India is currently in a position, where it has good relations with many nations around the globe. Entering into trade agreements is one of the steps which India can take to build a stronger position in terms of trade. However, choosing the right framework and negotiations in a way that all partner countries enjoy mutual benefits, is critical to ensure that the agreements serve the intended purpose. Further, learnings from past agreements have to be carefully studied and future agreements should be considered accordingly.
Being a trillion-dollar economy and one of the fastest developing nations across the globe. India's primary focus is currently on building relations with different nations and establish a strong import-export market. The country is set to take its export record to $500 billion by the end of 2022-23 as compared to $291 billion in 2020-21. Therefore, India is signing multiple bilateral and regional trade agreements for its growth.
India's current trade agreements
India has several operational trade agreements in place with various countries and jurisdictions including those with ASEAN, Korea, Japan, Singapore, Malaysia, UAE, Australia, MERCOSUR, Sri Lanka, Asia-Pacific region, SAARC, Chile, Mauritius and Afghanistan. Additionally, India is engaged in negotiations for finalizing trade agreements with several countries including European Union, Iran, Egypt, Indonesia, New Zealand, Southern African Customs Union, Peru and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Area. India is looking to finalise three trade agreements namely: India-UK, India-Canada and India-Israel.
India's primary focus is currently on signing country-specific bilateral trade agreements rather than any regional cooperation deals on trade or business. This is reflected by India's free trade agreement with the UAE earlier in 2022, coming into effect on 1st May and India-Australia ECTA that India signed on 2nd of April 2022.
As India is on the verge of signing several new trade agreements, it is important to learn from its past experience in terms of negotiations as well as utilization of trade agreements.
Change in patterns in recent trade agreements
The trade agreements presently being negotiated are progressive in nature as they include several sectors as well as policy areas which were not covered under previous agreements signed in the early 2000s.
- The India-UAE agreement covers audio-visual services, and entertainment services along with special focus on financial services and e-commerce.
- The India-UK agreement which is planned to be signed by the end of this year will contain more than 20 policy areas including sustainability, labour, and supply chain resilience.
Learning at the administrative level
- Need for a proper framework
A proper framework would address the appropriate allocation of resources by industries, as well as assist the Indian industry to understand the pros and cons of the trade agreements being entered into by India. There is a need to consult the stakeholders and thoroughly analyse and explain certain basic questions to the industry, such as “With whom to contract”, “When to contract” and “Why to contract”.
- Development in phases
There are 11,000 tariff lines in India which are the centre of negotiations to build a trade agreement. From the past agreements, it has been observed that opening all the tariff lines simultaneously has been exploitative for India. In such a case, neither the Indian industry nor the experts get a chance to analyse the impact of the negotiated terms. To avoid such situation, India can adopt a strategy, where the tariff lines of the country should be included in the agreements in a phased manner after measuring the performance thereof. The performance of the Indian industry should be analysed and it should be made sure that the opening of a tariff line does not hamper with its growth in any manner.
- Products attracting tariff/non-tariff measures should be excluded
While negotiating a trade agreement, the products which attract additional duties like anti- dumping duties/ anti-subsidy duties should be kept out of the positive offer list to the partner country, or where the chances of dumping or subsidization is high. This is because the Indian industry is already suffering due to dumped/ subsidized imports of such products.
- Avoiding inverted duty structure
An inverted duty structure represents a situation where the import of raw material attracts duty, while the import of final goods is imported duty-free. There have been many instances of inverted duty structure due to trade agreements. Therefore, it is important to negotiate in a manner that inverted duty structure anomaly is minimized under any free trade agreement.
- Longer transition period
The transition period is the period during which bilateral safeguard measures may be invoked following the concessions given. For instance, the India-ASEAN agreement stipulates that the bilateral safeguard measures can be invoked only within a period of five years, from the date of concession. As a learning step, in the recently signed India-Australia agreement, the transition period has been set as 14 years. Having a longer transition period is usually beneficial for the domestic producers in the country.
Learning at the industry level
- Greater participation in consultations
Active participation from the industry is required during the negotiations of a trade agreement. There have been several instances in the past where the industry was not even aware of the negotiations, before the agreement was signed. However, currently, extensive industrial consultations take place during negotiations of trade agreements. There is a need to further increase the participation of the industry in terms of giving detailed and specific information.
- Aggressive and Defensive Approach
A major part of the industry has taken a defensive approach rather than considering an aggressive approach during negotiations. Trade agreements open the export markets for the industry, which is helpful to create a balanced trade ecosystem. A balanced give- and-take approach during negotiations leads to a mutually beneficial agreement, thereby achieving the real motive behind signing a trade agreement.
Shifting the focus to bilateral arrangements to foster development, India has taken a step towards building a stronger trade position before the global community. With ongoing negotiations of bilateral agreements with multiple countries, it becomes essential to learn from old trade agreements. Which reflects that certain fundamentals of negotiations and utilization of trade agreements need to be established. Thereby necessitating increased involvement of the industry and amplified protection against exploitation of the agreements.
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