China increased its efforts to get India into an Asian trade market with zero tariffs after U.S. President Donald Trump hinted at the prospect of higher tariffs on Indian exports. Positioned as a strategic opportunity, the offer extends access to a vast consumer base. But according to analysts, the plan might present India with a much bigger obstacle than Trump's tariff threats.
India has a huge market. It is one of the most alluring markets in the world because of its 1.4 billion people, expanding middle class, and high purchasing power. Without India's involvement, international powers cannot exert the greatest amount of economic influence in the area.
Key HIghlights
- India rejects zero-tariff deal due to economic disparities, risk to sensitive sectors despite market appeal.
- Modalities matter: India prefers package agreements over blanket zero tariffs to protect domestic interests.
China has extended another invitation to India to join the Regional Comprehensive Economic Partnership (RCEP) in response to growing pressure from Washington.
Since 2019, Beijing has pushed for New Delhi to join the RCEP, citing zero tariffs as a major inducement. However, India has turned down time and time again. Beijing's aspirations and the possible threats to its own industries make it cautious.
Comprehending RCEP
Ten ASEAN members and five of their Free Trade Agreement (FTA) partners—China, Japan, South Korea, Australia, and New Zealand—are part of the 15-nation RCEP. With approximately three billion members and a share of nearly 30% of the world's GDP, the RCEP is the largest trade bloc in the world.
Simplifying trade regulations, lowering obstacles, and integrating member countries' markets are the objectives of the agreement. The RCEP was signed in November 2020 and became operative on January 1, 2022. Its main objectives are to ease non-tariff barriers, reduce or eliminate tariffs, and promote international trade and investment.
The Viewpoint of China
China's government-run Given Trump's proposed 50% tariff increases, Global Times emphasized India's increasing vulnerability as a result of its strong reliance on the U.S. market. The newspaper made the case that expanding into Asian markets could give India more market opportunities and strategic flexibility while also reducing risks.
The daily asserts that India needs to aggressively pursue other markets. Asia's vast economies and unrealized potential may offer India a more secure growth trajectory. In order to restructure India's trade orientation within the region, the paper proposed that joining the RCEP would be a crucial first step.
"Long-term benefits" were also emphasized in the publication. It states that 90 percent of goods could be covered by the zero-tariff framework of the RCEP over the course of the next 10 to 15 years. According to the daily, this could give India access to a vibrant and expanding market while serving as a buffer against the volatility of US trade policies.
India's worries
India's concerns regarding the RCEP have been voiced repeatedly. According to the government, the agreement may have unbalanced effects and does not sufficiently represent India's interests. The possible effects on domestic industries are a major worry.
The Indian market may be overrun by low-cost imports from China and other Asian countries, which would undermine domestic production and make it harder for Indian goods to compete. This risk is increased by China's high production efficiency. India had suggested ways to restrict the import of specific goods that exceeded predetermined limits, but negotiations were unable to reach an agreement.
Also Read: Trump's 50% Tariffs on India Spark Boycotts, Push for Self-Reliance
Additionally, India has a sizable trade deficit with China, which in the fiscal year 2024–2025 was $99.2 billion. This imbalance might worsen if you joined the RCEP without any protections. In order to support regional dominance and the Belt and Road Initiative, China views India's inclusion as a geopolitical and economic priority.
India still places a high priority on its own interests, independence, and strategic independence. In any situation that could jeopardize its trade or geopolitical position with regard to China, the government wants to keep control of supply chains and project strength.
