Mint Explainer: What do the free trade agreements mean for India?
free trade agreements (FTA) with nearly half a dozen countries. Mint explains what is fuelling these pacts and what they mean for India’s international trade. India is currently in talks with developed countries such as the UK, European Union, Canada and Australia for an FTA, an extensively used tool for economic integration.
Globally, there are over 350 free trade agreements between the members of the World Trade Organization. Multiple factors drive an FTA, such as geo-politics, complementarities between economies and access to global supply chains. But the most important objective of an FTA is to have an easier access to goods and services in each other’s economy by mutual elimination of duties.
However, the latest FTAs are going beyond traditional objectives and are looking at digital trade and addressing non-tariff barriers. The UK’s three-year maturation rule for whisky, environment measures increasingly introduced in trade by the EU such as Carbon Border Adjustment Mechanism (CBAM) are often considered to be non-tariff barriers. The bulk of free trade agreements that are in effect today were signed between 2000 and 2010 when India’s global trade was witnessing a jump.
But with rising trade deficits over the years, India did not sign an FTA after 2011 for the rest of the decade. Things changed after India pulled out of Regional Comprehensive Economic Partnership (RCEP) and anti-China sentiments swept the world following the coronavirus pandemic. India began looking at possibilities of FTAs with several countries after reaching a conclusion that the RCEP deal with 16-countries had inadequate safeguards for its industries.
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