Introduction
Over the past 5 years, India’s involvement in the signing of trade deals has been on an incredible rise. The Free Trade Agreements and Economic Corporation and Partnership Agreements are designed and drafted in a manner that benefits countries in reducing trade barriers, eliminating tariffs and in gaining preferential access to global markets.
India has placed itself in an advantageous position by signing close to 13 such Free Trade Agreements with various countries including the much talked about 3 major Corporation and Partnership Agreements, namely the India-Mauritius Comprehensive Economic Corporation and Partnership Agreement (CECPA), the India-UAE Comprehensive Partnership Agreement (CEPA) and the India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA). Besides these various comprehensive economic partnerships, India is also in the advance negotiation stage of a Free Trade Agreement with the European Union (EU) after a long gap of 8 years, which will invariably help discover the significant untapped potential for boosting economic ties between the two regions.
Similarly, India has been in talks with the UK government for the signing of a Free Trade Agreement and at present, both parties are actively involved in negotiations, and it is expected that the agreement shall be signed within a couple of months.
The Finer Details
Lets analyse the salient features of the 3 major trade partnership agreements.
• India-Mauritius Comprehensive Economic Corporation and Partnership Agreement (CECPA)
The agreement came into force on 1st April, 2021 and it was first time that India had signed a trade agreement with an African nation in order to support and develop a strategic partnership between India and Africa.
Under the agreement, exports of more than 615 products from Mauritius will benefit from tariff liberalization, 376 products will benefit from duty-free access, 127 products (sugar, rum, fruit, wine, among others) will face reduced tariffs, and 112 products will benefit from reduced tariffs under a system of Tariff Rate Quotas (TRQs). These TRQs include 7.5 million pieces of garments, and 7000 tons of canned tuna that will enter the Indian market duty free.
India has also agreed to provide market access for Mauritian services in some 95 sub-sectors, including professional, business and financial services, as well as telecommunications services.
With this trade agreement signed between India and Mauritius, both countries shall benefit from the generous fiscal policy and a comprehensive business facilitation program specifically designed to enhance trade and cooperation between the two nations.
Another very significant trade agreement signed by India which has grabbed the center stage for its cooperation partnership is the agreement with the UAE.
• India-UAE Comprehensive Partnership Agreement (CEPA).
The UAE is presently India’s third largest trading partner and second largest export destination only after the USA. While India is the UAE’s second-largest trading partner and the largest in terms of exports. An agreement was therefore essential to boost the partnership and structuralize the cooperation between both parties. The landmark agreement was entered on 18th February, 2022 and came into force on 1st May, 2022.
The main aim of the agreement is to increase the non-oil trade between the two countries to USD 100 billion in the next five years. It is expected that this agreement shall benefit around USD 26 billion worth of Indian products that are subject to a 5% import duty by the UAE. The UAE will remove customs tariffs on nearly 80% of the goods, which account for 90% of India’s exports to the UAE by value. India expects CEPA to generate 10 lakh jobs across labor-intensive sectors such as textiles, gems & jewelry, leather, footwear, pharma, agriculture products, medical devices, sports goods and automobiles. In addition to goods, CEPA also covers 11 service sectors and over 100 sub-sectors, which includes business services, telecommunications, construction, education, tourism, nursing, finance among many others.
Lastly, another important bilateral trade agreement has come into force after being suspended in the year 2015. This bilateral agreement is an interim Economic Cooperation and Trade Agreement (ECTA) that has been signed by India and Australia on April 2nd, 2022 and it is expected that a concluded Comprehensive Economic Cooperation Agreement (CECA) shall be signed by the end of 2022.
• India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA).
In its first bi-lateral trade agreement with a developed country in the last decade, India aims to foster growth, development and strength with the newly elevated trade relations between India and Australia. This interim agreement has come at an opportune time when the trade momentum between the countries is on a high.
Australia’s aim is to make India one of its top three export markets by 2035 and also the third-largest in Asia for Australian investment.
Governments of both countries expect trade in goods to double in five years (after the implementation of the agreement) to USD 50 billion.
India can import coal from Australia at a much cheaper rate and this constitutes about 70 percent of India’s imports from Australia and which also attract a 2.5 percent duty.
Conclusion
India is aggressively perusing bilateral trade deals with many countries. These deals are expected to cover a range of products and services from textiles to alcohol, automobiles, pharmaceuticals as well as aspects regarding labour movement, intellectual property enforcement and data protection.
These trade deals do also issue a fair deal of challenges, as Indian manufacturers have not been able to utilise the full potential of preferential trade in goods. However, the extent of the final benefits will depend upon the status of future export competitiveness created by Indian industries.
