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International relations

RCEP: Five things to know about Asia's mega trade talks

India frustrates China, demanding its farmers and industries be protected

An ASEAN summit kicks off five days of meetings in Bangkok that will conclude on Monday evening with a summit of the 16 nations trying to put together the Regional Comprehensive Economic Partnership.   © Getty Images

BANGKOK -- Leaders of 16 Asia-Pacific countries are set to meet here on Monday evening amid hopes that tangible progress will be announced regarding a major regional trade bloc.

The hope remains despite a lack of significant movement in ironing out key details.

Negotiations toward the Regional Comprehensive Economic Partnership began in 2013. They involve the 10-member Association of Southeast Asian Nations and six of its dialogue partners -- Australia, China, India, Japan, New Zealand and South Korea.

But the talks did not pick up pace until last year; the U.S.'s protectionist pivot under President Donald Trump provided the impetus. Still, doubts remain as to whether a deal can be hammered out soon. As the negotiators make a final push on Friday, before the RCEP members' summit on Monday, here are five things to know about the proposed pact.

How does the RCEP differ from the TPP?

The RCEP is an ambitious multilateral free trade framework driven by ASEAN and backed by China. It is widely viewed as an alternative to the 11-nation Trans-Pacific Partnership -- which the Trump administration abandoned -- and would link the economic engines of China and Japan with fast-growing India and Vietnam.

The partnership, if formed, would be the world's largest free trade alliance, encompassing over 3.6 billion people and about one-third of global gross domestic product. According to 2016 projections by the Asian Development Bank, a concluded RCEP pact would provide global income benefits of about $260 billion.

However, it differs from other multilateral trade deals, in part by comprising only Asia-Pacific countries. In addition, it does not go nearly as far as the TPP-11 in freeing up trade and setting ground rules in areas like the environment and state-owned enterprises.

How would the deal affect global trade?

Crucially, the RCEP includes China and India, the world's most populous countries. China and India also do not have a bilateral FTA. A deal could be expected to encourage more trade, cross-border investment and flows of talent across the Asia-Pacific region.

A deal would also support a rules-based order amid the U.S.-China trade war, tariff hikes and resurgent nationalism in parts of the world. In addition, it would cement ASEAN's central role in forging regional integration.

Trade experts say that as the U.S. and other countries push back against globalization, successful RCEP negotiations could send a strong signal: A large bloc of Asia-Pacific nations remains committed to trade liberalization.

Why are members so eager to conclude the agreement now?

Although the Trump administration's unilateral moves on trade and its ratcheting up of tensions with China motivated the RCEP negotiators, the disparate levels of economic development and differing interests among the proposed bloc's members have made the talks arduous.

Thailand, the current ASEAN chair, remains hopeful that the protracted negotiations can be wrapped this year, though it does not want to wait that long. It is keen to finalize an agreement that RCEP leaders can sign on Monday evening at their summit in Bangkok.

India's reluctance to open its market kept a deal from being concluded last year. Prime Minister Narendra Modi did not want to alienate Indian farmers, manufacturers and other groups months before national elections that his party ended up sweeping this past April and May.

What are the sticking points?

By mid-October, sources say negotiators had agreed on significant portion of the 20 issues such as trade facilitations, intellectual property rights and the free movement of workers, but remained at loggerheads over regulations regarding e-commerce and foreign investment.

India fears that lowering tariffs or investment barriers may harm its domestic industries and farms. Many of its RCEP partners are somewhat sympathetic to this anxiety, given India's large trade deficit with China. But India does have a reason to compromise: It wants its peers to open their labor markets so its information technology workers can work abroad.

If India were to accept the RCEP in its current form, the Modi government could be depicted as not working on behalf of Indian farmers and small-scale industries, according to Pankaj Jha, who teaches strategic affairs at India's O.P. Jindal Global University. "India will join RCEP [only] if there are certain additional safeguards," Jha said, "or else it will keep [the pact] in limbo."

Is a conclusion likely this year?

India's hard-line stance led to China to call for a trade bloc without the country, but the idea was rejected.

Modi does not seem to be backing down, and skepticism remains that the 16 nations can reach a deal. Piyush Goyal, India's minister for commerce and industry, on Wednesday said New Delhi will not sign any trade deal in haste.

Goyal said India is not weak, nor does it lack negotiating experience. India will enter free trade agreements or comprehensive partnerships on its terms, Goyal added.

At the same time, he said, the country cannot isolate itself. "India will have to finely balance our imperative to protect domestic interest," Goyal said, "yet also engage with the rest of the world."

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