Column: Mitigating FTA challenges

Aug 27 2014, 01:42 IST
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SummaryIndia has not been able to sufficiently leverage these agreements to increase its presence in the markets of its partners. Overall, the share of Indian exports to FTA/CEPA partners declined from nearly 38% in 2004 to 33% in 2012.

This year, India completes a decade of intensive engagement with its economic partners through the bilateral Free Trade Agreements (FTAs). The commencement of the negotiations with the 10-member Association of South East Asian Nations (ASEAN) in 2004 for an FTA covering the goods sector was a significant step for the country’s engagement with the global economy. The Agreement marked a departure from India’s erstwhile position regarding bilateral/regional agreements. Until its engagement with the ASEAN in 2003, India was almost unequivocally wedded to the multilateral trading system. The only aberrations came in the form of the bilateral deals with immediate neighbours in the South Asian region. India’s preference for the multilateral trading system was aptly reflected in a discussion paper on regional trading arrangements (RTAs) that it had tabled in the early days of the Doha negotiations. In this paper, India argued that “the multilateral framework for international trade under the WTO-rule-based system needs to be strengthened by addressing issues of concern emerging on account of formation of such a large number of RTAs, including their impact on development”. These views regarding RTAs, clearly those of an outlier, changed quite dramatically with India’s engagement with the ASEAN.

The India-ASEAN FTA is also significant because it has emerged as the corner-stone of India’s “look east” policy. The FTA was conceived as a part of the 2003 Framework Agreement on Comprehensive Economic Cooperation between India and the ASEAN. This Framework Agreement set out the roadmap for deepening economic cooperation between the two sides through the establishment of an India-ASEAN Regional Trade and Investment Area (RTIA). The RTIA was to be realised through progressive elimination of tariff- and non-tariff barriers in almost all trade in goods and by progressive liberalisation of trade in services with substantial sectoral coverage. At the same time, the partners agreed to establish a liberal and competitive investment regime that facilitates and promotes investment within the India-ASEAN RTIA. The negotiations were initiated with rather ambitious targets: the deal on trade in goods was scheduled to conclude by June 2005, while the negotiations on services and investment, which were to be initiated immediately after the conclusion of the agreement on goods, were to be concluded by 2007. The negotiations went well beyond these timelines: the goods agreement became operational only in 2010 and although the negotiations on services and investment agreements were concluded at the end of 2012, they are

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