India's Policy Orientation on RCEP: Problems and Way Out

He Ping



India's Policy Orientation on RCEP: Problems and Way Out

He Ping

Since they were first launched in May 2013， negotiations on the Regional Comprehensive Economic Partnership （RCEP） have been ongoing for more than three years. After 13 rounds of negotiations and four Commerce Ministers' Meetings， the original goal of concluding negotiations by the end of 2015 has been postponed one year to the end of 2016. According to the information disclosed thus far， the odds are against realizing this goal as well. India's geopolitical position and trade policy orientation have been particularly significant， and its stance and attitudes have had a profound impact on the process and direction of the RCEP negotiations. This paper is an attempt to analyze India's policy orientation concerning the RCEP as well as the interests and power games behind them， while also discussing the potential breakthrough points for advancing the RCEP negotiations.

India's Change of Attitude Toward the RCEP Negotiations

When it comes to official statements， it seems that India has always held a positive attitude toward the RCEP negotiations. In recent years， it has been quite proactive on the issue of trade liberalization. According to the Asian Development Bank （ADB）， India has a total of 28 Free Trade Agreements （FTA） which are signed， in force or being negotiated. This number is only after Singapore （32） among ADB members.1The cooperation agreements signed between India and its partners are called a variety of ways， including FTA， Preferential Trade Agreement （PTA）， Trade Treaty， Trade Agreement， Comprehensive Economic Cooperation Agreement （CECA）， and Comprehensive Economic Partnership Agreement （CEPA）. For the sake of convenience， this paper will generally call them FTA.This being said， based on factors such as its national conditions and demands for industrial development， it is apparently hard to define the country as a “facilitator” or “leader” in various FTA negotiations， including the RCEP. Such a phenomenon is paradoxical. The imbalance caused by power games often leads to obvious differences and inconsistencies in India's trade strategy. Generally， India's attitude toward the RCEP has experienced the following three major turning points.

The first turning point took place when India decided to join the RCEP negotiations. The RCEP itself is a result of the coordination and combination of existing regional cooperation initiatives， such as the East Asian Free Trade Agreement （EAFTA） advocated by China and the Comprehensive Economic Partnership for East Asia （CEPEA） advocated by Japan. Geologically located in South Asia， India is loosely associated with East Asia in many ways， while being an important member of the broader Asia-Pacific cooperation represented by ASEAN “10+6.” In a sense， the participation of India has determined the positioning and process of the RCEP from the very beginning. For India， besides the economic demands of integrating various existing FTAs and exploring the Asia-Pacific market， there are two major factors contributing to India's participation in the RCEP. First is the special long-term relationship between India and ASEAN. India's diplomacy in Southeast Asia is obviously business-oriented，2Amitendu Palit， “India-Southeast Asia Relations: Enhancing Mutual Benefits，” Brookings India Impact Series， Brookings Institution India Center， May 2015.so it is of vital importance for both sides to enhance their business ties by joining the RCEP negotiations. Secondly， there are the non-business factors， including maritime security and the balance of regional powers. Therefore， the participation of India has been vigorously supported by countries like Malaysia. As the Indianmedia puts it， “India becomes part of regional trading bloc despite Chinese opposition.”3Sachin Parashar， “India Becomes Part of Regional Trading Bloc Despite Chinese Opposition，” The Times of India， July 8， 2013.

The differences in various parties' expectations and acceptance of the depth of integration have formed potential conflicts in the early stage of the RCEP negotiations. For one thing， the industrial sector of India has kept highly alert to the so-called Chinese “government subsidies， dumping and non-market economic behavior” as well as potential industrial shock and high trade deficit. For another， some ASEAN countries demand that the RCEP must adopt，due to the participation of India，higher standards on issues such as rules of origin. Therefore， India's attitude in negotiations has been viewed as the key and biggest uncertainty in the initial stage of the RCEP negotiations.

The second turning point came in August 2014， around the second RCEP ministerial meeting. The Indian Prime Minister was absent in that meeting. The parties reached an impasse in the discussion of negotiation modality. India maintained that the coverage of its tariff reduction could not exceed 40 percent， which was far less than the 80 percent to 90 percent proposed by other countries. As such， the RCEP negotiations came to a halt. For that， some countries， with Japan included， proposed to reach an agreement without India for the moment. Under such conditions， it would be India's decision whether to join the talks and sign the agreement. India has not objected to this proposal.

The third turning point followed soon after. Following the second ministerial meeting， India was to host the sixth round of talks in December 2014. After carrying out a new round of policy coordination，India “returned” to the negotiations and the RCEP resumed the “10+6”track. But there was a major international factor prompting this move: 12 countries， including the US， obviously accelerated their talks on the Trans-Pacific Partnership （TPP）. The agreement was reached in December 2015， and formally signed in February 2016， only to be approved by the congress of each state.

According to the generally agreed Basic Concept on Initial Offer（BCIO）， tariff concessions will be implemented on three levels based on the identities of FTA partners. For India， this open and step-by-step path toward tariff liberalization will be divided as follows: on the first level， like China， Japan， South Korea， Australia， and New Zealand， India pledges to remove tariffs on 80 percent of goods from ASEAN countries，among which 65 percent of tariff concessions should go into effect right away， while the remaining 15 percent would be lifted in a step-by-step manner over the next 10 years. On the second level， India will remove 65 percent of tariffs on goods from Japan and South Korea， while the latter two countries should cancel 80 percent of tariffs on goods from India. On the third level， for China， Australia， and New Zealand， which have not reached FTAs with India， India will remove 42.5 percent of the tariffs on goods from the three countries， while the three countries should accordingly remove 42.5 percent， 80 percent， and 62.5 percent of tariffs on India's goods， respectively.4“Inputs on Initial Offer of Goods under Regional Comprehensive Economic Partnership （RCEP）， ”Ministry of Commerce and Industry， Government of India.Besides trade in goods， in order to exploit its comparative advantage， India has also called for a rise in the level of ambition in negotiations on services and investment， and put forward specific recommendations on issues such as the temporary movement of skilled workers and business visas.5“Commerce Minister Complains of ‘Sledging' in Trade Talks，” The Hindu， May 2， 2016.However， persisting concerns in these negotiations have yet to be addressed. Before the 12th round of negotiations held in April 2016， reports emerged that some countries accused India of “postponing and hindering” the talks andgiving them “an ultimatum.”6“Commerce Minister Complains of ‘Sledging' in Trade Talks，” The Hindu， May 2， 2016.

Positive Incentive of India's Economic and Trade Strategies on the RCEP Policy Orientation

Since the mid-1980s， a slow trade reform has been carried out in India. While naturally the result of that reform process， bilateral and regional FTAs have opened the Indian market to the outside world. The RCEP is the biggest stride India wants to make along the reform path. For the country， the RCEP has special economic and trade significance.

In terms of trade policy， the RCEP is an important puzzle to complete the jigsaw of the existing FTA construction framework. In December 1998， India and Sri Lanka signed the first bilateral FTA on trade in goods. India's second comprehensive FTA entered into force in August 2005 with Singapore. In 2009 and 2011， India reached FTAs with South Korea and Japan， respectively， covering the three “Singapore topics” of trade facilitation， investment， and competition policy. As of May 2016， 11 bilateral FTAs have been signed and came into force （with Sri Lanka， Afghanistan， Thailand， Chile， Singapore， Nepal， South Korea，Bhutan， Bangladesh， Malaysia， and Japan）， together with five multilateral FTAs including the South Asian Free Trade Area and the Asia-Pacific Trade Agreement. At the same time， India has also accelerated FTA negotiations with developed economies such as the EU， Australia， New Zealand， and Canada. It is not difficult to see that India's existing FTA partners are mainly developing countries in South Asia and Southeast Asia. Due to the time of signature， level of ambition， market demand， and other reasons，these FTAs have failed to significantly help India promote export and upgrade industries. Hence， the RCEP will become an important bridge for India to connect itself to the Southeast Asian and South Asian markets. It will also become a key step for the country to speed up trade policy reformand truly implement its Indo-Pacific strategic vision.

In terms of economic strategy， the RCEP is an important fulcrum of India's industrial reform. After 2014， when Narendra Modi took office， the new government upgraded the “Look East Policy” started in the 1990s by the Rao government into the more proactive “Act East Policy.” Meanwhile， the Modi government has put forward the Brand India strategy which includes 5“T's，” and trade is an important “T”（the other four are talent， tourism，tradition， and technology）. The government of India has also proposed such initiatives as Made in Indi， Digital India， and Skills India. In the newly developed Foreign Trade Policy 2015-2020， trade has for the first time been identified as an important component to achieve long-term strategic goals and security goals. In the sixth WTO Trade Policy Review in April 2015， India demonstrated unprecedented interest in various forms of economic partnership agreements.7As one of the tools to achieve the above reform initiatives and the stepping stone to implement the Act East Policy， the RCEP will help India gain direct access to the huge markets of Japan， South Korea， and Australia.8Bipul Chatterjee and Surendar Singh， “Why RCEP Is Vital for India，” The Diplomat， March 3， 2015.

In terms of global governance， the RCEP can be a strategic buffer for India to respond to “super FTAs” such as the TPP， and it is also a response to the new type of economic governance system.9Suparna Karmakar， “Rulemaking in Super-RTAs: Implications for China and India，” Bruegel Working Paper， March 2014.In 2013，when the US Vice President Joe Biden visited India， he invited India to join the TPP negotiations. But India only responded coldly. Later，although the US once released the message that it expected India to join the TPP， it was an objective fact for all to see that the country was not equipped to join. Due to such issues as intellectual property

7 “Trade Policy Review，” Report by the Secretariat， World Trade Organization， WT/TPR/S/313 · India，April 28， 2015， https://www.wto.org/english/tratop_e/tpr_e/s313_e.pdf.right protection for pharmaceutical products，10Jayant Raghu Ram， “Crouching Tiger， Hidden Dragon: the TPP's IPR Chapter Issues and Concerns for India，” Center for WTO Studies， WP/CWS/200/16/Rev. 4， February 2016.there was a huge and insurmountable divide between India's reality and the proposed TPP clauses. It can even be said that discussions on the so-called possibility and potential benefits of India's joining the TPP is only an unrealistic academic talk and wishful thinking on the policy level. In this regard，officials such as Nirmala Sitharaman， Minister of State for the Ministry of Commerce and Industry， have repeatedly expressed their opinions.

However， staying out of the TPP does not mean that India can be free from problems. According to research based on the GTAP model， when it comes to the negative impacts brought about by tariff reduction of the TPP， India will stand to lose the most among all countries involved. India's lowered GDP growth rate as a result of tariff concessions will be equal to and even surpass that of China.11Badri Narayanan and Sachin Kumar Sharma， “An Analysis of Trans-Pacific Atlantic Partnership （TPP）: Implications for Indian Economy，” Centre for WTO Studies， Indian Institute of Foreign Trade， New Delhi，India， 2014； Golam Ahmed Faruqui， Laila Arjuman Ara and Qamruzzaman ACMA， “TTIP and TPP: Impact on Bangladesh and India Economy，” Pacific Business Review International， Vol.8， Issue 2， August 2015；Badri Narayanan G.， Harsha Vardhana Singh and Dan Ciuriak， “Quantifying Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership Spillovers on India，” Discussion Paper， International Institute for Sustainable Development， August 17， 2015.On trade in goods， India's share in the international market will be eroded by some of the TPP developing countries. In the trade of pharmaceuticals，textiles， chemicals， leather and plastic， India will suffer greatly. For example， as for textiles and garments， Vietnam is expected to gain part of the share taken up by India in the global market. This trade transfer effect is even more obvious in trade in services. In the outsourcing of services， India will face greater competition from countries like Vietnam. In addition to the transfer effect in trade and investment， “super FTAs”such as TPP will also generate huge spillover effects in fields such as rule-making framework.12Dan Ciuriak and Harsha Vardhana Singh， “Mega-regional Trade Agreements: How Excluded Countries Can Meet the Challenge，” August 18， 2015， available at SSRN 2680215； Dan Ciuriak， “India's Possible Response to the Challenge of the Mega-regionals，” Foreign Trade Review， March 8， 2016， DOI: 10.1177/0015732515625720.For India in the medium and long term， itwill be negatively affected in labor， environment， intellectual property，and the rule-making standards of value and production chains. It is noteworthy that India has started negotiations on a Bilateral Investment Treaty （BIT） with the US. When India has talks on a FTA or BIT with the US and other TPP countries， the latter will inevitably take TPP terms and standards as a reference.

In this regard， the RCEP is like a lesser evil to choose for India. The country may view the TPP and the RCEP as representatives for “radical integration” and “prudent integration，” respectively. The latter provides less commitment， more exemptions and exceptions， and more relaxed implementation deadlines， which is in line with India's stable yet slow reform process.13“Economic Survey 2014-2015，” Minister of Finance， Government of India， 2015， p. 37.Meanwhile， like the WTO Doha Round negotiations，the TPP has adopted the approach of “package agreement.” Compared to the TPP， the RCEP will be a more ideal choice as it allows periodic adjustments， recognizes the diversity of development levels and focuseson capacity-building.14David Nellor， “TPP and RCEP: the Hare and the Tortoise？” Gateway House: Indian Council on Global Relations， May 20， 2015.

Indian PM Modi expressed India's commitment to supporting the realization of the RCEP at the 11th East Asia Summit in Vientiane， Laos on Sept. 9， 2016.

Major Obstacles Facing India's RCEP Policy Orientation

The RCEP will bring substantial benefits for India: it will expand its preferential access conditions in the Asia-Pacific market， promote deeper integration with regional production networks and value chains，mitigate the negative impacts of the TPP and the Transatlantic Trade and Investment Partnership （TTIP）， etc.15Surendar Singh， “India's Approach towards Bilateral， Regional and Multilateral Negotiations，”Discussion Paper， CUTS CITEE， October 2015.That being the case， why does India still slow the pace of negotiations and even once stayed outside the talks？ Leaving aside specific industries and products， the major obstacles hindering India's participation in the RCEP negotiations lie in the following three aspects.

First of all， India has a strong anti-trade tradition. The struggle against British colonial rule， the Gandhian boycott against foreign products， and Nehru's Fabian socialism concept of economic development have all had a significant influence on India's relatively closed and protective policies. India's trade policy is often regarded as a product of its domestic political and economic factors， and is less affected by changes in the international economic order.16Amit Shovon Ray， “Shaping the Coordinates of India's Trade Policy Architecture: Domestic versus International Drivers，” ISAS Working Paper No. 126， 2011； Suparna Karmakar， “Political Economy of India's Trade Negotiations Economic Significance of FTAs，” Preliminary draft paper for ETSG13.The Indian government has admitted that the biggest challenge facing the country's foreign trade is from inside. India's well-known NGO “Consumer Unity & Trust Society” （CUTS） has put forward policy recommendations based on interviews with around 60 stakeholders in Mumbai， Chennai，Calcutta， and other places， hoping that India can play a rule-setter role in the RCEP negotiations. But meanwhile it also stressed the need for a series of special treatments on such issues as phased tariff concessions，targeted discussion of rule of origin， maintenance of farm products' export limits and quotas， avoidance of integration in domestic laws and regional rules on issues like the intellectual property rights （IPR）concerning pharmaceuticals， etc.17Bipul Chatterjee and Kyle Cote， “Mega Regional Trade Agreements and the Indian Economy: An Analysis of Potential Challenges and Opportunities，” World Commerce Review， September 2015， pp. 110-117.This stance has well reflected the selfcontradictory mindset of the Indian government and industrial sector on market openness and rule reform. Moreover，a number of labor unions， including the Bharatiya Mazdoor Sangh （BMS， Indian Workers' Union） and Centre of Indian Trade Unions （CITU）， have formed a national committee against FTAs， which has submitted petition letters to the Prime Minister and departments like the Ministry of Commerce and Industry， explicitly demanding an end to all trade agreement negotiations which are “detrimental to the Indian economy，”including the RCEP.18“Trade Unions Sound Alarm over FTAs； Say Hitting Economy，” The Times of India， April 21， 2016.

Over the past few years， India's economy registered rapid growth，which seemed even more outstanding when some emerging economies like China slowed down. According to the ADB forecast， by 2030 and 2050， the population of India's middle-income class is expected to hit 1.19 billion and 1.4 billion， respectively， while that of the high-income class is expected to reach 15 million and 210 million， respectively.19Asian Development Bank Institute， Asia 2050: Realizing the Asian Century， Manila: Asian Development Bank， 2011， p. 24.Indian officials are often tempted to emphasize the huge market's unlimited charm and potential benefits for its FTA partners， with a view to persuade others to reduce barriers for trade reciprocity. But the problem is that， when domestic enterprises refuse to let foreign businesses enter the highly promising market， and when domesticconsumers have yet to demonstrate their willingness to accept foreign products and services， the market bonus， however big， is just a figment of the imagination. For example， due to the impact of higher tariffs on some agricultural products， such as grains， India's simple average MFN tariff rate even increased one percentage point from 12 percent during 2010-2011， and the proportion of tariff-free specifications fell from 3.2 percent to 2.7 percent in 2014-2015.20“Trade Policy Review Report by the Secretariat，” Trade Policy Review Body， World Trade Organization，WT/TPR/S/313， April 28， 2015， p. 9.

Second， the RCEP's weak presence and integration in the value chain of the Asia-Pacific region have greatly reduced the partnership's attractiveness to Indian industries. Whether forward participation or backward participation， India is always among the lowest positioned members in regional value chains.21Amitendu Palit， “Regional Supply Chains in Asia: Examining India's Presence and Possibilities in the RCEP，” Working Paper， CWS/WP/200/20， Centre for WTO Studies， November 2014.India only has a tiny number of products， such as aircraft parts （SITC 79295）， which have participated in the international division of labor in the upper stream of the global industrial chain， while others like vehicle parts stay in the downstream.22Sadhana Srivastava and Rahul Sen， “Production Fragmentation in Trade of Manufactured Goods in India: Prospects and Challenges，” Asia-Pacific Development Journal， Vol. 22， No. 1， June 2015.Particularly， in electronic machinery， electrical products， and other industries most representative of China and Southeast Asian countries' participation in the global division of labor， India's performance only has a meager record.23Prema-chandra Athukorala， “How India Fits into Global Production Sharing: Experience， Prospects，and Policy Options，” India Policy Forum， 2013-2014.

India has done little on the five major factors for integrating into the global supply chain.24The five major factors are: being able to promote the tariff rates and structure of imported intermediate goods； a rule-making environment able to attract foreign investment in the manufacturing sector； sound domestic tax system； a business environment that can reduce costs of trans-border transactions； strong logistic ties with economies in the region. Please refer to Jayanta Roy and Pritam Banerjee， “Why Isn't India a Major Global Player？ The Political Economy of Trade Liberalization，” Robert Schuman Centre for Advanced Studies， EUI Working Paper RSCAS 2013/84.In the latest Ease of Doing Business ranking released by the World Bank in 2016， India only ranked 130thamong 189 economies. In terms of the Services Trade Restrictiveness Index developed by the Organization for Economic Co-operation and Development （OECD）， India's restrictiveness was also far stronger than East Asian countries.

From interviews with Indian companies， industrial organizations，and policymakers， it can be seen that， although in recent years the Indian business community does view East Asia and ASEAN as an important export destination and source of imports of technologyintensive intermediate products， India's integration into the global production network， generally speaking， is still weak.25Meenu Tewari， C. Veeramani and Manjeeta Singh， “The Potential for Involving India in Regional Production Networks: Analyzing Vertically Specialized Trade Patterns between India and ASEAN，”Working Paper 292， Indian Council for Research on International Economic Relations， December 27， 2014.To a certain extent， this has become a problem of reciprocal causation: little participation in regional division of labor and value chain has led to the inadequate willingness of the Indian government and industrial community to join high-level regional integration， and the absence of high-quality FTAs has made it hard for market openness and the development of an export-oriented economy to be promoted. Infrastructure bottlenecks， high transaction costs， complex regulatory requirements， and an unsatisfactory business environment have all greatly contributed to India's backwardness. Therefore， to improve the domestic investment environment and thus attract more foreign investment is of vital importance for India to enhance its participation in the regional value chain.

The essence of “Modi economics” is to revitalize the weak manufacturing sector and attract more foreign investment. In this framework， if the “Made in India” initiative is to achieve real success，the key lies in whether India can truly strengthen its integration into

Fear of the potential competition from China is one of the main reasons why India remains cautious about the RCEP.the regional value chain， rather than just looking at the short-term indicators and surface results embodied by absolute export volume and growth rate. In fact， taking advantage of the existing FTA networks，some Indian industries have shown signs of deepening regional industrial cooperation. For instance， as the worlds' sixth largest auto production and sales country and the largest motorcycle market， India has gradually emerged in an industry which was originally dominated by Thailand and other ASEAN countries. Enterprises in Japan and South Korea also have high expectations in this regard.

Third， the “side effects” and “adverse effects” of FTAs have taken shape. As the number of FTAs continues to grow， India's total trade deficit has increased by 20 times from 2001-2002 to 2014-2015. Especially after the signature of FTAs with developed economies such as Japan and South Korea， India's exports have not witnessed expected growth， while imports from its partners have increased sharply. For instance， the explosion of steel products from Japan and South Korea has forced the Indian government to set up protective tariffs. No wonder some Indian scholars advocate that the “obsession” with FTAs will finally do harm to India's industries in the long run.26Nilanjan Ghosh， “FTA-fetishism to Hurt Indian Industry in the Long Run，” Observer Research Foundation， November 16， 2015.An internal report of the Indian Ministry of Commerce and Industry said that it was even possible that the RCEP can lead to a 1.6 percent drop of the country's GDP.27Asit Ranjan Mishra， “RCEP Negotiations: India Likely to Take a More Aggressive Stand，” Livemint，April 18， 2016.

In this respect， fear of the potential competition from China is one of the main reasons why India remains cautious about the RCEP. Currently， India's trade deficit with China has accounted for nearly onequarter of all its trade deficits. India believes that， due to China's market access and non-tariff restrictions， as well as the protection of state-owned enterprises， among other policies， India's pharmaceuticals， informationtechnology， basic IT services and agricultural products will find it difficult to successfully enter the Chinese market. According to the Indian government's forecast， based on current trends， during 2016-2017， India's imports from China will reach $800 billion， while its exports to China will only reach $200 billion， so the bilateral trade deficit is expected to rise by a further $600 billion.28“Foreign Trade Policy Statement， ” Ministry of Commerce and Industry， Government of India， April 1，2015， pp. 27-28.If the RCEP is reached， this figure is likely to continue to expand. That is why some Indian scholars have argued that，when China is vigorously developing trade in services and India has long held a comparative advantage in this field， trade in services should be an important area in the China-India RCEP negotiations and even global multilateral negotiations.29Rajrishi Singhal， “Silver Lining to India's Trade Blues，” Gateway House: Indian Council on Global Relations， January 21， 2016.

In addition， the low utilization rate has always been a problem faced by many Asian intraregional FTAs， which is especially evident for India. In terms of export value， India's utilization of the India-ASEAN FTA was only 2.4 percent and 7.4 percent， respectively.30Ganeshan Wignaraja， “Assessing the Experience of South Asia-East Asia Integration and India's Role，”ADBI Working Paper 465， 2014， p. 15.Small， medium， and micro enterprises account for nearly 45 percent of India's manufacturing output， nearly 40 percent of total exports， nearly 8 percent of GDP， and have played an important role in job creation and rural development.31“Foreign Trade Policy Statement， ” Ministry of Commerce and Industry， Government of India， April 1，2015， p. 47.These pivotal enterprises for the Indian economy should have been the most important players to utilize FTAs.32To this end， the Indian government has set up a trade portal website in December 2014 “www. indiantradeportal.in” to collectively provide the domestic industrial community with information about FTAs and target markets. Besides this， it has also launched a special Twitter account in April 2016 to answer questions on economic and trade policies.Unfortunately， after independence， long-term trade protection has not promoted substantial development of India's manufacturing industry. Under the protection of a veritable greenhouse， Indian small and micro enterprises generally lack the engine to drive technological innovation，nor can they improve efficiency or profitability. In turn， they have no intention or ability to make the most of existing FTAs， and even have prejudice and fear against potential FTAs such as the RCEP.

In 2011， Citigroup predicted that India would become the world's tenth， third， and second largest trading nation by 2015， 2030， and 2050， respectively.33Willem Buiter and Ebrahim Rahbari， “Trade Transformed: The Emerging New Corridors of Trade Power，” Citi GPS: Global Perspectives & Solutions， October 18， 2011.According to the WTO Annual Report， in 2014，India was the world's 19th largest exporter of goods and the 12th largest importer of goods. In terms of trade in services， the country was the eighth largest exporter and tenth largest importer， still far from the above prediction. The core goal set by the Indian government itself in 2015 was that， by 2020， India should become a significant participant in world trade and occupy the leading position in the international trade rule-making system； by 2019-2020， exports of goods and services should jump from $465.9 billion in 2013-2014 to $900 billion， and its share in world exports should rise from 2 percent to 3.5 percent.34“Foreign Trade Policy Statement，” Ministry of Commerce and Industry， Government of India， April 1，2015， p. 14.In reality， despite the introduction of “Made in India” and a series of other policies， India's export situation has not been optimistic. More than two years after Modi took office， his great governance of the country is demonstrated in such indicators as economic growth， inflation rate，industrial production growth margin， and foreign direct investment. But exports have been the few areas that have witnessed regress rather than progress.35Gerard Baker， Niharika Mandhana and Rajesh Roy， “India's Narendra Modi Defends Efforts to Shake up Economy，” The Wall Street Journal， May 26， 2016.To improve its status in Asia-Pacific regional trade will be an arduous task for India.

India to Advance the RCEP Negotiations: The Way Out

For India to promote the RCEP negotiations， it cannot worry too muchabout gains and losses. Rather， it should have courageous political will and future-oriented strategic thinking if it aims to remove obstacles in negotiations.

First， India should actively give play to the positive driving role of specific domestic interest groups. Influenced by a traditionally domestic demand-led economy， India's trade policy has a relatively inwardlooking， conservative， and defensive nature. In addition， political factors such as a large number of small and medium enterprises， great absolute number of the low-income demographic， dynamic democratic movements and civil society， problems of regional balance and ethnic group balance， and the relationship between the central government and local governments under the federalist system， it is almost impossible to meet the needs of all domestic interest groups in a balanced way through the RCEP under current conditions. Moreover， to simply retain or even strengthen subsidies to disadvantaged industries will do no good to changing the long-term protective atmosphere， while perpetually stalling the RCEP negotiations. Therefore， to break the stubborn balance of domestic industries may be the way out for India to promote the RCEP negotiations. With more than half of the seats in Congress， the governing BJP should take advantage of this rare political stability， show greater political courage， and encourage interest groups which have benefitted from the RCEP to play a positive driving role. In fact， India has taken action in this regard. For example， the Board of Trade， which is composed of representatives from different sectors and is chaired by the Minister of Commerce and Industry， has been reorganized， and held its first meeting in April 2016. In addition， government ministries such as the Ministry of Commerce and Industry have also held various RCEP-themed consultation meetings and symposiums with a number of industrial

India should give up unrealistic expectations on the RCEP and promote the conclusion of a preliminary agreement with a pragmatic attitude.groups and NGOs such as the Indian Chamber of Commerce， the Federation of Indian Chambers of Commerce and Industry （FICCI），and the Federation of Indian Export Organizations （FIEO）. Of course，the Indian government will also need to appease enterprises and people which are likely to lose because of the RCEP， so as to reduce internal resistance.

Second， India should give up unrealistic expectations on the RCEP and promote the conclusion of a preliminary agreement with a pragmatic attitude. At present， there are mainly two opinions concerning the RCEP in India. One opinion holds that the RCEP should be further expanded and India should reach a high level of ambition. A number of Indian officials and scholars like Anand Sharma， former Minister of Commerce and Industry， have stressed that development is one of the pillars of the RCEP's missions， so the RCEP should not be viewed as a typical market access initiative. They advocate that the RCEP should strive to be a community like ASEAN and the EU.36Asit Ranjan Mishra， “After WTO， India Hardens Stand in RCEP Negotiations，” Livemint， September 4， 2014.Scholars such as Ganeshan Wignaraja and Pradumna B. Rana have emphasized the integration of East Asia and South Asia and focused on pan-Asian economic integration. They call on India to join the Economic Review and Policy Dialogue （ERPD） and other existing“10+3” mechanisms， and believe that other South Asian countries should also join the RCEP negotiations.37Ganeshan Wignaraja， “Assessing the Experience of South Asia-East Asia Integration and India's Role，”ADBI Working Paper 465， 2014； Pradumna B Rana and Chia Wai-Mun， “Economic Integration between South Asia and East Asia: A Perception Survey of Asian Opinion Leaders，” RSIS Working Paper， No. 272，April 2014.Although these voices have expressed the good will to further promote regional and interregional cooperation， they have undoubtedly added to the burden and difficulties of negotiations when the RCEP talks are already experiencing challenges. The other opinion argues that a low-level RCEP agreement can be reached first while some issues can be further improved andstrengthened in the future. As reference， the ASEAN Economic Community was completed as scheduled on December 31， 2015. But rather than a phased summary and destination of integration-building，this achievement should be viewed as a new starting point and goal in the pursuit of regional cooperation worthy of the name. Similar practice has led people to imagine that if a high-level agreement fails to be reached in the short run， then it is also acceptable to sign a “light version” or “simplified version” of the RCEP. Some Indian scholars have also suggested that the country may refer to the precedents such as the FTA signed with South Korea， and set up an annual or biennial review mechanism for a specific tariff concession model， so as to realize buffer and adjustment effects.38Kyle Robert Cote and Purna Chandra Jena， “India's FTAs and RCEP Negotiations，” Discussion Paper，CUTS International， September， 2015.Both opinions have their own merits，but an unrealistic vision will make it hard for the RCEP negotiations to be concluded as scheduled and weakened goals will inevitably make the proposed RCEP illusory. The priority is to strive to reach a higher-level preliminary agreement and maintain the momentum of negotiations with this initial result.

Finally， India should avoid copying its stance in the WTO Doha Round negotiations. In the Doha Round negotiations， India adopted a tough stance on some issues， unwilling to compromise， and there have been considerable “like-minded” countries. The stalled Doha Round negotiations are not unrelated to the stubborn stance of India and other major powers. Currently， as regional trade integration talks are gaining momentum around the globe， no country can stay aloof. The RCEP is faced with a strong challenge from TPP and other regional trade arrangements. If the RCEP parties continue to hold an uncompromising attitude， then the negotiations may be long-stalled and countries in the region will find it hard to achieve substantive cooperation or “deep integration.” India's performance in the RCEP negotiations has actually retained its defensive multilateralism and negativism in the economicand trade fields. In this regard， as some Indian scholars have said， if India is to become a truly responsible regional power and rising global actor， it should abandon the tough decision of whether to be a “ruletaker” or “rule-breaker.” Rather， it should be a “rule-maker.”39C. Raja Mohan， “Summitry and Substance，” The Indian Express， November 11， 2014.Led by TPP， the making of global trade rules and the balance of power are undergoing profound changes. India should follow the trend and make decisions on the promotion of the RCEP negotiations at an earlier date.

Conclusion

International trade negotiations like the RCEP are part of a lengthy game in which all parties have to weigh their gains and losses. The analysis of this paper is not intended to impose responsibility for the dilemma to any specific country or industry. But the protracted RCEP negotiations that end with a low-level agreement are neither consistent with the interests of the parties concerned， nor conducive to the longterm prosperity and development of the Asia-Pacific region.

In the past decade， the Asia-Pacific region's construction of an FTA network， in terms of absolute number and vitality， led the world. Today， this network is faced with the dual challenges of integration and upgrading. A number of “new generation FTAs” such as the TTIP between the US and the EU， as well as the EIA between Japan and the EU， are ready to conclude their negotiations as soon as possible，the deadlines of which are set at the end of 2016. With the important developing powers and emerging economies of China and India being its major stakeholders， the RCEP is a significant pillar among the three pillars of global “super FTAs.” To promote the active and steady progress of the RCEP negotiations constitutes a heavy task for Asia-Pacific countries including China and India. Time waits for no man.

He Ping is Associate Professor of the Center for BRICS Studies， Fudan University.