Some concluding remarks and suggestions in the context of India’s FTAs/CECAs are as follows.
It may be beneficial for India to have some useful FTAs with the strategic developed countries and blocks instead of its competitors or other developing countries, political considerations apart. Studies by Dr H A C Prasad in collaboration with India Exim Bank1 have also indicated the above while suggesting that the strategic regional forum of India with QUAD countries could be taken forward to the level of some form of economic and trade grouping
While it may be difficult for India to be a partner of any FTA in the near future where China is the major player as decisions on FTAs cannot be separated from geopolitical considerations, FTAs/CECAs with some advanced countries like US,UK,EU could be beneficial for India and its FTA partners. There are indications of Trade diversion from China to India by these countries. India needs to quickly utilize the opportunity to see that Trade diversion to India coupled with Investment diversion to India becomes a reality as many foreign investors are planning to move lock, stock and barrel from China.
Already India has concluded CECA with Australia and CEPA with UAE. Services sector has also been included in both. While negotiations on India-UK FTA is progressing and India-EU FTA restarted, India-US FTA negotiations seem to be stalled due to the US policy, though trade negotiations on many fronts are progressing with the US. Reviews are taking place in the case of India – Srilanka FTA and a few others.There is now a realisation that past FTAs were flawed. So, a careful but quick review of existing FTAs on the lines of zero-budgeting along with concluding new useful FTAs with major trading partners of India is important. Negotiations in Indo-UK and Indo-EU FTAs should be brought to a logical conclusion at the earliest. If necessary India should not hesitate to terminate some less useful FTAs or make them more useful for India atleast at the time of renewal.
Since, some countries are in multiple FTAs and the same commodities are included in tariff concessions in different FTAs, there should be some uniformity. The tariff concession for a tariff line by India should be the same for all FTAs. This will help in avoiding an FTA partner trying to use or misuse the best concessions in the FTA which has relatively lower preferential tariffs. This will also help in removing the confusion to domestic producers and make actions of a multiple FTA partner predictable.
Many FTAs of India to developing countries have resulted in mainly giving tariff concessions. So, a proper evaluation of the less developed and developing countries needs to be done to see whether they have graduated to a level where tariff concessions may not be needed for some items or whether the same countries are competing against India, using the tariff concessions. With US withdrawing GSP benefits to India but not to some developing FTA partners of India, India will be more open to competition in the US market from its FTA/RTA partners. These countries get tariff concessions in India’s FTAs, some as LDC partners. These very countries which continue to enjoy US GSP benefits, compete against India in the very same commodities for which GSP has been withdrawn for India, particularly Bangladesh. Vietnam is also very competitive in some products like textiles. This needs to be addressed by introducing graduation and sun-set clauses in India’s FTAs, particularly earlier FTAs at the time of review, which should be a total review.
FTAs should be based primarily on economic gains resulting in tariff liberalization on both sides without affecting sensitive sectors particularly agricultural sector. Political, Strategic or other gains should be only secondary. During negotiations for new FTAs in the future, if the MFN tariffs of the partner countries are already zero, near-zero or low, India should try to get maximum gains in areas other than tariffs as the preference margins for India would be low
Recent FTAs like the India-Australia ECTA and India-UAE CEPA include Services sector. But they should not be just based on a Request-Offer approach, but should be based on a common template for India’s services sector .
1 a) "Impact of Covid-19 on India's International Trade: Strategies and Policy Perspective", (In collaboration with India EXIM Bank), Special publications, India EXIM Bank, February 2021
b) “Relooking India's Tariff Policy Framework”, (In collaboration with India EXIM Bank), Special publications, India EXIM Bank, March 2020
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