A year later, hard negotiations are still continuing. UK PM Rishi Sunak said last month that there was progress in talks but he “won’t rush” into a deal. From New Delhi’s perspective, this is in sharp contrast to what it accomplished last year — a trade deal with the United Arab Emirates inked only after 88 days of negotiations.
Free Trade Agreements (FTAs), or treaties between two or more nations designed to reduce barriers to trade and investment, are not new to India. New Delhi has signed 13 such pacts in the last five decades, with the primary ones being with countries and blocs in the east — for instance Japan, South Korea, Australia, and the Association of Southeast Asian Nations. In 2019, New Delhi opted out of the Regional Comprehensive Economic Partnership at the last moment, mainly due to concerns over China’s undue benefits out of the proposed pact.
With India now looking westward, negotiating to clinch favourable deals with big economies such as the UK, the US and the European Union, it’s becoming clear that part of this new journey could be bumpy. These economies are willing to ink deals with India, recognising the country’s big market and high growth in output, but simultaneously want New Delhi to cede ground on newer areas from environment to digital trade.
New Delhi is also negotiating a trade agreement with Israel, believed to be more for strategic reasons, and until last month, it was also engaged with Canada. Ottawa and New Delhi have since pressed pause on it after bilateral ties deteriorated over the killing of a Sikh separatist in Canada. “Between the UK and the EU, I feel, the EU will be a tough nut to crack, considering that the bloc is putting so many conditions regarding issues on environment, sustainable development, labour standard, digital trade et al,” says Jayant Dasgupta, former Indian ambassador to the World Trade Organization (WTO).
“Before India agrees to some of these conditions, we need to frame our own laws and regulations on these.” There is no doubt that Indian exporters in sectors such as textiles and apparels, leather and footwear, pharmaceuticals, farm and marine products, and gems and jewellery will make a killing if New Delhi manages to secure a good deal with the UK and the EU. Mithileshwar Thakur, secretary general of Apparel Export Promotion Council, finds merit in inking trade deals with these economies.
“For Indian ready-made garments, the present import tariff imposed by Europe and the UK is 9.6%. Once FTAs are signed and the tariff is brought to nil, it will be advantageous for Indian exporters, as our competitors — Bangladesh and Vietnam — already enjoy zeroduty access in those markets,” he says. He, however, adds that “India must be careful in choosing its FTA partners and pay attention to negotiation of issues concerning non-tariff barriers”. He also cautioned against certain measures such as the EU’s proposed carbon tax that, he says, alone has the potential to nullify the gains expected from tariff elimination through the FTA.
Abhijit Das, former head of WTO studies in Indian Institute of Foreign Trade, minces no words when he says that India may have to concede ground on areas of future growth. “What may essentially happen in these new-era FTAs with the UK and the EU is that we may get a few billion dollars of additional exports in merchandise and services trade but end up giving concessions in areas such as digital trade, green technologies etc., which are the areas of future growth potential,” he says. “That’s where the grand bargaining lies.”
The issues such as digital trade, labour and environment standard as well as agricultural practices have also cropped up in the US-led and somewhat secretive Indo-Pacific Economic Framework (IPEF) negotiations involving 14 nations including India, Australia, Japan, South Korea, Vietnam et al. According to an officer connected to the development, the IPEF agreement could be announced very soon considering that there have been regular meetings for months leading to a near conclusion.
Pradeep Mehta, secretary general of CUTS International, a public policy research, advocacy and networking NGO, says “there is no one-sizefits-all approach to trade deals”, adding that India should think of FTAs as a way to secure goods, services, investments and regulatory complementarity with its important trading partners rather than seeing the pacts merely through a win-loss lens.
“India has already recognised that new issues (e.g., environment, labour, digital trade, patents et al) will increasingly figure in the trade agendas of our important trading partners. It will also be a mistake to think these issues are exclusive priorities of advanced economies. We must now be proactive rather than just reactive.”.
For the advanced economies, India’s burgeoning middle-class population is a key attraction. A report published last year by the UK’s Department of International Trade says India’s middle class is expected to double from 30 million in 2019 to 60 million in 2030, “before reaching nearly 250 million in 2050.”
The report then continues, “This change represents a great increase in demand for products and services, creating huge opportunities for British firms.” There has been speculation that the UK is trying to convince India to reduce tariffs on scotch whisky and cars. Significantly, the UK’s trade report also talks about seeking commitments from New Delhi on free and trusted cross-border data flows and prevention of unjustified data localisation — areas where India has ample concerns.
India has also been continuing low-key negotiations with two geographic blocs — the BIMSTEC (Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation) and the Gulf Cooperation Council (GCC). According to an officer in the know, IndiaCanada negotiations had reached an advanced stage before political turbulence stalled talks.
According to former ambassador to WTO Dasgupta, “the storm will pass and negotiations will restart”. He further argues, “With the kind of relationship we have had with Canada — over 5% of their population being Indian origin and a large number of Indian students studying there — I don’t see any major disruption in Indo-Canadian trade. The FTA negotiations will resume sooner rather than later.”
In May this year, India’s industry body Ficci took a business delegation to Ottawa and Toronto with a focus on trade talks. “The resumption of talks will depend on whether Canada is appreciative of India’s concerns (of harbouring Khalistani terrorists),” says Ficci secretary general Shailesh Pathak. He also advocates reopening of old FTAs. “Indian industry in 2023 is much more confident on global trade in goods and services compared to two decades ago. Trade deals and FTAs over 15 years old do need to be renegotiated to reflect the needs of today’s industry as well as the Indian economy,” Pathak says.
No doubt, the rest of the world has stepped forward to engage with India mainly due to its mammoth market of 1.4 billion people as well as the nation’s remarkable growth trajectory.
India, too, is seizing the opportunity. The big question, though, is will India be robbing itself of future-potential areas for quick gains today. [email protected]