Regional Comprehensive Economic Partnership, also known as RCEP, is a mega-trading bloc being negotiated between the ten members of the ASEAN group and six other members, namely South Korea, Australia, China, Japan, New Zealand and India. It is a proposed free trade agreement (FTA) between these nations, which will include goods and services, investment, intellectual property rights, economic and technical cooperation and dispute settlement. This policy letter analyzes trade data on India`s and China`s trade with Afghanistan, Bangladesh, Bhutan, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka, collectively referred to as “South Asia” or N8. Over the past two decades, China has established itself as an important trading partner of South Asia. Beyond Pakistan, China invaded South Asia (N8) by becoming Bangladesh`s largest trading partner in 2015 and boosting trade and investment with Nepal, Afghanistan, maldives and Sri Lanka.  This reflects in particular the strategic importance of the region for China`s Belt and Road Initiative (BRI), especially for small South Asian countries.  The SEA called on the government to fill a gap in the South Asian Regional Free Trade Pact, which bypassed customs authorities by diverting palm oil and soybean oil imports through Nepal and Bangladesh.  Nilanthi Samaranayake, “China`s Engagement with Smaller South Asian Countries” (Washington DC: United States Institute of Peace, April 2019), www.usip.org/sites/default/files/2019-04/sr_446-chinas_engagement_with_smaller_south_asian_countries.pdf The free trade dynamics of the 2000s have been largely lost with India`s neighbors. Trade liberalization initiatives under the Bay of Bengal Initiative for Multi-Sector technical technical and Economic Cooperation (BIMSTEC) have been under negotiation for more than 15 years. SAFTA and the even bolder idea of a South Asian economic union are no longer at the centre of New Delhi`s regional concerns.
India`s free trade agreement with Sri Lanka dates back 20 years and negotiations on an Expanded Economic Partnership Agreement (CEPA) are constantly delayed. With the global multilateral trade liberalization agenda stalled, India needs to redouble its focus on regional trade agreements. . . .