India Rejects RCEP, Citing China’s Non-Transparent Trade Practices & Aims to Become a Semiconductor Hub
India’s Commerce Minister Piyush Goyal has firmly rejected the notion of India joining the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade deal. He argues that India’s interests are not aligned with a free trade agreement with China due to concerns about transparency and unfair trade practices. This decision reinforces the ongoing strategic tension between the two Asian powerhouses.
Key Takeaways:
- India’s concerns with RCEP stem from the lack of transparency and fairness in China’s economic practices.
- Goyal accuses China of using the WTO’s policies to its advantage, flooding global markets with low-quality goods.
- India envisions itself as a "Taiwan Plus One" for semiconductor manufacturing, attracting foreign companies seeking diversification outside of Taiwan.
- The country’s strategy includes massive investments in infrastructure and a $10 billion incentive program to attract semiconductor manufacturers.
India’s Stance on RCEP: A Trade War by Other Means?
India’s decision to opt out of the RCEP in 2019 was driven by concerns about a potential surge of cheap Chinese goods flooding its market. Goyal emphasizes that RCEP would effectively be "nothing but a free trade agreement with China," a move he believes would harm Indian farmers and small businesses. These concerns are not unique to India; many countries have raised alarms about China’s trade practices, particularly their reliance on state subsidies and non-transparent practices. The perceived lack of a level playing field in global trade is a major point of contention.
Further highlighting India’s discontent, Goyal stated: "When you see from the lens sitting outside the country, you don’t realize how difficult it is to compete against a non-transparent economy. Certainly nobody back home would like to have an FTA with [a] non-transparent economy, very opaque in its economic practices, where both trading systems, political systems, the economy — the way it is managed — is completely different from what the democratic world wants."
India’s Ambitions: A Semiconductor Giant in the Making?
Despite the trade tensions with China, India is positioning itself as a global player in the semiconductor sector. Its ambition is to become a "Taiwan Plus One" destination for companies looking to diversify their supply chains. This strategy is a response to the growing global concern about overreliance on Taiwan, a leading chip producer, for critical technologies.
To attract foreign investment, India is offering a range of incentives, including:
- A $10 billion incentive program to encourage semiconductor fabrication plants.
- A focus on building a robust ecosystem for the industry.
- A clear political commitment to supporting this sector.
Prime Minister Narendra Modi has already inaugurated three semiconductor plants, further solidifying India’s commitment to its ambitions. The first batch of domestically produced chips is expected by late 2025 or early 2026 from a joint venture between Tata Electronics and Taiwan’s Powerchip Semiconductor Manufacturing Corp.
Goyal emphasizes India’s strengths: "We are encouraging [the] semiconductor industry in a big way. We started building up the ecosystem, which is essential before we can see more and more foundries coming into the country for the actual chip making." He highlights the "compulsive case" for India: "It provides an alternative where you will always have a youthful population in life, huge demand, and you will have the rule of law to back it."
The Global Semiconductor Landscape: A Race for Dominance
While India’s ambitions are ambitious, the global semiconductor landscape is becoming increasingly competitive. Taiwan currently holds around 44% of the global market share, followed by China (28%) and South Korea (12%). The U.S. and Japan account for a much smaller share (6% and 2% respectively).
However, the balance of power is shifting. Taiwan’s global share in advanced manufacturing processes is expected to decrease to 40% by 2027, with South Korea seeing a 2% decline. Meanwhile, China’s share is expected to increase by 3% to 31%. This indicates a potential shift towards more regionalized production and competition.
Looking Ahead: A New Era of Global Trade?
India’s decision to reject RCEP and its ambitions to become a semiconductor hub signify a changing global landscape. The world is moving away from a model of complete reliance on single countries for critical technologies and goods. The rise of regional trade blocs, like RCEP, and initiatives like India’s semiconductor drive, represent a new paradigm of economic diversification and strategic partnerships.
This transition, however, is likely to be fraught with geopolitical complexities and economic uncertainties. India’s stance on RCEP and its semiconductor ambitions underline its quest to secure its economic and technological future in a rapidly changing global environment.
