Revisiting India's FTAs: New guidelines to boost trade and exports

New-age FTAs include clauses on environmental and labour regulations

Doubts have been expressed over the past several years about the wisdom of signing free-trade agreements (FTAs). It has now been reported that the Department of Commerce will ask the Union Cabinet for its assent to “fresh guidelines” for negotiating FTAs, following a meeting with the Prime Minister’s Office on the subject of standard operating procedures (SOPs) for such negotiations. This presumably reflects the view that India has not done well out of several FTAs it has signed, because exports from the partner countries have on occasion grown quicker than shipments from India. A review of the FTA process is welcome and it is to be hoped that any SOPs that are firmed up as a result of these discussions do not push India further towards protectionism.

 

Over the past few years, India has taken forward discussions with some strategically important partners such as the United Kingdom (UK) and the European Union (EU), while signing a comprehensive partnership with the United Arab Emirates (UAE) and an early-harvest deal with Australia. This apparent forward movement, however, conceals some stumbles and hesitations. For example, though it was expected the India-Australian deal, signed a few years ago, would be converted from a preliminary to a comprehensive agreement, there does not seem to be much energy among partners to take this forward. The UK and EU FTAs too have not made as much progress as could be hoped. If new SOPs can address this issue, they will be a welcome improvement. In some cases, slow progress is due to a lack of institutional memory of previous discussions — this might be particularly the case with the EU, which has been a stop-start process for over a decade. This has been specifically reported as a hurdle that the SOPs will attempt to overcome, which is an optimistic sign.

 

This is an opportunity for the political executive to reiterate to officials the importance of increasing India’s trading connections. SOPs have the capability of giving the officials some comfort in making concessions at the negotiating table. They should be accompanied, however, by broader attempts to ensure that Indian exporters benefit as much from FTAs as Indian consumers have. Industry needs to be given demonstrations of how to take advantage of new markets that have been opened as a consequence of FTAs. Concerns that non-tariff barriers could still exist even in trading relationships where tariffs have been lowered must also be addressed through the creation of a comprehensive database of such non-tariff barriers. That can be taken up bilaterally.

 

New-age FTAs also include clauses on environmental and labour regulations. Commerce-ministry negotiators are naturally concerned about stepping into these areas, which fall in the domain of other ministries. The Union Cabinet must provide comfort and authority so that agreements on these issues too can be reached. Finally, if institutional memory is the criterion, the government must consider using external expertise. The government itself has think tanks, which can be tapped to create specialised cells to provide support to ongoing negotiations even when individual officials within the department have moved on. Overall, the idea should be to tap emerging opportunities in global trade, partly because of the changing global economic and political environment.