{"id":253709,"date":"2023-07-27T21:27:29","date_gmt":"2023-07-27T15:57:29","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=253709"},"modified":"2023-08-31T10:29:38","modified_gmt":"2023-08-31T04:59:38","slug":"ftas-learning-from-peers","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/ftas-learning-from-peers\/","title":{"rendered":"FTAs: Learning from peers"},"content":{"rendered":"\n

Source<\/strong>– The post is based on the article \u201cFTAs: Learning from peers\u201d <\/strong>published in the \u201cBusiness Standard\u201d <\/strong>on 27th July 2023<\/strong>.<\/p>\n

Syllabus: <\/strong>GS3- Economy<\/p>\n

Relevance:<\/strong> Issues related to external trade<\/p>\n

News- <\/strong>The article compares the India approach to FTAs with other emerging economies.<\/p>\n

What are the impacts of tariff liberalisation?<\/strong><\/h2>\n

In the early stages of Free Trade Agreements, tariff liberalisation<\/strong> was the central agenda for shallow economic integration<\/strong>. An example of this is the US-Canada auto pact<\/strong> in 1965. It stimulated growth in the Canadian auto industry.<\/p>\n

Similarly, the Thai auto industry experienced development through its participation in the Asean Brand to Brand complementation scheme <\/strong>in the late 1980s. This initiative offered preferential tariff margins<\/strong> to select regional economies.<\/p>\n

How have FTAs evolved over time?<\/strong><\/h2>\n

Developing economies have become aware about the advantages of integrating with global value chains<\/strong>. Now, FTAs have converted to deep trade agreements.<\/strong><\/p>\n

FTAs include trade in services and investment<\/strong>, and additional policy areas like intellectual property rights, dispute settlement and competition policy<\/strong>. In these deep trade agreements, the rules of origin <\/strong>are central to GVC-led trade.<\/strong><\/p>\n

How is India ‘s approach to FTAs different from other major emerging economies?<\/strong><\/h2>\n

Tariff liberalisation<\/strong>– Asean\u2019s FTAs with its regional neighbours like Japan, Korea, have tariff liberalisation commitments that are in the range of 87 percent to 99 percent of all tariff lines<\/strong>.<\/p>\n

The Asean-India FTA has less than 80 per cent tariff liberalisation.<\/strong><\/p>\n

In its trade deal with Australia concluded in 2022, India adopted for liberalisation of only around 70 per cent of tariff lines<\/strong> as against 100 per cent by Australia.<\/strong><\/p>\n

Rule of origin<\/strong>– Stricter rules of origin does not favour GVC-type of production.<\/strong> It restricts the preferential market access<\/strong> offered by an FTA.<\/p>\n

This is particularly relevant in the context of trade involving parts and components, which are essential in Global Value Chains<\/strong>. At each border crossing, the value addition<\/strong> may not always be significant.<\/p>\n

India has negotiated a complex set of Rules of Origin in its Free Trade Agreements<\/strong>. It insists on both a change in tariff classification and substantial value addition.<\/strong><\/p>\n

In 2020, changes in the Customs Act<\/strong> have made the utilisation of FTAs even more burdensome.<\/p>\n

Importers now have the additional responsibility of satisfying the government of India about the origin of the imported product<\/strong>, in addition to obtaining the Certificate of Origin.<\/strong><\/p>\n

In contrast, Asean has simplified its RoO criteria <\/strong>since the early 2000s. The RoOs of Asean’s FTAs, as well as those of its member states with East Asian economies, are simple with flexible cumulation rules.<\/strong><\/p>\n

Investment liberalisation<\/strong>– India’s model bilateral investment treat<\/strong>y incorporates an investor-state dispute settlement mechanism<\/strong>.<\/p>\n

It is complex and requires the prior exhaustion of local remedies<\/strong>. These provisions have the potential to create obstacles for foreign investment.<\/strong><\/p>\n

On the other hand, China has evolved its BIT with a focus on economic development<\/strong>. The first-generation BITs, concluded between 1982 and 1989, only addressed dispute resolution <\/strong>related to determining compensation in cases of expropriation.<\/p>\n

However, the next generation BITs<\/strong> expanded the scope to include the option for investors to approach the International Centre for Settlement of Investment Disputes.<\/strong><\/p>\n

The third generation BITs<\/strong> offer stronger international law protection<\/strong> to foreign investors. China’s BITs also apply uniformly in special economic zones.<\/p>\n

Sustainability provisions in FTAs<\/strong>– These provisions have transitioned from being supplementary agreements<\/strong> in FTAs to becoming essential chapters<\/strong> in almost all modern FTAs.<\/p>\n

India’s approach of categorising sustainability provisions as “non-trade” issues<\/strong> is also outdated. The increasing number of FTAs that now include commitments on internationally recognized labour rights and climate cooperatio<\/strong>n, aligning with the pursuit of sustainable development goals.<\/strong><\/p>\n

For instance, the Comprehensive and Progressive Trans-Pacific Partnership<\/strong> has detailed chapters dedicated to both environmental protection and labour standards.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Source– The post is based on the article \u201cFTAs: Learning from peers\u201d published in the \u201cBusiness Standard\u201d on 27th July 2023. Syllabus: GS3- Economy Relevance: Issues related to external trade News- The article compares the India approach to FTAs with other emerging economies. What are the impacts of tariff liberalisation? In the early stages of… Continue reading FTAs: Learning from peers<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216,239,238],"class_list":["post-253709","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","tag-international-relations","tag-ir","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1701320033},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/253709","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=253709"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/253709\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=253709"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=253709"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=253709"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}