Simultaneous with negotiations for new pacts, Delhi critically reviews benefits and pitfalls of past ones.
The past year has seen hectic negotiations on scores of bilateral free trade agreements being planned by India with a clutch of countries and customs unions like the EU, but it still drew a blank when it comes to clinching of such deals
Much of the efforts of Indian trade negotiators were directed towards wrapping up the trade and investment agreement with the UK, and for that, as many as seven rounds of talks were held in 2023. The 13th round, the last one to be held this year, is went on between September 18 and December 15. During the year, on many occasions, hopes were raised on an agreement on all outstanding issues between both sides.
Reports suggested that the Prime Minister of the UK will visit India during the cricket world cup in November and preside over the signing of the agreement. The cricket event passed and agreement was nowhere in sight.
While negotiators worked hard for a trade deal with Canada, relations between India and the North American country took a turn for the worse. In September the news came out that Canada has asked for a pause in the talks on a trade agreement. At that time it was said that both sides wanted to reassess their positions.
This was followed by visit of Canadian Prime Minister Justin Trudeau to New Delhi for the G-20 Summit which again was marked by frosty exchanges in bilateral meetings. Days later on return to Canada Trudeau alleged India orchestrated killings of its nationals.
This ended any hope there was of a trade deal between the two sides and their revival could take years. Both sides had formally re-launched the negotiations on Comprehensive Economic Partnership Agreement (CEPA) last year and were also considering an interim agreement till they reach a deal on a broader pact.
Apart from the UK, other high stakes Free Trade Agreement (FTA) that is being negotiated by India is with the EU) Negotiations with the EU were relaunched in 2022 after a gap of 9 years. Earlier both India and EU had negotiated between 2007 and 2013 on trade and investment agreements. After the UK exited the EU both sides came for negotiations separately. The headline issues of discussion are similar in both the agreements.
The UK and EU want India to be more welcoming to its automobiles, wines and spirits, whiskey and gin while India’s demand is greater access for its traditional exports like leather, textiles, handicrafts and agri produce. Another major ask for India is easier visa access to UK and EU markets for its service professionals while its negotiators from Europe seek greater openings for its services industry.
However, these days product tariffs and market issues are just one part of the agreements. Both the UK and EU are also negotiating investment agreements with India which will extend protection to investors beyond what other overseas investors get.
With the EU six rounds of talks have been held while with the UK the Indian negotiators will sit again in January for the 14th round. As India goes into general election mode in the next three months the window of opportunity on the UK pact is narrowing.
If the March passes then a gap of another three months will come till the new government assumes office. Then in late 2024 the UK readies for its elections. The UK FTA is important for India as it is the most complex trade deal it will enter into and it would also be its first with a developed western world. The learnings from the negotiations would guide similar engagements with the EU.
“If FTA gets signed with the UK and EU it will be a support for the industry exporting traditional products from India,” director general and chief executive officer of Federation of Indian Export Organisations (FIEO) Ajay Sahai said.
Apart from traditional sectors, the engineering sector is also expecting gains from UK and EU FTAs. The quotas and countervailing duties on Indian steel and aluminium imports that are put by the EU are expected to be addressed in the FTA that will be a boost for the engineering sector, chairman of Engineering Export Promotion Council Arun Kumar Garodia said.
Negotiations with the European Free Trade Association (EFTA) that includes Switzerland, Norway, Iceland and Liechtenstein for an FTA are also progressing at a fast pace. India also started negotiations with Bangladesh, Sri Lanka, Peru and Oman in 2023. Offers have been made to Africa. In all India has 13 operational trade agreements and in 2024 the list may be expanded with Oman, UK, EU, EFTA, Sri Lanka and Bangladesh
Along with negotiating new trade agreements, progress was made on India’s demand for review of the Asean India Trade in Good Agreement. In August both sides set the framework and deadline of the review. India is seeking a similar review of trade agreement with Japan as it feels that its exports have not benefited as much from the opening up of markets while imports from the partners have zoomed since their signing.
Because many of the past agreements have not delivered the gains that were expected, India has been very cautiously moving at every step in the recent negotiations. The criticism against the older FTAs is that they were signed more due to strategic reasons than economic.
Minister of External Affairs S Jaishankar said recently that India would like to very judiciously consider the merits and risks of the FTAs. “Every decision of the FTAs is exposing millions of people. Their livelihoods are on the line. When we look at FTAs it is not a theoretical exercise which should be done for smart timely diplomacy because there is a visit coming,” he had said.
While India has been a tough negotiator of trade agreements, data suggests that its partners have gained more from the trade openings that have happened. “Trade deficit increase has been at double the rate for FTA countries,” co-founder of Global Trade Research Initiative Ajay Srivastava said.
In the period between 2017 and 2022, India’s exports to its FTA partners increased by 31% while its imports increased by 82 per cent, according to a report. India’s FTA utilisation remains very low at around 25%, while utilisation for developed countries typically sits between 70–80%.
So, while FTAs and their issues hog the attention, local industry has to be readied with products of quality and in sufficient quantities to take advantage of newer markets. Here trade and industrial policy has to walk together.
Source:financialexpress.com