What India should strive for in trade deals

News: India has decided to enter into trade agreements with key partners like the UK, UAE and Australia and announced an ambitious plan for an early harvest deal by March 2022.

These trade agreements coincides with India coming out of the Covid-19 pandemic-related slowdown and wants to become “Atmanirbhar” and play “a bigger role in the global value chain”.

What are the challenges?

India’s previous negotiations on trade agreements has not provided Indian exporters a level playing field.

-For example, in the case of early harvest with Thailand, Thailand has benefitted more compared to India.

India offered little and received a lower level of commitment, compared to its competitors in these markets.

The possibilities of attracting more FDI, gaining greater market access, and partnership have always taken a back seat in our industry consultations.

Policy uncertainty has been a key issue in many sectors in the case of India. Policies designed to meet certain objectives, like reducing the trade imbalance with China, ended up adversely affecting countries other than China.

India has one of the highest tariffs in the world. Since the trade agreements lead to tariff liberalisation, Indian industry always worries about tariff liberalisation intensifying competition in the domestic market.

India’s defensive policies like the ban on some GI products are considered by some countries as a violation of India’s GI obligation under TRIPS.

What should India do in the new trade agreements?

The consultations have to look beyond tariffs. The focus should be on attracting investment and the development of value chains.

Allowing greater market access can help other countries to source more from India, as seen in the case of ASEAN countries, and there is a good chance that our exports will increase.

Win-Win deal-Gains can be cross-sectoral, focus should be on areas of export competence and interest. For example, access to cross markets for Indian IT companies and UK liquor companies.

As India enters into trade negotiations, there is a need for policy consistency and transparency.

It is important to make India a bigger player in the global value chain, import substitution may not lead to greater global integration.

There is a need for alignment between domestic policy objectives and that of trade agreements to further India’s position in trade negotiations.

India may look at best practices of countries like Vietnam, which has successfully signed trade agreements, as it designs its domestic policies and enters into trade agreement negotiations.

Source: This post is based on the article “What India should strive for in trade deals” published in Business Standard on 23 Nov 2021.