Four years after India walked out of the Regional Comprehensive Economic Partnership (RCEP) agreement, neighbours Sri Lanka and Bangladesh are now considering their chances of membership in the 15-nation trading bloc.
Sri Lanka has already applied to join the RCEP, and President Ranil Wickremesinghe, who begins a visit to Beijing for the Belt and Road Initiative (BRI) Forum on Sunday, is expected to seek support for his country’s candidacy in meetings with leaders there. Meanwhile, the Bangladesh government — whose Commerce Ministry has recommended joining RCEP — is expected to take a final decision only after elections are held there in January 2024, its Foreign Minister A.K. Abdul Momen said.
Vast potential
The Sri Lankan Presidential Secretariat confirmed the government’s application for RCEP membership in an August statement, saying that it recognised “the potential of this vast trade block comprising major economies like China, Japan, and [South] Korea”. As his government negotiates with the International Monetary Fund (IMF) and other creditors for loans to tide over Sri Lanka’s financial crisis, Mr. Wickremesinghe has moved more purposefully towards RCEP membership. Through bilateral meetings, he is seeking support for the move from Malaysia, Indonesia, Japan and Thailand, and is likely to raise the issue in his meetings in Beijing as well.
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“There have been some processes and discussions [towards joining RCEP], but we haven’t made an application yet. Our general principle is not to join any big organisation or agreement until after the election mandate,” Mr. Momen said in an interview to The Hindu. He explained that this was why Bangladesh had not yet pursued the RCEP membership or that of the Brazil-Russia-India-China-South Africa (BRICS) earlier this year.
Looking beyond South Asia
Both countries are also in talks with India for updated Free Trade Agreements (FTAs), and are part of the 2006 South Asia Free Trade Agreement (SAFTA). However, they recognise that joining RCEP would take them out of the orbit of subcontinental trade, and enable access to the Association of South East Asian Nations (ASEAN)-led group that comprises China, Japan, South Korea, Australia, and New Zealand as well.
At present, RCEP members represent 30% of the global GDP; in fact, it is the first such agreement involving the big Asian economies. The final RCEP document said that the 15 countries would aim to eliminate up to 90% of tariffs imposed on goods traded within the bloc within 20 years.
‘Development of concern’
MEA officials did not respond to requests for a comment on whether India would reconsider its decision to pull out of RCEP talks, as close neighbours like Sri Lanka and Bangladesh make plans to join. When asked, a senior government official dealing with international trade said that if India’s neighbours join RCEP, it would be a “development of concern”, citing the opening up of markets in India’s vicinity to a group dominated by Chinese trade, and the possibility that those markets may become “more globally competitive” than India’s.
While India was a founder member of the RCEP grouping, Prime Minister Narendra Modi announced that India would pull out of talks in 2019, owing to concerns over mobility in services and fears of Chinese goods flooding the market, as well as objections raised by the domestic agriculture sector and smaller businesses. While India has been invited to return to RCEP meetings on several occasions, the government has not yet indicated that it would consider a review.
‘Regional markets are key’
Sri Lanka and Bangladesh have additional reasons for the move away from more protectionist policies in both countries, analysts say.
“During the crisis in Sri Lanka, I think we learned that regional markets are the key. Sri Lanka has missed the boat on other regional groupings and FTAs in the past. I hope joining RCEP and other FTAs will help us spread our market, and frankly think it will force us to become more competitive with international players,” explained Kasturi Chellaraja Wilson, CEO of Sri Lanka’s Hemas Group, the island’s biggest FMCG and healthcare company. She was speaking to a group of South Asian diplomats, economists and editors in Colombo, attending a “One South Asia” conference organised by the World Bank.
Meanwhile, Bangladesh is expect to graduate from the list of Least Developed Countries by November 2026, and will lose preferential access to global markets, with a recent OECD paper estimating that export earnings could drop by 14% and average tariffs could increase by 9%. According to The Business Standard, a Bangladeshi newspaper, its Commerce Ministry’s proposal said that joining RCEP could increase Bangladesh’s exports by $5 billion. As Bangladesh is already negotiating free trade agreements with six of 15 RCEP countries, joining the grouping would simplify the process, the proposal added.
Welcoming applicants
Under the RCEP agreement that came into force in January 2022, the RCEP secretariat — based provisionally in Jakarta along with ASEAN — was mandated to accept membership applications from countries after 18 months, that is, from July 2023. This week, an ASEAN official said that the criteria for admission would also be finalised in the next few months, “by 2024”.
“We are at this stage of preparing the groundwork for the accession rules. Once that is done and finalised, it will lead to the start of the negotiations of potential accession by the respective countries,” Satvinder Singh, the Deputy Secretary-General for the ASEAN Economic Community, was quoted as telling local media in Jakarta last week.
