A senior Japanese official stated that Japan has not given up hope that India will rethink joining the Regional Comprehensive Economic Partnership (RCEP) that it left in 2019, implying that India-Japan interactions in other nations may be harmed if India continues to stay out. The RCEP’s “Rules of Origin” clause, in particular, might make it more difficult for items with an Indian component to be sold readily among the 15-member grouping countries in the future, according to the official.
“RCEP will boost the Indian economy with a better supply chain, especially with ASEAN countries,” stated Noriyuki Shikata, Japan’s Cabinet Secretary for Public Affairs, during the visit of Japanese Prime Minister Fumio Kishida.
“As a founding member, India will be handled differently, and if India is willing to negotiate its re-entry into RCEP, Japan would be pleased to take the lead on that,” Mr. Shikata said, recognizing that the Modi government has shown little interest in the process.
During the annual summit conference, India and Japan inked a series of economic agreements, with a special focus on projects in India’s northeast. For the next five years, the two leaders have established a goal of five trillion yen in Japanese investment, which includes loans, FDI, and support. Mr. Shikata explained that ideas for joint partnerships in third countries, such as incorporating Indian-made components in goods, could face higher taxes and restrictions. The RCEP, in particular, includes a “Rule of Origin” certification requirement that would restrict free trade to items manufactured in RCEP nations., which have agreed to eliminate tariffs on 91 percent of commodities.
“The issue of Rules of Origin certificates arises as a result of the nature of the RCEP agreement. If, for example, Japanese and Indian companies invest in Thailand or Vietnam and build a supply chain, the final product is exported to China, they could use RCEP provisions to impose additional conditions or tariffs,” Mr. Shikata explained, adding that India-Japan collaborations could then be limited to projects in India’s immediate vicinity, such as Bangladesh.
“If India joins in, that kind of investment, cross-border investment, might be made easier,” he continued.
RCEP includes China, Japan, South Korea, Australia, and New Zealand
The 15-nation Regional Comprehensive Economic Partnership (RCEP), which includes China, Japan, South Korea, Australia, and New Zealand, as well as ten members of the Association of Southeast Asian Nations (ASEAN), represents roughly 30% of global GDP and population, went into effect on January 1 this year. India was a founding participant of the discussions, which began in 2012, but Prime Minister Narendra Modi said in 2019 that his government was pulling out due to a lack of progress on problems such as Chinese dumping and allowing Indian services full access in the region. Since then, Japan and Australia, two countries that have continued to convene the trilateral trade conversation they began with India during the RCEP negotiations, have stated that they would welcome India’s return to the pact if it chose to do so, which was also welcomed by the RCEP grouping.
In a 180-degree turn from 2019, when Commerce Minister Piyush Goyal pledged that India would sign no Free Trade Agreements (FTAs) “in a hurry or to the detriment of Indian industry and exporters,” the Modi government has accelerated several FTA negotiations in recent months, finalizing one with the United Arab Emirates and speeding up talks with Australia, Canada, and the United Kingdom. Mr. Shikata, on the other hand, claims that preparations to evaluate the India-Japan FTA, which was signed in 2011, have made no progress, and that the government has given no indication that it would reconsider its decision to quit the RCEP in 2019.
Mr. Shikata stated, “We will wait,” adding, “It is a sovereign decision.” The door is open, and Japan is eager for [India to re-join].”