Think, give-and-take to expand trade relations

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India in 2020 declined to join the Chinese led RCEP. 

This fueled the concerns of trade isolation and to overcome this India has been trying to forge some bilateral free trade agreements (FTAs).   

What are the initiatives taken by India in this direction? 

India has been generally following a ‘Look West’ approach and has initiated FTA talks with the US, Europe, UK. 

Its full trade agreement with UAE is also in the final stages. 

Although negotiations have taken place with EU, US, Australia and Canada but the progress has been slow. 

UK after Brexit has been keen for a trade alliance with India.  

What should India focus on while signing FTA with UK? 

India and UK both have been trying to put some goods and services off the pact. This may lead to a situation where only 65% of goods and 40% of the services get covered. 

However, both the sides in a bilateral FTA should not go closely into sectoral details as only a full-scale FTA can bring long term benefits to both the parties. 

The short term effects on local markets should not prevent India from seeing the long term gain from the deal. For example- India has a very high tariff on Scottish whiskey which only leads to custom duties but does not automatically generate jobs in local markets.  

India should focus on having competitive edge rather than market access to derive benefit from the deal. 

As India and UK have little overlaps in terms of what they manufacture at scale,trade pact will not be hard to negotiate. 

Source– This post is based on the article “Think, give-and-take to expand trade relations” published in Live Mint on 18th Jan 2022.