MEA asks commerce ministry to review FTAs, delay talks

This, as India has been getting demands to open up its services sector from these countries

The Ministry of External Affairs (MEA) had asked the Ministry of Commerce and Industry to review some of the key free trade agreements (FTAs) that India signed with Singapore, Japan, South Korea and the Association of Southeast Asian Nations (Asean), sources said, as India had failed to achieve the main objective of leveraging the services sector.

The MEA has also urged the commerce ministry to slow the pace of its negotiations for similar deals with Thailand, New Zealand and Canada, among others.

Ironically, it was the MEA which had spearheaded the signing of FTAs in an effort to promote economic diplomacy. India signed a number of agreements after talks for a global trade deal under the Doha Round failed to make any headway. Also, India had always been keen to gain greater market access for its professionals in the services sectors of various countries. This is because with India’s stagnating manufacturing sector, it was not able to gain competitiveness in the export of high-end products.

However, in an effort to get more access under services trade in terms of greater movement of professionals such as doctors, nurses, accountants and teachers, India has received some “odd demands from other countries,” according to a senior MEA official.

For example, under the proposed FTA with Thailand, it has demanded the opening of massage parlours and spas here because that is the country’s main revenue earner. This has turned out to be one of the main stumbling blocks in the negotiations.

India had been in talks with Thailand to have an FTA since 2004, when both sides launched the ‘Early Harvest Scheme’ under which they have already abolished duties on 82 items.

On the other hand, the FTA route has also not helped India in augmenting its exports. Ironically, it is having large trade deficits with countries with which it has such agreements.

In 2011, India’s trade in goods with its FTA partners was about 39 per cent of its total trade. This figure has not registered much change since 2006, according to CUTS- a Jaipur based think tank.

India is running a huge trade deficit with Japan even though both have signed a comprehensive economic partnership agreement (CEPA).

India’s trade deficit with Japan was $3.6 billion in 2010-11 before the CEPA was implemented and it almost doubled in 2012-13 to $6.3 billion. Its exports to Japan in 2012-13 was $6.26 billion compared with imports of $12.50 billion.

In 2012-13, the country’s total exports stood at $300.60 billion, down 1.76 per cent from 2011-12. The FTAs did not prove to be helpful in arresting the fall in exports with a slowdown of demand globally and the government was forced to revise the export target for this financial year to $350 billion from $500 billion earlier.

India is currently negotiating bilateral trade deals with the European Union, Canada, Israel, Australia, New Zealand, Africa and Chile.