Why in news ?
- India and New Zealand concluded negotiations on a bilateral Free Trade Agreement (FTA) in Dec 2024–25, while India continues to stay out of the Regional Comprehensive Economic Partnership (RCEP).
- The development is being framed as a “RCEP-minus-China” strategy — i.e., signing bilateral/mini-lateral FTAs with RCEP members (except China) to secure market access without exposing India to China-centric risks embedded in RCEP.
Relevance
- GS-II (International Relations, India & Regional Groupings)
- India’s trade diplomacy, strategic autonomy, China-plus-one supply chains
- GS-III (Economy – External Sector, Trade Policy, Industry Competitiveness)
- FTAs, tariff safeguards, MSME vulnerability, manufacturing competitiveness
RCEP in brief
- World’s largest trade bloc at launch (ASEAN-10 + China, Japan, South Korea, Australia, New Zealand).
- Covers ~30% of global GDP and trade, aims at tariff reduction, rules-of-origin integration, services and investment harmonisation.
- India withdrew in 2019 citing concerns of:
- Surge in cheap imports, especially from China
- Weak safeguards on dumping and non-tariff barriers
- Unresolved issues in services, e-commerce, data and market access
- Risk of deindustrialisation and farm distress.
India’s stated concerns
- Large and persistent trade deficit with China (India’s biggest bilateral deficit partner).
- RCEP tariff cuts could have created near-zero duty access for Chinese goods through partner-country routing (“indirect entry”).
- Lack of strong auto-trigger safeguards, strict rules of origin, and effective dispute enforcement.
- Agriculture, MSMEs, dairy and light manufacturing flagged as high-vulnerability sectors.
What India is doing instead — ‘RCEP minus China’ ?
- Strategic choice: bilateral FTAs with most RCEP members while keeping China outside any tariff-cut framework.
- India already concluded or upgraded trade pacts with:
- Australia (ECTA, 2022 → CEP upgrade under way)
- UAE (CEPA, 2022)
- Mauritius CECPA
- Ongoing talks / frameworks with Japan, Korea (upgrades), ASEAN review, UK, EU, Gulf region
- New Zealand FTA (2024–25 conclusion announced).
- Objective: secure market access + investment + supply-chain links
while avoiding tariff dependence on China.
Why this strategy matters ?
- Market access without surrendering tariff control to China → lowers systemic risk.
- Selective integration helps India promote:
- Manufacturing competitiveness & PLI-led sectors
- Services mobility & digital trade bargaining power
- Trusted-supply-chain partnerships (Indo-Pacific, IPEF-style).
- Reduces exposure to price under-cutting and import surges in steel, electronics, chemicals, toys, textiles, tyres, dairy etc.
India–New Zealand FTA
- Expands access in agri-products, processed food, tourism, education, services.
- Sensitive areas (e.g., dairy) handled with calibrated concessions / exclusions.
- Complements earlier FTAs with Australia and ASEAN, improving Indo-Pacific economic connectivity.
Comparative assessment: Joining RCEP vs ‘Minus-China’ path
- RCEP (with China) — Risks
- High probability of import diversion via ASEAN hubs
- Weak leverage on non-tariff barriers
- Tariff erosion before domestic industry becomes competitive.
- Bilateral path — Advantages
- Negotiation flexibility (sector-wise safeguards, staging, quotas)
- Policy space for industrial upgrading
- Targeted reciprocity tied to domestic priorities.
Critiques & Constraints
- Fragmented bilateralism may create complex rules-of-origin and compliance costs.
- Lost opportunity to shape regional standards architecture from inside RCEP.
- India must still address domestic productivity gaps, logistics costs, scale & technology depth to fully utilise FTAs.
Strategic implications
- Supports China-plus-one diversification and resilient supply chains.
- Aligns with Indo-Pacific economic coalitions while preserving autonomy.
- Positions India as a selective liberaliser prioritising security-sensitive sectors.
Data-linked takeaway indicators
- RCEP bloc ~30% of world GDP / population; largest mega-FTA at inception.
- India exited in Nov 2019; cited unresolved safeguards and market-access asymmetries.
- India’s largest trade deficit partner = China; vulnerability concentrated in manufacturing value chains.
- India pursuing FTA-led market access with most RCEP members except China (“RCEP-minus-China”).
