What’s at stake in talks for a UK-India free trade pact
India and the UK recently revived talks for a Free Trade Agreement (FTA) to encourage trade and investment. The FTA between India and UK is expected to be signed by October.
What is a Free Trade Agreement (FTA)?
It is an agreement between two or more countries to minimize barriers to imports and exports of products and services among them.
It includes reducing tariffs, quotas, subsidies or prohibitions which could limit exchange of goods and services across borders.
The FTA might allow free trade among the two nations with a few exceptions.
This involves a formal and mutual agreement signed between two or more countries.
The agreement could be comprehensive and include goods, services, investment, intellectual property, competition, government procurement and other areas.
What is the status of the India-UK FTA?
India and the United Kingdom have a multi-dimensional strategic partnership and are actively engaged in bilateral trade.
The two countries agreed to begin formal negotiations for an FTA in January 2022, aiming to advance trade and investment relations between them.
The fifth round of FTA talks concluded on 29 July, and the expectation is that negotiations would be completed and the stage set for the FTA by October.
The FTA is important for both countries as it would provide a boost and create a robust framework of overall trade and investment between the two countries.
Which are the countries with which India has FTAs?
As of April 2022, India had 13 FTAs, including the South Asian Free Trade Area, and with Nepal, Bhutan, Thailand, Singapore, Japan and Malaysia.
The 13 also include the agreements with Mauritius, UAE and Australia signed during the last five years.
Additionally, India has also signed six limited Preferential Trade Agreements.
What is the level of India-UK trade?
Bilateral trade stands at $50 billion (ie approx. $35 billion in services and $15 billion in merchandise).
India is UK's 12th largest trading partner and accounts for 1.9% of UK's total trade in four quarters to the end of 2022.
UK is the seventh largest export destination for India.
The trade balance maintained by India with UK has largely been a surplus.
Top three services exported from India to UK are technical, trade-related and other business services, professional and management consulting services and travel.
How will an FTA with UK benefit India?
Apartfrom reducing tariffs,the FTA also looks at lowering non-tariff barriers,particularly technical barrierstotrade around rules of origin, investor protection and IPR.
MoUs on joint recognition of certain educational qualifications and an outline pact on healthcare workforce have alreadybeen signed.
Also, both UK and India have set up panels for a totalization deal being advocated by India and permitting Indian legal services for the UK.
Concepts : Types of Trade Agreements
(1) Free Trade Agreement - discussed above
(2) Preferential Trade Agreement
In this type of agreement, two or more partners give preferential right of entry to certain products.
This is done by reducing duties on an agreed number of tariff lines.
Here a positive list is maintained i.e. the list of the products on which the two partners have agreed to provide preferential access.
Tariff may even be reduced to zero for some products even in a PTA.
India signed a PTA with Afghanistan.
(3) Comprehensive Economic Partnership Agreement
Partnership agreement or cooperation agreement are more comprehensive than an FTA.
CECA/CEPA also looks into the regulatory aspect of trade and encompasses and agreement covering the regulatory issues.
CECA has the widest coverage. CEPA covers negotiation on the trade in services and investment, and other areas of economic partnership.
It may even consider negotiation on areas such as trade facilitation and customs cooperation, competition, and IPR.
India has signed CEPAs with South Korea and Japan.
(4) Comprehensive Economic Cooperation Agreement
CECA generally cover negotiation on trade tariff and Tariff rate quotas (TRQs) rates only.
It is not as comprehensive as CEPA.
India has signed CECA with Malaysia.
(5) Framework Agreement
Framework agreement primarily defines the scope and provisions of orientation of the potential agreement between the trading partners.
It provides for some new area of discussions and set the period for future liberalisation.
India has previously signed framework agreements with the ASEAN, Japan etc.
(6) Early Harvest Scheme
An Early Harvest Scheme (EHS) is a precursor to an FTA/CECA/CEPA between two trading partners. For example, early harvest scheme of RCEP has been rolled out.
At this stage, the negotiating countries identify certain products for tariff liberalization pending the conclusion of actual FTA negotiations.
An Early Harvest Scheme is thus a step towards enhanced engagement and confidence building.
.jpg)
0 Comments