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2-min read

Neither Economic Nor Diplomatic, Reason Behind India's RCEP Move May be Linked to Trump, Brexit

Truth is there is no political incentive for an Indian leader to be pursuing globalisation and free trade when the West itself is moving away from it.

Zakka Jacob | CNN-News18@Zakka_Jacob

Updated:November 5, 2019, 8:27 AM IST
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Neither Economic Nor Diplomatic, Reason Behind India's RCEP Move May be Linked to Trump, Brexit
PM Narendra Modi at the ASEAN-India summit in Nonthaburi, Thailand. (Image: AP)

New Delhi: After 28 rounds of negotiations spanning almost seven years, India has finally walked away from the Regional Comprehensive Economic Partnership (RCEP).

If it went through with India, RCEP would have resulted in the largest trading bloc of the world, larger than the European Union. RCEP would have seen the coming together of all the 10 ASEAN countries plus their six free trade partners which includes Australia, Japan and China.

Ostensibly, the reason given by the government to walk away from RCEP is economic: it would open up a flurry of cheap Chinese goods flooding the Indian market and short changing the Indian farmer by getting cheaper agro and dairy imports from Australia and New Zealand.

So the government has decided to put the interests of farmers and small businesses above that of free trade. But then, the government knew this all along.

Why walk out after seven years of bipartisan talks? The negotiations began in 2012 when the Congress-led United Progressive Alliance (UPA) was in power and continued through all of Narendra Modi’s first term as Prime Minister. So why call off the talks now?

That’s because the real reason to pull out of RCEP may be political and not economic or diplomatic.

Here’s why: With the advent of Donald Trump and Brexit, there is no more appetite for free trade and globalisation. One of the first things the US president did was to derail NAFTA (North American Free Trade Agreement), the oldest free trade agreement in the world.

He has been railing and ranting against China completely upending the world’s largest trade relationship. Trump was quick to realise and the Brexiteers quickly followed the cue that people in the West see globalisation and free trade as ‘job snatchers’.

It is a very reductionist and sometimes dangerously nativist philosophy. But it makes for good populism and populism always makes for good politics. The last 30 years have seen the advent of globalisation starting from the Ronald Reagan-Margaret Thatcher years.

It suited the West very well as the cheap manufacturing jobs went away to China and to the Asian Tigers while the West focused almost exclusively on higher-end intellectual jobs, mostly in services.

As a result the working class factory job disappeared almost entirely from the West and it gave birth to terms like Rust Belt and Mill Towns in the heart of both America and England. The reason this system worked for the West was because it increased profits for western corporations because it kept wages low by using relatively cheaper Asian labour.

While corporate profits stacked up so did inequality in Middle America and in the Midlands in England. Hence, the birth of the term ‘forgotten people’. It is this same forgotten people who were the biggest supporters of Donald Trump and of Brexit.

It wouldn’t take opposition politicians in India too much to paint RCEP as anti-poor and anti-Indian farmer and industry. The Congress’ Rahul Gandhi had attacked RCEP for being anti-poor and accused Modi of selling out on India’s interests.

The Left parties and even the Sangh’s own Swadeshi Jagran Manch had been making noises on this issue. Truth is there is no political incentive for an Indian leader to be pursuing globalisation and free trade when the West itself is moving away from it. And that’s the real reason why Modi walked away.

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