Source: The Hindu

Introduction

India recently achieved a milestone trade agreement with the European Free Trade Association (EFTA), consisting of Iceland, Liechtenstein, Norway, and Switzerland. Amidst this accomplishment, there's a growing recognition for the necessity of a well-defined Free Trade Agreement policy by India, particularly concerning International Trade and Foreign Investment Laws. Such a policy framework is crucial for navigating the complexities of global trade dynamics and fostering mutually beneficial economic relationships with trading partners.

What is the Background EFTA Deal?

• In March, India finalized a significant trade deal with the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland.
• Termed the Trade and Economic Partnership Agreement (FTA), it aims to boost trade levels between India and EFTA members, with a focus on addressing environmental and labour standards, a departure from past agreements.
• Economist Biswajit Dhar emphasized India's shift towards integrating environmental and labor considerations into trade negotiations, highlighting the agreement's significance.
• The FTA holds a promise for strengthening economic ties and fostering sustainable development among participating countries.
• Setting it apart from recent FTAs, the India-EFTA agreement includes a detailed investment chapter, prioritizing facilitation over protection.
• Noteworthy commitments include EFTA countries aiming to increase FDI to India by $100 billion over 15 years and facilitating the creation of one million jobs, establishing an "obligation of conduct" towards these goals.

What is a Free Trade Agreement?

• About
  • A free trade agreement (FTA) is a pact between two or more countries or regions to reduce or eliminate barriers to trade, such as tariffs and quotas, with the goal of promoting economic integration and increasing trade between the signatories.
  • FTAs are typically designed to boost economic growth, create jobs, enhance competitiveness, and provide consumers with access to a wider variety of goods and services at lower prices.
  • India is involved in various free trade arrangements, including the South Asian Free Trade Area (SAFTA), the Association of Southeast Asian Nations (ASEAN) Free Trade Area, the India-Japan Comprehensive Economic Partnership Agreement (CEPA), and negotiations with the European Union for a free trade agreement, among others.
  • Negotiations for India’s FTAs with countries like the United Kingdom and the European Union (EU) appear to have stalled amidst the current parliamentary elections in India.

Key Feature of Free Trade Agreement

• Tariff Reduction or Elimination:
  • FTAs often involve reducing or eliminating tariffs (taxes on imports) on goods traded between the participating countries.
• Market Access:
  • FTAs aim to improve market access for goods and services by reducing non-tariff barriers, such as import quotas, licensing requirements, and technical standards.
• Trade Facilitation:
  • FTAs may include provisions to streamline customs procedures, simplify documentation requirements, and enhance trade facilitation measures to reduce the costs and time associated with cross-border trade.
• Investment Protection:
  • Many FTAs include provisions to protect foreign investments, such as safeguards against expropriation without compensation and mechanisms for resolving investment disputes.
• Intellectual Property Rights (IPR):
  • FTAs often address intellectual property rights, including patents, copyrights, trademarks, and trade secrets, to promote innovation and protect the interests of creators and innovators.
• Services Trade:
  • Some FTAs include provisions to liberalize trade in services, such as financial services, telecommunications, and professional services, by reducing regulatory barriers and improving market access.
• Labor and Environmental Standards:
  • Modern FTAs may incorporate provisions related to labor rights and environmental standards to ensure that trade liberalization does not come at the expense of workers' rights or environmental protection.

What is the Position of India in Context of Free Trade Agreement?

India has entered into several free trade agreements (FTAs) with various countries and regional blocs to promote trade and economic cooperation. Some of the significant FTAs involving India include:

• ASEAN-India Free Trade Area (AIFTA):
  • Signed in 2009, this agreement aims to promote trade in goods and services between India and the Association of Southeast Asian Nations (ASEAN) member states, comprising Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. It covers a wide range of sectors, including agriculture, textiles, electronics, and services.
• India-Japan Comprehensive Economic Partnership Agreement (CEPA):
  • Signed in 2011, this agreement aims to promote bilateral trade and investment between India and Japan. It covers trade in goods, services, and investment, and includes provisions related to tariff reduction, rules of origin, and intellectual property rights.
• India-Korea Comprehensive Economic Partnership Agreement (CEPA):
  • Signed in 2009, this agreement aims to promote trade and investment between India and South Korea. It covers trade in goods, services, and investment, and includes provisions related to tariff reduction, rules of origin, and intellectual property rights.
• India-Malaysia Comprehensive Economic Cooperation Agreement (CECA):
  • Signed in 2011, this agreement aims to enhance trade and investment ties between India and Malaysia. It covers trade in goods, services, and investment, and includes provisions related to tariff reduction, rules of origin, and intellectual property rights.
• India-Singapore Comprehensive Economic Cooperation Agreement (CECA):
  • Signed in 2005, this agreement aims to strengthen economic ties between India and Singapore. It covers trade in goods, services, and investment, and includes provisions related to tariff reduction, rules of origin, and intellectual property rights.
• India-ASEAN Free Trade Agreement (FTA):
  • This FTA, signed in 2009, aims to promote trade and economic cooperation between India and ASEAN member states. It covers trade in goods, services, and investment, and includes provisions related to tariff reduction, rules of origin, and intellectual property rights.
  • These agreements are designed to promote economic integration, facilitate market access, and enhance cooperation in various sectors, thereby benefiting businesses and consumers in India and its trading partners.

What are the Other Major Trade Agreements Signed by India?

Conclusion

India's recent milestone trade agreement with the European Free Trade Association underscores the importance of a well-defined Free Trade Agreement policy. This pact, focusing on environmental and labor standards, marks a shift in India's trade negotiations strategy. With a detailed investment chapter prioritizing facilitation, the agreement aims to bolster economic ties and foster sustainable development, setting a precedent for future agreements.