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TURKISH CENTER for ASIA PACIFIC STUDIES
India’s Possible Alignment with RCEP & CPTPP and its relative gains and losses
Assistant Professor, Department of Economics & Finance, Birla Institute of Technology & Science (BITS), Pilani, Hyderabad Campus, Hyderabad, India.
Somesh Kumar Mathur
Professor, Department of Economics Sciences, Indian Institute of Technology, Kanpur (IITK), India.
Shaheed Bhagat Singh College, New Delhi, India
APAC Report · December 2022
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We use both partial (structural gravity model) and general equilibrium models to understand India’s possible deeper alignment with 15-nation RCEP (Regional Comprehensive Economic Partnership) and 11-nation CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) mega trade blocs. There are 7 common members in RCEP-15 and CPTPP-11. The existing trade of India with the two mega trading blocs suggests that India should align with RCEP because India’s trade with RCEP-15 is approximately $185 billion while with CPTPP it is lower to the tune of $70 billion. However, the general equilibrium model allows us to study the economy-wide impact of our deeper engagements and provides us with the policy responses of whether India should align with the RCEP or the CPTPP. The latter will depend on India’s deeper engagements with the mega trading blocs with India following an atmanirbhar policy of promoting input and output-oriented technological progress in manufacturing and transport and communication.
The deeper alignment policies go beyond tariff and non-tariff liberalization with capital and natural resource endowment movement and include global value chain participation with the adoption of output and input-oriented technological progress in either one nation or in all member states. An FTA simulation scenario with deeper integration clauses brings relatively the lowest welfare and VGDP growth for India whether it aligns with the RCEP or the CPTPP. The best scenario for India is when it aligns with either the RCEP or the CPTPP with the inclusion of deeper integration clauses being adopted with India following an atmabirbhar policy while others don’t. We use a structural gravity model to analyse the RCEP and the CPTPP trade among themselves including India when the RCEP and the CPTPP form a union and when they as a mega block standalone liberalize using data for the year 2021.
Keywords: RCEP, CPTPP, Deeper Integration, Atmanirbhar Policies, Global Value Chains, Relative Gains, GTAP-10 simulations, Welfare and VGDP growth.