As India signs a Free Trade Agreement with 4 European Nations, is there hope for other negotiations- from the UK and EU to Oman, Gulf and Eurasian countries? Do FTAs help increase trade substantially? And are they a challenge to the global economic order under the WTO- Up ahead, an interview with Irish Trade minister on whats delaying the India EU FTA
Hello and Welcome to WorldView at The Hindu with me Suhasini Haidar.
This week we look at an important part of Foreign Policy- Trade policy and trade diplomacy.
While at present the Ministry of External Affairs oversees diplomacy, and the Ministry of Commerce negotiates Trade policies, we are seeing both come together more and more for trade talks. In fact in countries like the UK, Australia, Canada and others Departments of Foreign Affairs and Trade are actually merged together.
Let’s start with this week’s developments, and a flurry of activities around India’s Free Trade Agreement negotiations just ahead of elections being announced:
1. India signed a Trade and Economic Partnership Agreement (TEPA) with a 4-nation non-EU European Bloc of Iceland, Norway, Liechtenstein and Switzerland. The agreement that was completed after 21 rounds of talks, and began in 2008, had been suspended between 2013-2023.
-The agreement included a chapter on investment promotion, with EFTA countries promising $100bn investment in 15 years, as long as high GDPs and other economic factors remain.
– On Intellectual Property Rights, India rejected a push for data exclusivity, which could have raised prices of Generic Pharma in India
– It also included a chapter on Human Rights and Sustainable development
There’s more of our coverage on the EFTA India FTA ,including an interview with the key Swiss Minister in charge of the negotiations Helene Budliger
2. The India-UK FTA has made some progress, but it is unclear if it can be signed now, before elections, or later this year as the UK heads to elections. Prime Minister Narendra Modi and British Prime Minister Rishi Sunak spoke this week to discuss the FTA
3. Belarus Foreign Minister Sergei Aleinik said after talks in Delhi that India and the Eurasian Economic Union are serious about starting FTA talks now
4. And during a visit to India, Ireland’s Trade Minister Simon Coveney said that hopes are high on the India-EU Bilateral Trade and Investment Agreement (BTIA). Listen in, as I asked him just what was holding up the agreement:
Now at present India has FTAs with about a dozen countries and regions, most of which were signed pre-2014:
1. India-ASEAN FTA, also CECAs with Singapore and Malaysia
2. India-Japan CEPA
3. India-S. Korea CEPA
4. SAFTA of all SAARC countries- along with separate FTAs with Sri Lanka, Nepal, Bhutan
More recently the government has signed 3 FTAs
5. India-Mauritius CECPA-implemented in 202
6. India-UAE CEPA, implemented in 2022
7. India-EFTA FTA, expected to be implemented in 2025
There’s also the India-Australia Early Harvest Agreement or ECTA, which is not a full-fledged FTA yet, that is being negotiated.
In the works at present are negotiations with dozens of countries- but the ones that seem most on the anvil are:
1. Australia- CECA was due to have been completed by December 2023
2. Canada- Negotiations for CEPA suspended by Canada over the Nijjar killing last year
3. UK- FTA was nearly done many times in the past few years, but first the rapid changes in UK PMs, and then India’s own election process has tripped it up
4. Oman- FTA is understood to have been finalised, so you can expect an announcement soon, or after elections
5. Gulf Cooperation Council 6 nations-FTA has been delayed, some consideration of joining with the India UAE FTA
6. European Union- BTIA- talks were suspended between 2013-2022, but now in advanced stages
7. Eurasian Economic Union EAEU 5 Post Soviet States including Russia and Belarus- where talks may begin soon.
One with the US that was started during the Trump presidency was dropped by the Biden Administration, and could be picked up if the government changes.
Broadly, where are the stumbling blocks for India’s negotiations:
1. Modi government had a traditional mistrust of FTAs, suspended most talks after 2014, and scrapped all Bilateral Investment Treaties
2. In 2019, India also walked out of the RCEP- 15 nation Asian and Australian FTA . While India has refused to reconsider, neighbours like Bangladesh and Sri Lanka have applied to join RCEP.
3. India’s announcement of the Make In India or Atmanirbhar Bharat policy runs counter to free trade without subsidies negotiations
4. India has always been protective of agricultural sector, and most FTAs leave the subject out entirely
5. Concerns about Chinese goods flooding the markets via FTAs with third countries – mean India pushes for strong Rules of Origin clauses
6. Intellectual Property Rights is increasingly a problem as countries move towards R&D as an economic mainstay, India is being forced to accept more international patents
7. Issues like Democratic freedoms, Human Rights issues, transnational operations are also bleeding into negotiations like the EU, EFTA and now Canada
8. FTAs defeat the purpose of the WTO, and bypass global mechanisms for free trade
Quick question on the benefits of FTAs- theres no doubt that trade increases with FTAs as they
-Reduce or zero out tariffs in most sectors
-Increase market access for both parties
-Make for reliable supply chains
-Build a positive momentum for trade
If you want to quantify benefits, it is more difficult in the short term, but Commerce Ministry figures given in Parliament said this in terms of how India’s exports grew:
India’s exports – RTA Partner Countries/Region wise
Values in US$ billion
| India’s RTA partner Countries/region | Names of RTAs | Export in 2011 | Export in 2021 |
| ASEAN | India-ASEAN FTA India-Singapore CECA India-Malaysia CECA India-Thailand FTA – Early Harvest Scheme (EHS) | 34.5 | 40.6 |
| Japan | India-Japan CEPA | 5.6 | 6.1 |
| South Korea | India-South Korea CEPA | 4.6 | 7.0 |
| SAFTA | Agreement on SAFTA India-Sri Lanka FTA India-Nepal Treaty of Trade India-Bhutan Agreement on Trade, Commerce and Transit | 13.0 | 31.6 |
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S)
Clearly, there are benefits to FTAs, and that probably explains the complete turnaround in the government’s policy towards negotiations over a decade.
WV Take: Free Trade Agreements are not just about tariff reductions and transactional approaches of give and take on market acess or IPR- they are an avowment of mutual trust between two countries or regions, and in effect a commitment to give each other’s businesses and investments near national treatment. Protectionism and political differences will always be the biggest blocks to the free flow of trade, and it is necessary that India align its trade policy with its domestic and international outlook on other issues, before rashly entering or leaving free trade agreement notifications.
WV Reading Recommendations:
1. India’s Moment: Changing Power Equations around the World by Mohan Kumar
2. FREE TRADE AGREEMENTS: India and the World by Dr V. S. Seshadri
3. India’s Foreign Policy in the Post-Covid World Edited by Surendra Kumar- Chapter on India’s economic diplomacy by Rahul Chhabra
4. India’s Trade Policy in the 21st Century by Amita Batra
5. JOURNEY OF A NATION : 75 YEARS OF INDIAN ECONOMY by Sanjaya Baruc
Script and Presentation: Suhasini Haidar
Production: Gayatri Menon and Shibu Narayan
