INTRODUCTION
1.1 Objective of Study
The purpose of this thesis is to estimate economic effects when the proposed RCEP is concluded in particular, India reduced importing tariff from other members in RCEP. The impact will be evaluated by means of the terms of trade, Real Gross Domestic Products (GDP), equivariant variation (EV) and the balance of trade. This trade liberalization assumes the two cases, which are 50 percent and compete free trade in heavy manufacture goods among RCEP partners. Is trade liberalization in RCEP let India lose under brutal competition? Or would it be possible for India or all to prosper by shared growth? If so, which sectors will increase or reduce in their trade? In order to answer those questions, this paper investigated an empirical research to compute the expected economic effects under the selected scenarios by utilizing the GTAP models.
1.2 Significance of this research
The depth of globalization has been deepening in the 21th century. The wave of globalization called interconnected economy in the world, represented as multinational corporations and international division of labor though the prosses of production, sales and research and development. Along with that world trends, nations and regions has formed economic cooperation under the umbral of international organization such as World Trade Organization (WTO). Subsequently, bilateral or specific reginal integration has preferred because nations are able to negotiate and bargain precisely rather than huge international frameworks. For example, North American Free Trade Agreement (NAFTA) or Association of South- East Asian Nations (ASEAN) are well known as multi regional FTA. On the other hands, the world economy also observed the backflow of reginal integration with the rise of protectionism; for instance, British withdraws from European Union (EU) and the US from TPP, respectively. Now that trade-war between the U.S. and China leads instability of the world economy. In such a situation, the President Trump’s decision to pull out of TPP made the world aware of the great presence of Regional Comprehensive Economic Partnership (RCEP), that is Asia centered free trade agreement. RCEP is a proposed mega trade deals between 16 Asia-Pacific nations: India, China, Japan, South Korea, Australia, New Zealand, Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. If RCEP finally enters in force, it holds the participants which have a total population over 3 billion and an estimated trade share of 28 percent (WTO, 2017), consisting GDP of around 21 trillion (International Monetary Union, 2017). RCEP covers one third of world GDP only in Asia-Pacific regions, including the two Asian giants: India and China. Considering the growth of Asian nations, Asia is recognized as a central area of global chain due to the existence of each different phase in terms of industrialization. Therefore, the volume of trade within intra regions consist great amount. Thus, if free trade is achieved in RCEP, that would bring huge economic effects to the world. As a current progress, the members of RCEP have been negotiating since 2011, yet they do not reach an agreement because there are complicated and intertwined nations’ interests between different parties in both of domestic and international field. The latest meeting among RCEP members was hold on 13 October 2018 in Singapore and revealed that the proposed goal to reach an agreement until 2018 not feasible. At the meeting, India represented the strong oppositions for tariff elimination (Nikkei, 2018). India has suffered from having negative balance of trade, that reached around 148 billion U.S.
dollars in 2017 (Ministry of commerce of India, 2018). Therefore, India is keenly reluctant to eliminating tariffs in order to protect domestic industries and the poor in rural areas. Indian government would not be able to maintain the current regime without their supports. However, it does not mean there is no prospect that India will participate in RCEP. It is obvious that India has opened its market though the history and it has great potentials and motivation to negotiate with RCEP partners. In this study, it investigates the situation that India reduced tariff rates for sensitive products categized as heavy manufacture goods such as Petroleum, coal products, Chemicals, Steel, Mortar Vehicle and Parts, Transport, Electrotonic products, Machinery and Manufacture, and Utilities and Construction. Negotiations for those products are the last frontier where Indian governments requires difficult decisions for creating new trade policy. In academic studies, this is the first attempts to estimate the possible economic effects for India and the other members countries in RCEP, in the case India lowered its tariffs in order to discuss the feasibility of RCEP
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