FTAs, free for all?

Free trade agreements with Japan and South Korea have not worked in India’s favour. Will the deals with Australia and UAE deliver?

K.A.Badarinath

After Canberra ratified the India Australia Economic Cooperation and Trade Agreement (IndAus ECTA) on Tuesday there was huge sense of achievement that overtook the establishment and media outlets.

While fine print was still hazy given that second phase of the deal was yet to be concluded, duty cuts and liberalized visa regimes was touted as a big deal for Indian side.

There’s no denying that bilateral trade deals are here to stay given that multi-lateral negotiations at forums like World Trade Organization have come to a virtual standstill, limited trade and investment blocks take long time to get going.

Taking bilateral trade to US $ 50 billion in five years from the prevailing $ 31 billion with Australia is laudable. Billion-dollar question however, would be which side will the trade balance tilt?

The next deal that may get operative is the pact with United Arab Emirates which was also signed eight months ago. Comprehensive Economic Partnership Agreement (CEPA) between Abu Dhabi and New Delhi may be more comprehensive. UAE foreign minister Sheikh Abdullah bin Zayed Al Nahyan is in New Delhi to give a big push to CEPA.

Here again, the trade balance is in favour of UAE as of now and it may only widen further after the CEPA.As per Indian commerce ministry figures, imports from UAE were US $ 28.4 billion as against $ 16 billion exports during April – September 2022. Widening trade imbalance may be a source of concern in free trade agreement with Australia or CEPA with UAE.

After a hiatus during first three years, Narendra Modi government signed 13 trade deals or operationalized agreements with partners in last five years. Hastening bilateral agreements became a necessity given the $ 5 trillion economic target that India set for itself in its economic expansion game plan. But then, have these agreements done well for Indian industry, exporters, service providers, farmers and consumers is a valid question that needs to be answered. There’s no verifiable data to back any claims of a big benefit to Indian side. Data available with Commerce Ministry, RBI and Finance Ministry also needs to be collated and reconciled.

In the past, industry and trading community in India have complained that deals with Japan and South Korea never worked in India’s favour as the trade balance and investment gap only widened with several desi companies, services losing out.

Sri Lanka, Nepal, Bhutan, Mauritius, Thailand, Malaysia bracketed as neighbourhood countries or South East Asian neighbours were others with whom free trade deals were operative. Even if trade balance was in their favour, India has the potential to play ‘big brother’ role.

But with biggies like Japan, South Korea, UAE and Australia, terms of engagement may be a clinching factor. Two regional deals with ASEAN and SAFTA were also scrutinized on cost benefit issues.

In addition, six preferential trade agreements with limited scope became operative between India and its partners like Afghanistan, Chile etc. In this category also falls the agreement India has with Mercosur (South American block) and Asia Pacific nations through APTA.

Free trade negotiations will be kicked off with United Kingdom, Canada, European Union and Gulf nations later this week. Here again, the big question is what are India’s gains?

While bilateral and limited blocks trade is an imperative, Indian negotiators must be sensitive enough to ensure that FTAs do not turn out to be free for all and nothing much for India.

Free trade as a concept has undergone serious makeover especially after Western developed economies including US has shunned the hitherto flexible economic, investment and trade partnerships.

There’s no alternative to engaging the world on multiple fronts. But, big question is on what’s in it for India?

(The writer is Director and Chief Executive of New Delhi based think tank, Centre for Integrated and Holistic Studies)