India pulled out of a trade pact covering much of Asia, paving the way for 15 other countries to sign the China-backed regional trade deal next year.
India conveyed its decision to exit the Regional Comprehensive Economic Partnership, or RCEP, foreign ministry official Vijay Thakur Singh told reporters in Bangkok on Monday. Prime Minister Narendra Modi highlighted that he was guided by the impact it would have on the lives and livelihoods of all Indians, especially vulnerable sections of society, she said.
“India had significant issues of core interest that remained unresolved,” Singh said. “India has participated in good faith in the RCEP discussions and negotiated hard with a clear-eyed view of our interests,” she added. “We took the right decision in the national interest.”
Modi decided not to join the deal in order to protect service workers and farmers, an official told reporters in New Delhi on Monday. India had pushed the other 15 nations to address its concern over deficits and open their markets to Indian services and investments, the official said.
India’s exit from the deal removes the biggest impediment to a pact meant to cover about a third of the global economy. In the run-up to the Bangkok meetings, where Asian leaders hoped to announce a breakthrough, India made last-minute demands that irked other countries as domestic opposition increased due to worries the country would be flooded by cheap goods from China.
China has sought to accelerate the deal as it faces slowing growth from a trade war with the US, which withdrew from the Trans-Pacific Partnership after Donald Trump took office in 2017. A deal would further integrate Asia’s economies with China just as the Trump administration urges Asian nations to shun Chinese infrastructure loans and 5G technology.
The US has sought to downplay the significance of RCEP, with Commerce Secretary Wilbur Ross telling Bloomberg that it’s “not much of an agreement.” Most Southeast Asian leaders skipped a summit on Monday with US representatives after Trump decided to avoid the annual meetings for a second straight year.
“It’s not a free trade agreement, it’s not anything remotely like TPP, nor anything remotely like our separate arrangements with Japan and with South Korea,” Ross said in an interview. “So I don’t think you want to blow that out of proportion. It’s a very low-grade treaty.”
China said Monday that the 15 remaining countries decided to move forward first and India is welcome to join RCEP whenever it’s ready.
“There won’t be any problem for the 15 nations to sign RCEP next year,” Chinese Vice Foreign Minister Le Yucheng told reporters in Bangkok on Monday. “We are taking an open attitude — whenever India is ready, it’s welcome to get onboard.”
RCEP countries said in a joint statement on Monday that all participating countries would work to solve outstanding problems “in a mutually satisfactory way.”
© 2019 Bloomberg L.P.