When 16 nations met early this month at a trade summit in Bangkok, hoping to iron out the terms of the Regional Comprehensive Economic Partnership (RCEP) through extensive negotiations, India became the only exception with its surprising withdrawal from the regional trade deal.
Officially launched in 2012, the RCEP negotiations brought together the 10 member countries of the Association of Southeast Asian Nations (ASEAN) and six other trade partners in the region, namely China, Japan, South Korea, India, Australia and New Zealand. India’s abrupt decision left the mega free-trade pact likely to be signed without it in 2020, as 15 participating countries concluded their text-based discussions.
Within a few months of taking office in May 2014, Indian Prime Minister Narendra Modi shifted the “Look East Policy,” which was implemented in the 1990s, to an “Act East Policy,” claiming the latter was more “progressive” than the former in terms of India’s integration into the Asia-Pacific region.
Analysts thought the new policy was a pragmatic diplomatic strategy in response to the new global political and economic situation after the end of the Cold War. India’s ambition was to achieve its strategic goals by increasing cooperation with Southeast and East Asian countries in such areas as politics, economy and security, they said.
Five years on, India is yet to match its words and ambitions with real action. With the Act East Policy below its expectations, India is again facing hard realities.
Behind Act East Policy
In 2015, India launched a new Maritime Security Strategy (IMSS-2015) to complement the Act East Policy. The strategy incorporates the Andaman Sea connecting India and Southeast Asian countries into the concept of the “Indian Ocean Region,” thus raising its position in India’s diplomatic and geopolitical priorities to the regional level of core concerns.
At the same time, India has made the Asia-Pacific region, especially East and Southeast Asian countries, one of its hot spots for the first time, with its level of geographical focus listed as only next to those around the Indian Ocean Region.
In recent years, India’s foreign trade has been growing. According to data released by the Indian Ministry of Commerce and Industry, Asian nations account for nearly 49% of its overall foreign trade, of which trade with East Asia accounts for about 23% of its total trade volume, while its trade with the United States amounts to 20.18%, followed by 19.26% with Europe, 9.56% with Africa, and 0.92% with the Commonwealth of Independent States. In other words, imports from and exports to East Asia have already taken up the largest share of India’s overall foreign trade.
India’s reasons for putting more diplomatic priority on East Asia are more in the interests of economic relations and other factors, rather than only limited to maritime exchanges.
Under the leadership of Modi’s government, India has been actively engaged in diplomatic and maritime exchanges with governments in other countries, especially the Pacific region. As part of the Act East Policy, it has increased diplomatic and maritime cooperation with all East Asian countries.
Limitations of Act East Policy
Since 2015, India has carried out joint maritime-law enforcement patrols and military exercises with ASEAN countries such as Indonesia, Myanmar, Thailand and Vietnam, and held maritime military exercises involving 16 countries in 2016 and 2018. In East Asia, India has also established maritime security cooperation with Japan. In 2016, it invited Japan and the United States to participate in the Malabar naval exercise. The Act East Policy has achieved relatively fruitful results in the military and defense fields.
In contrast to the great progress in the field of defense and security cooperation, important economic agreements signed between India and East Asian countries are rather scarce. So far, India has only signed a memorandum of cooperation on oceans and fisheries with South Korea. The two sides said in their joint statement that they would encourage more maritime cooperation and seek further partnership in the shipbuilding industry. It can be said that India has been hesitant in implementing the Act East Policy and has not done enough in cultural and economic exchanges and strategic coordination.
India’s withdrawal from the RCEP again reflects the limitation of the piecemeal Act East Policy. Given India’s original intention of comprehensive engagement and the small economic progress it has made apart from defense affairs, its indecision in economic cooperation was not only derived from its national strength, but also a testament to its lack of confidence. After all, economic cooperation means opening up the Indian market and that the competitiveness of Indian domestic companies will be tested.
Cooperation, not confrontation
It is fair to say that India’s inclination toward the world’s largest economic engine through its aggressive Act East Policy is quite reasonable. However, the limitation and confrontation characteristics of the policy have gotten in the way of its achievements. It’s even more so this year as the United States terminated preferential trade status for India under the Generalized System of Preference (GSP). More than 2,900 kinds of Indian exports to the United States, worth about US$5.6 billion, no longer enjoyed preferential tariff reductions.
Coupled with the stalemate of the domestic economic reforms, India’s annualized GDP growth rate has now fallen below 6%. If it wants to get out of that predicament, India must come up with a more transformative and sincere cooperation policy.
The limitation of the Act East Policy to defense cooperation adds “aggression” to the policy. But truly to integrate into the Asia-Pacific economic circle, India must cooperate with East Asia and Southeast Asian countries in various fields such as culture, economy and politics, although this requires India’s domestic economy to be ready for opening up. Nevertheless, as the opportunities outweigh the challenges, India should take the initiative to seek changes to the current situation. Only cooperation can bring a win-win result. Otherwise, the vision of the Act East Policy can only turn into an illusion.
(This article was first published on Asia Times Chinese. Translated by Guo Fengqing and Xu Yuenai.)