Answer:

Free Trade Agreements (FTAs) are arrangements between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non-tariff barriers on substantial trade between them. While remaining committed to the multilateralism of WTO, under Article 1 of the GATT, India has negotiated a series of FTAs, with Sri Lanka, Singapore, ASEAN, Malaysia, Japan and Korea etc, under the exemptions of the Articles XXIV of GATT and Article V of GATS. Thus, the FTA route has been a preferred method to promote trade with mutually advantageous groups and countries.

It has served India well by:

♤ Ensuring Market Access to the preferred countries

♤ Increase in exports

♤ Increase in overall trade by about 50% over roughly four years.

However, industry associations have repeatedly complained to the commerce ministry that because of FTAs, India’s imports from these nations have significantly jumped, while exports have not increased proportionately. Thus there has been a clamor to have a relook at the FTA strategy

The emergent mega regional agreements like Trans Pacific Partnership (TPP) also require a relook at the strategy. On the one hand higher standards on environment, labor and Intellectual Property make the TPP exclusionary, on the other hand the non- participation in this may pose challenges in terms of reduced GDP to the tune of 0.2%, making Indian exports uncompetitive in certain markets, challenges to food security, pressure on sectors such as pharmaceutical industry.

Keeping these effects in mind, India needs to take the following measures quickly:

♤ International Coalition - India needs to stitch together a coalition of like-minded countries

♤ Attain higher standards in production - We should, side by side, try to meet those upgraded standards to avoid the risk of exclusion

♤ Conclude ongoing free trade negotiations soon - These include the India-EU Bilateral Trade and Investment Agreement and the mega Regional Comprehensive Economic Partnership with the Association of Southeast Asian Nations, China and others. Benefits from these agreements will help mitigate some of the export losses that India may face in leather goods, textile, and plastics on account of trade diversion due to TPP.

♤ Diversify exports - Aiming to diversify export destinations to hitherto untapped markets like Latin America and Africa would also help.

♤ Identify India’s trade interest areas- India also needs to identify its trade interest areas and propose alternative negotiating templates. One such area is biopiracy, protection of traditional knowledge, and the link between the WTO’s Trade-Related Aspects of Intellectual Property Rights agreement and the Convention on Biological Diversity.

♤ Infrastructure development- including port congestion and poor road connectivity, is one of the main hurdles in attaining this cost competitiveness. Addressing India’s infrastructural deficiency will have the dual effect of not only making India’s exports cost-competitive, but making them attractive for international lead firms to integrate India in global value chains.