India renews its courtship with APEC

Author: Nikhil Joshi and Geethanjali Nataraj, CII

The 21-member Asia–Pacific Economic Cooperation (APEC), home to over 2.9 billion people, is a prominent force in shaping regional economic policies, promoting trade and investment and fostering cooperation among its members. Amid global economic slowdown and China’s economic uncertainties, India — the world’s fastest-growing major economy — can bolster global growth by strengthening its regional integration through APEC.

India has tried to join APEC since the late 1990s, but it remains an observer until today. India has been expanding trade and investment ties with the region since the 2000s, particularly through the India–ASEAN Free Trade Agreement and Comprehensive Economic Cooperation Agreements with Singapore and Malaysia. But some APEC members have reservations about accepting India.

India is the world’s fifth-largest economy. Its share of global GDP has more than doubled since 1990. Trade is vital for India’s economy, accounting for approximately 49 per cent of its GDP in 2022 and growing. This is on par with Indonesia and higher than Japan, the United States and Colombia which have sought APEC membership since 1995.

Becoming an APEC member would bring several benefits for India, such as promoting closer economic relations, facilitating trade and investment flows and opening market access to major economies. Aligning with APEC by simplifying and harmonising trade procedures and regulations could boost India’s exports, attract foreign direct investment and support domestic initiatives like ‘Make in India‘.

Membership could encourage India to adopt best practices, streamline trade processes and reduce transaction costs. India could learn from APEC’s concerted unilateralism, where member countries voluntarily propose trade liberalisation measures without formal negotiations.

Membership can also facilitate technology transfer in key sectors for India, such as information technology, pharmaceuticals, biotechnology, renewable energy and manufacturing. Access to new technologies would enhance India’s competitiveness and productivity while promoting knowledge sharing and capacity building among APEC members.

India’s inclusion would benefit APEC members by providing increased access to India’s labour force, expanding consumer markets and creating more investment opportunities. In return, India would gain access to APEC’s resources and expertise, including the influential APEC Business Advisory Council. India can also participate in discussions on topics aligned with its developmental interests, such as automation, Micro, Small and Medium Enterprises and women’s economic participation.

Asia Society Policy Institute stated in its 2015 brief that ‘APEC membership would support India’s “Act East” foreign policy and strategic objectives in the region’, through access to a ‘forum that combines political deliberations among leaders with working-level economic task forces and technical groups’.

India’s APEC membership would help the group address increased protectionism, slowing growth in the West and China’s expanding regional influence. India exited the Regional Comprehensive Economic Partnership (RCEP) due to geopolitical and trade concerns involving China. India prefers stricter rules of origin to safeguard its domestic market against an influx of cheap imported goods, especially from China.

India also declined RCEP membership as several of its key demands were not met. India’s request for the opening of the movement of natural persons was rejected by ASEAN. On the contrary, India is interested in APEC as it is a grouping instead of a trade agreement with binding commitments.

The prospect of obtaining concessions for its demands may explain India’s keenness to join APEC. This also presents an opportunity for APEC to embrace the ‘Indo-Pacific’ concept, giving the forum a renewed purpose in the 2030s.

But India also has concerns. Domestic industries may face heightened competition from more advanced and efficient industries in established APEC member countries, thereby potentially impacting local businesses and employment opportunities. India would also need to undertake significant domestic reforms and adjustments to adhere to APEC standards and regulations, which may be challenging in the short run.

India’s APEC participation also carries geopolitical implications. It requires careful diplomacy and strategic decision-making to balance the interests and priorities of other regional groupings of which it is a member. These include the South Asian Association for Regional Cooperation and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation.

Among concerns raised about India’s potential APEC membership is the fear of an imbalanced representation favouring Asia over Pacific countries. While this argument carries weight, India’s inclusion is justified since APEC already includes Asian members like China, South Korea, Japan and six ASEAN states. There is also the apprehension that India’s inclusion could slow down the economic liberalisation agenda due to the forum’s consensus-based nature.

The challenges for India in joining APEC would revolve around India’s ability to overcome existing trade barriers and harmonise its standards and regulations with the forum. India will have to address market access sensitivities, reduce tariff structures and remove non-tariff barriers. India will also have to work toward achieving APEC standards on gender parity, social equity across rural and regional areas and green initiatives.

APEC’s framework of unilateral liberalisation — coupled with regional peer learning, pressure and technical support — provides a pathway for India’s integration with the region. But India must still undertake reforms and muster support among APEC’s members if it is to secure membership.

Nikhil Joshi is a Research Intern and Geethanjali Nataraj is a Principal at the Confederation of Indian Industry, New Delhi

The views expressed in this article are the authors’ own and do not represent the views of the Confederation of Indian Industry.

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