India’s fourth-largest trade partner. This healthy growth means there have been substantial mutual gains…. RCEP is ASEAN plus 5 (i.e. China, Japan, Korea, Australia and New Zealand). Most of these already have a free trade agreement with ASEAN and each other. India too has a free trade treaty with Korea and Japan, and one with Australia is in the works….The significance of RCEP cannot be overstated now that the world’s economic centre of gravity has shifted to the east. 

My response is as follows:

(1) Economic gravity is not shifting East. Too premature.

(2) If India has agreements with almost all the constituents with almost all of them, then why is there a need to sign this with China in it?

(3) India did well by not signing up to OBOR. Good call. It could work well here as well because of the common element in both the arrangements.

(4) Nothing will be lost by waiting for a year or two.

(5) Given that India has a Free Trade Agreement (FTA) with most of the constituents of RCEP, the economic impact of staying away will be marginal to nothing.

(6) Finally, if India has FTA with many constituents, then it is not worried about competitiveness and those FTA can spur India’s competitiveness quest.

The Times of India has cited the speech by Dr. S. Jaishankar, India’s Foreign Minister to the ‘Deccan Dialogue’ at the Indian School of Business today. He has explained why India was right to stay away.

I remembered reading some observations he had made in connection with trade with China in his book, ‘The India Way’:

The Indian system did not develop the requisite standards and regulations that should normally accompany the opening of an economy. It allowed Chinese goods in to the extent of hollowing out many sectors of its own industry. Unfortunately, at the other end, there was not even a semblance of reciprocity, even in sectors like pharmaceuticals and IT services where India has a global reputation….

… But the Indian controls are less effective and such cheap imports in fact undercut the growth of its domestic capacities. Nor has India shown the skills of China in absorbing technologies and creating its own. This will therefore remain a vexing issue for foreseeable future. Like the rest of the world, India too is finding it difficult to come to terms with a state capitalist model that has no precedent….

… A rising China seeks to shape Asia, perhaps even the world, to its architectural vision….

One concern is that unlike on the rest of world, India’s rise has been partly lost on a China that has been growing five times faster….

More relevant to global affairs, India will not get the openness in the world economy that China enjoyed, say in 2006, when they had the same per capita income. Nor can it reach the kind of compact with global capitalism that China could in the past.

The Soviet challenge diluted in the 1980s and the Tiananmen concerns in the West quickly gave way to profit margins….With less going for us, we also have a harder climb….

….Some of the historical accounts of negotiations bring out how China used inexactitude to give itself more wiggle room…. The border and the future of ties cannot be separated….

….. In chess, an ‘Indian Defence’ is a popular opening for those who find themselves playing black. And indeed, playing black has been the standard Indian strategic posture. As life becomes complicated, there are learnings in what Aron Nimzowitsch introduced to the game a century ago. Known as the ‘Nimzo-Indian Defence’, he imaginatively created latitude for the black; and therein lies a lesson.

What is the Nimzo-Indian Defence? I am not a chess connoisseur.

Postscript: I would like to remind readers of the long post I wrote in July on this same topic as a complement to the article, ‘Why India must remain vocal for global’ written by M/s Kelkar, Mashelkar and Rajadhyaksha. I just re-read it. I am still pleased with what I wrote. Sometimes, the perspective of time and distance might make us wince. This one still brought out a smile.

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