Shyam saran
Former Foreign Secretary and Senior Member of the Center for Policy Research
Is India pulling out of its Act East policy? Last year, India left the final phase of the negotiations on the Regional Comprehensive Economic Partnership (RCEP) despite having engaged in intensive negotiations for more than seven years since 2012. The RCEP has become a reality with the agreement signed by 15 countries on November 15. They include the 10 ASEAN countries, China, Japan, South Korea, and Australia and New Zealand. India is missing. It is reassuring that thanks to friendly countries like Japan, the door has been left open for India to become a member again, but this seems unlikely. India has effectively escaped the evolving regional economic and trade arrangements. This also jeopardizes its ambitions to be a credible Indo-Pacific power. You cannot expect to play a larger regional role from the fringes of the regional economy. And that’s where we find ourselves.
India’s attractiveness as a base for manufacturing and exports would decline if its access to large markets were restricted under regional trade regimes.
What is intriguing is that India also appears to be downgrading its role at the East Asia Summit (EAS). At the last virtual summit, India was represented by the Minister of Foreign Affairs instead of the Prime Minister. The only other head of state / government missing was the US President, but he had a credible excuse for being in the middle of a political transition. At the previous meeting at the EAS foreign ministers level, India was also represented by its Minister of State. What is the message that India is sending through this degraded participation?
The EAS is very important to India and more so in terms of its Indo-Pacific strategy. It was not easy for India to be included in this forum when it was inaugurated in 2005. The Chinese were pushing for ASEAN + 3 (China, Japan and South Korea) to be the core of the East Asian economic and security architecture. The United States, for its part, was promoting the Asia-Pacific Economic Cooperation (APEC) as the preferred vehicle for building a new regional architecture. Despite its best efforts, India was unable to become a member of APEC. Only thanks to the efforts of Japan and Singapore was their inclusion in the EAS possible. This was the first recognition that India had an important role in East Asia or later the preferred notion of Asia-Pacific. It was the Indian Prime Minister who followed this up by presenting the idea of an East Asian community, with ASEAN playing a central role. In 2011, India spearheaded the initiative to invite the United States and Russia as members to create an inclusive and influential forum, which could deliberate on the political, economic and security challenges of the enlarged region. What distinguished the EAS from other forums was its character as a leader-led process, which gave it a potentially influential role in managing regional affairs. Having decided to stay out of the RCEP, our role in the EAS has become even more critical if our Act East policy is to maintain some traction.
The RCEP was an EAS initiative launched in 2012. Perhaps it can be assumed that since the RCEP is no longer on our agenda, the EAS also loses its importance. This is a wrong assessment. If RCEP has weakened our engagement and our role on our critically important eastern flank, the downgrading of the EAS will only reinforce this. Intentional or not, the message to our friends and adversaries in the region would be that our interest in the region has waned and that India’s footprint in the Indo-Pacific will weaken. This leaves the Indo-Pacific more vulnerable to political and security penetration from China. The Chinese are already projecting the RCEP as a great triumph that cements their economic dominance of the region. Even the Japanese who had defended safeguards against Chinese trade and investment in the region using RCEP eventually relented. The Chinese finance ministry has reported that “for the first time China and Japan reached a bilateral tariff reduction agreement that achieved historic penetration.” This is what allowed the RCEP to conclude.
The prime minister of Japan has described the RCEP as “the expansion of a free and fair economic zone” and has offered “the possibility for India to return to the agreement in the future and the hope of obtaining the support of other countries”. On the other hand, Japan hopes that, under Biden, the United States will be able to return to the Trans-Pacific Partnership, which in its current incarnation is known as the Comprehensive and Progressive Trans-Pacific Partnership. China is not a member, but may eventually join due to the weight of its economy and its role as the world’s largest trading country. India will be completely marginalized in the regional and global economy. The implications of this, both in economic and foreign policy terms, must be carefully deliberated.
We have considered free trade and other regional economic arrangements through the prism of imports from India. The aspect of Indian market access to other large markets is often ignored. RCEP without India may mean some protection against cheaper Chinese imports. But India’s own access to the markets of those now in the RCEP would also be affected. RCEP members will surely give preferential access to each other rather than a stranger. Investment calculations would also be influenced by these trade agreements. India’s attractiveness as a base for manufacturing and exports would decline if its access to large markets under regional trade regimes is restricted or attracts higher tariffs. This should not be lost sight of.
An Indo-Pacific strategy without a policy of deep engagement with ASEAN and East Asian countries would lack credibility. It cannot simply be based on closer security arrangements with friendly partners in the region. It must also have a strong and vibrant economic dimension. We must not risk withdrawing from the region where we have expanded our presence overcoming difficult obstacles.
