{"id":364774,"date":"2026-06-09T16:08:32","date_gmt":"2026-06-09T10:38:32","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=364774"},"modified":"2026-06-09T17:53:23","modified_gmt":"2026-06-09T12:23:23","slug":"indias-foreign-trade-agreements-ftas-approach-and-challenges-explained-pointwise","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/indias-foreign-trade-agreements-ftas-approach-and-challenges-explained-pointwise\/","title":{"rendered":"India&#8217;s Foreign Trade Agreements (FTAs): Approach and Challenges &#8211; Explained Pointwise"},"content":{"rendered":"<p>India has recently accelerated its pursuit of Free Trade Agreements (FTAs) as part of its strategy to deepen global economic integration, diversify export markets, and strengthen supply-chain resilience. Moving beyond its earlier cautious approach, India has concluded FTAs with countries such as United Arab Emirates and Australia, while actively negotiating agreements with the European Union, United Kingdom, and other partners. India now has 15 FTAs covering 27 countries, another 9 agreements with 42 countries are nearing completion &#8211; once finalized, India&#8217;s FTA partners will total 69 countries &amp; could account for ~75% of the country&#8217;s exports.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-364791\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/06\/Screenshot-2026-06-09-160641.png?resize=742%2C370&#038;ssl=1\" alt=\"India's FTAs - Approach &amp; Challenges\" width=\"742\" height=\"370\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/06\/Screenshot-2026-06-09-160641.png?w=742&amp;ssl=1 742w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/06\/Screenshot-2026-06-09-160641.png?resize=300%2C150&amp;ssl=1 300w\" sizes=\"auto, (max-width: 742px) 100vw, 742px\" \/><\/p>\n<table style=\"border-collapse: collapse; width: 100%;\">\n<tbody>\n<tr>\n<td style=\"width: 100%; text-align: center;\"><strong>Table of Content<\/strong><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 100%;\"><a href=\"#h1\">What are Free Trade Agreements (FTAs)?<\/a><br \/>\n<a href=\"#h2\">Key Features of FTAs<\/a><br \/>\n<a href=\"#h3\">Pros &amp; Cons of FTAs<\/a><br \/>\n<a href=\"#h4\">What is the relationship between Multilateralism under the WTO Regime and the FTAs?<\/a><br \/>\n<a href=\"#h5\">India\u2019s Stance towards FTAs<\/a><br \/>\n<a href=\"#h6\">What advantages have FTAs brought to India?<\/a><br \/>\n<a href=\"#h6\">What are the challenges associated with Free Trade Agreements (FTAs) for India?<\/a><br \/>\n<a href=\"#h7\">What should be India&#8217;s approach regarding the FTAs?<\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><strong><a id=\"h1\"><\/a>What are Free Trade Agreements (FTAs)?<\/strong><\/span><\/h2>\n<ul>\n<li>FTAs are arrangements between two or more countries or trading blocs that agree to <strong>reduce or eliminate customs, tariff and non tariff barriers on substantial trade<\/strong> between them.<\/li>\n<li>FTAs, normally cover <strong>trade in goods<\/strong> (such as agricultural or industrial products) and <strong>trade in services<\/strong> (such as banking, construction, trading etc.).<\/li>\n<li>FTAs can <strong>also cover other areas<\/strong> such as:\n<ul>\n<li class=\"font-claude-response-body whitespace-normal break-words pl-2\"><strong>Services trade: <\/strong>market access for banking, insurance, telecom, education, etc.<\/li>\n<li class=\"font-claude-response-body whitespace-normal break-words pl-2\"><strong>Investment protections: <\/strong>guarantees against arbitrary expropriation, dispute resolution mechanisms<\/li>\n<li class=\"font-claude-response-body whitespace-normal break-words pl-2\"><strong>Intellectual property:<\/strong>\u00a0patent, copyright, and trademark standards<\/li>\n<li class=\"font-claude-response-body whitespace-normal break-words pl-2\"><strong>Government procurement:<\/strong>\u00a0opening public contracts to foreign bidders<\/li>\n<li class=\"font-claude-response-body whitespace-normal break-words pl-2\"><strong>Non-tariff barriers:<\/strong>\u00a0harmonising standards, certifications, and customs procedures<\/li>\n<li class=\"font-claude-response-body whitespace-normal break-words pl-2\"><strong>Labour and environment:<\/strong>\u00a0increasingly common in newer agreements<\/li>\n<\/ul>\n<\/li>\n<li>Types of Trade Agreements:<br \/>\n<table style=\"width: 100%; border-collapse: collapse; border-style: solid; background-color: #f2cece;\">\n<tbody>\n<tr>\n<td style=\"width: 32.9558%;\"><strong>Preferential Trade Agreement<\/strong><\/td>\n<td style=\"width: 67.0442%;\">Partial tariff reductions on select goods<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 32.9558%;\"><strong>Free Trade Agreement<\/strong><\/td>\n<td style=\"width: 67.0442%;\">Broad elimination of tariffs\/barriers between members<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 32.9558%;\"><strong>Customs Union<\/strong><\/td>\n<td style=\"width: 67.0442%;\">FTA + common external tariff<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 32.9558%;\"><strong>Common Market<\/strong><\/td>\n<td style=\"width: 67.0442%;\">\u00a0Customs union + free movement of labour and capital<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 32.9558%;\"><strong>Economic Union<\/strong><\/td>\n<td style=\"width: 67.0442%;\">Common market + harmonised economic policies<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/li>\n<\/ul>\n<h2 class=\"blue-h2-box\"><span style=\"color: #000000;\"><strong><a id=\"h2\" style=\"color: #000000;\"><\/a>Key Features of FTAs:<\/strong><\/span><\/h2>\n<ol>\n<li><strong><span class=\"\">Reduction of Tariffs:<\/span><\/strong><span class=\"\"> Tariffs are taxes imposed on imported goods. FTAs typically eliminate these taxes entirely (zero tariff) or reduce them significantly over a phased period.<\/span><\/li>\n<li><strong><span class=\"\">Reduction of Non-Tariff Barriers:<\/span><\/strong><span class=\"\"> NTBs are obstacles like quotas (limits on quantity), burdensome licensing requirements, or unnecessary technical standards. FTAs aim to streamline or remove these.<\/span><\/li>\n<li><strong><span class=\"\">Rules of Origin:<\/span><\/strong><span class=\"\"> To prevent goods from non-member countries from entering via the member with the lowest tariff, FTAs specify that only goods &#8220;substantially transformed&#8221; or with a high percentage of local content within the member countries qualify for the preferential tariff rate.<\/span><\/li>\n<li><strong><span class=\"\">Trade in Services:<\/span><\/strong><span class=\"\"> Many modern FTAs cover services (e.g. banking, insurance, consulting, telecommunications), allowing companies to set up operations in partner countries under fair conditions.<\/span><\/li>\n<li><strong><span class=\"\">Intellectual Property (IP) Protection:<\/span><\/strong><span class=\"\"> FTAs often set standards for protecting patents, copyrights, and trademarks to encourage innovation and creative industries.<\/span><\/li>\n<li><strong><span class=\"\">Investment Provisions:<\/span><\/strong><span class=\"\"> These include protections for foreign investors, such as fair treatment, protection from expropriation, and mechanisms for dispute resolution (e.g. investor-state dispute settlement, or ISDS).<\/span><\/li>\n<li><strong><span class=\"\">Dispute Settlement Mechanism:<\/span><\/strong><span class=\"\"> A formal process for resolving disagreements between member countries over the interpretation or implementation of the agreement.<\/span><\/li>\n<\/ol>\n<h2 class=\"blue-h2-box\"><span style=\"color: #000000;\"><strong><a id=\"h3\" style=\"color: #000000;\"><\/a>Pros &amp; Cons of FTAs:<\/strong><\/span><\/h2>\n<table style=\"width: 100%; border-collapse: collapse; border-style: solid; border-color: #000000; background-color: #f9fabb;\">\n<tbody>\n<tr>\n<td style=\"width: 50%; text-align: center;\"><strong>Pros<\/strong><\/td>\n<td style=\"width: 50%; text-align: center;\"><strong>Cons<\/strong><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><b data-path-to-node=\"10,1,0,0\" data-index-in-node=\"0\">Lower Prices for Consumers:<\/b> Imported groceries, tech, and clothing become cheaper because import taxes are removed.<\/td>\n<td style=\"width: 50%;\"><b data-path-to-node=\"10,1,1,0\" data-index-in-node=\"0\">Job Displacement:<\/b> Domestic industries that cannot compete with cheaper foreign imports may downsize or close, hurting local manufacturing.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><b data-path-to-node=\"10,2,0,0\" data-index-in-node=\"0\">Market Expansion:<\/b> Local businesses gain friction-free access to millions of new buyers abroad, boosting export potential.<\/td>\n<td style=\"width: 50%;\"><b data-path-to-node=\"10,2,1,0\" data-index-in-node=\"0\">Intellectual &amp; Regulatory Pressure:<\/b> Smaller nations sometimes have to alter domestic laws to align with larger trade partners.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><b data-path-to-node=\"10,3,0,0\" data-index-in-node=\"0\">Increased Foreign Investment:<\/b> Companies are more likely to build factories or offices in a country that has stable, duty-free trade access to major global markets.<\/td>\n<td style=\"width: 50%;\"><b data-path-to-node=\"10,3,1,0\" data-index-in-node=\"0\">Dependency Risks:<\/b> Relying too heavily on another country for critical goods (like tech or pharmaceuticals) can expose a nation to supply chain shocks.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><strong><span class=\"\">Increased efficiency:<\/span><\/strong><span class=\"\"> as countries specialize in what they do best.\u00a0<\/span><\/td>\n<td style=\"width: 50%;\"><strong><span class=\"\">Loss of policy space<\/span><\/strong><span class=\"\">: Governments cannot easily raise tariffs to protect a struggling domestic industry.\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><span class=\"\"><strong>Boosts economic growth<\/strong> and innovation through competition.<\/span><\/td>\n<td style=\"width: 50%;\"><span class=\"\"><strong>Trade diversion: <\/strong>Buying from an FTA partner that is less efficient than a non-member, simply because of tariff preferences.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><strong><a id=\"h4\"><\/a>What is the relationship between Multilateralism under the WTO Regime and the FTAs?<\/strong><\/span><\/h2>\n<ul>\n<li><strong>Article 1 of GATT<\/strong> (General Agreement on Tariffs and Trade) deals with the <strong>Most Favoured Nation (MFN) principle of the WTO<\/strong>. It states that &#8220;any advantage, favour, privilege, or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties&#8221;. This means that if tariffs are lowered or eliminated on a particular good from the US, they must be lowered\/eliminated for the same good from the EU or the UK or any other country.<\/li>\n<li>However, derogations <strong>(exemptions) from this MFN principle are permitted for forming FTAs<\/strong> under specific conditions of the WTO Agreements. Article XXIV of GATT for goods and Article V of GATS (General Agreement on Trade in Services) deal with these exemptions.<\/li>\n<li>The specific conditions (Article XXIV of the GATT) permitting FTAs are:\n<ol>\n<li>FTA members shall not erect higher or more restrictive tariff\/non-tariff barriers on trade with non-members than existed prior to the formation of the FTA;<\/li>\n<li>Elimination of tariffs and other trade restrictions be applied to &#8220;<em>substantially all the trade between the constituent territories in products originating in such territories<\/em>&#8221; i.e., if FTA is signed between two countries, the <b>trade barriers should be eliminated for <\/b><span style=\"text-decoration: underline;\"><b>nearly all goods<\/b>\/<\/span><\/li>\n<li>Elimination of duties and other trade restrictions on trade within the FTA to be accomplished &#8220;<em>within a reasonable length of time<\/em>&#8221; meaning a period of no longer than 10 years.<\/li>\n<\/ol>\n<\/li>\n<li>The &#8216;Enabling Clause&#8217; allows developing countries to form preferential trading arrangements without adhering to the conditions under Article XXIV.<\/li>\n<\/ul>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><strong><a id=\"h5\"><\/a>India\u2019s Stance towards FTAs:<\/strong><\/span><\/h2>\n<ul>\n<li>India had signed its first Trade Agreement in 1975. It was a Preferential Trade Agreement\u00a0known as <strong>Bangkok Agreement<\/strong> (renamed <strong>Asia-Pacific Trade Agreement<\/strong> in 2005).<\/li>\n<li>India signed the <strong>India-Sri Lanka FTA<\/strong> in 1998. This was the first time duties were eliminated on substantial tariff lines\/goods.<\/li>\n<li>After the <strong>\u2018Look East Policy\u2019<\/strong> was announced, several agreements were signed with East Asian countries. This includes Agreements with Japan, South Korea and the ASEAN.<\/li>\n<li>However, the outcomes of these FTAs were not favorable. While the trade with the FTA partner countries grew, the growth rate of imports was much greater than exports leading to rise in trade deficit.<\/li>\n<li>FTAs benefited India&#8217;s trade partners more than Indian firms. As a result, the Government became wary of signing more FTAs. India withdrew from RCEP in 2019. The fear was that the agreement included inadequate safeguards for Indian industries and that Indian market will be flooded with Chinese goods.<\/li>\n<\/ul>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-220313\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/Outcomes-of-FTAs.png?resize=750%2C625&#038;ssl=1\" alt=\"Outcomes of FTAs UPSC\" width=\"750\" height=\"625\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/Outcomes-of-FTAs.png?w=764&amp;ssl=1 764w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/Outcomes-of-FTAs.png?resize=300%2C250&amp;ssl=1 300w\" sizes=\"auto, (max-width: 750px) 100vw, 750px\" \/><\/p>\n<p style=\"text-align: center;\"><em>Source: Business Standard. India&#8217;s imports with FTA partner countries (South Korea, Japan, ASEAN) grew at a much faster rate than exports.<\/em><\/p>\n<ul>\n<li>But since 2021, India has broken a decade-long drought by signing and concluding a wave of major pacts for e.g. <span class=\"citation-39\">Treaties with the <\/span><b data-path-to-node=\"7,0,0\" data-index-in-node=\"39\"><span class=\"citation-39\">UAE<\/span><\/b><span class=\"citation-39\"> (May 2022), <\/span><b data-path-to-node=\"7,0,0\" data-index-in-node=\"55\"><span class=\"citation-39\">Australia<\/span><\/b><span class=\"citation-39\"> (December 2022), the <\/span><b data-path-to-node=\"7,0,0\" data-index-in-node=\"86\"><span class=\"citation-39\">EFTA bloc<\/span><\/b><span class=\"citation-39\"> (Switzerland, Norway, Iceland, Liechtenstein in October 2025), and most recently, <\/span><b data-path-to-node=\"7,0,0\" data-index-in-node=\"178\"><span class=\"citation-39\">Oman<\/span><\/b><span class=\"citation-39 citation-end-39\"> (which officially went into effect on June 1, 2026)<\/span>. The Government is now seeking more investment, technology and potential markets for Indian goods in exchange for access to India&#8217;s domestic market to foreign goods.<\/li>\n<li><span class=\"citation-38\">India concluded a massive historic FTA with the <\/span><b data-path-to-node=\"7,1,0\" data-index-in-node=\"128\"><span class=\"citation-38\">European Union (EU)<\/span><\/b><span class=\"citation-38\"> in January 2026, finalized a framework for an interim trade agreement with the <\/span><b data-path-to-node=\"7,1,0\" data-index-in-node=\"227\"><span class=\"citation-38\">United States<\/span><\/b><span class=\"citation-38\"> in February 2026, and is actively preparing to implement signed pacts with the <\/span><b data-path-to-node=\"7,1,0\" data-index-in-node=\"320\"><span class=\"citation-38\">UK<\/span><\/b><span class=\"citation-38\"> and <\/span><b data-path-to-node=\"7,1,0\" data-index-in-node=\"327\"><span class=\"citation-38\">New Zealand.\u00a0<\/span><\/b><\/li>\n<\/ul>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><strong><a id=\"h6\"><\/a>What advantages have FTAs brought to India?<\/strong><\/span><\/h2>\n<ol>\n<li><strong>Massive Surges in Export Volumes<\/strong>:\n<ul>\n<li><span class=\"citation-108\"><strong>India-UAE CEPA:<\/strong> Following the 2022 India-UAE CEPA, bilateral trade crossed a historic <\/span><b data-path-to-node=\"4,0,0\" data-index-in-node=\"87\"><span class=\"citation-108\">$100 billion<\/span><\/b><span class=\"citation-108 citation-end-108\">.<\/span> <span class=\"citation-107 citation-end-107\">Indian non-oil exports to the UAE surged by over 25% annually, driven by duty-free access for Indian gems, jewelry, textiles, and engineering goods.<\/span><\/li>\n<li><span class=\"citation-106 citation-end-106\"><strong>India-Australia ECTA<\/strong>: Under the India-Australia ECTA, Australia granted immediate preferential access to Indian goods.<\/span> <span class=\"citation-105\">By January 1, 2026, <\/span><b data-path-to-node=\"4,1,0\" data-index-in-node=\"137\"><span class=\"citation-105\">100% of Indian exports entered Australia completely duty-free<\/span><\/b><span class=\"citation-105 citation-end-105\">, causing India\u2019s exports to Australia to more than double compared to pre-FTA levels.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><strong>Securing Cheaper Raw Materials for &#8220;Make in India&#8221;<\/strong>:\n<ul>\n<li><b data-path-to-node=\"10,0,0\" data-index-in-node=\"0\">Steel &amp; Power:<\/b><span class=\"citation-101\"> Under the Australia pact, India eliminated tariffs on <\/span><b data-path-to-node=\"10,0,0\" data-index-in-node=\"69\"><span class=\"citation-101\">Australian coking coal<\/span><\/b><span class=\"citation-101 citation-end-101\"> and critical metallic ores.<\/span> This provided an uninterrupted, cheaper supply of vital raw materials directly to Indian steel plants and infrastructure projects.<\/li>\n<li><b data-path-to-node=\"10,1,0\" data-index-in-node=\"0\">Textiles &amp; Electronics:<\/b><span class=\"citation-100 citation-end-100\"> Deals with nations like the UAE and the EFTA bloc have reduced input costs on petrochemicals, polymers, and raw fabrics, allowing local MSMEs to manufacture finished goods at a lower cost base.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li><strong>Binding Commitments to Foreign Direct Investment (FDI)<\/strong>: In India&#8217;s agreement with the European Free Trade Association (Switzerland, Norway, Iceland, and Liechtenstein), India secured a formal commitment to <b data-path-to-node=\"13,0,0\" data-index-in-node=\"165\">$100 billion in direct, long-term investments<\/b> into India over 15 years. <span class=\"citation-99 citation-end-99\">Crucially, this agreement excludes volatile stock-market portfolio flows and focuses purely on building domestic industrial capacity and factories.\u00a0<\/span><\/li>\n<li><strong>Employment Generation<\/strong>: Since India has strictly focused its tariff-cutting advantages on high-employment, labor-intensive sectors (like textiles, footwear, leather, and toys), the Ministry of Commerce estimates that the Australia and UAE pacts alone are on track to generate upwards of <b data-path-to-node=\"18,0\" data-index-in-node=\"288\">1.2 million to 1.5 million new domestic jobs.<\/b><\/li>\n<li><strong>Advantage for Indian Service Sector<\/strong>:\n<ul>\n<li><b data-path-to-node=\"16,0,0\" data-index-in-node=\"0\">Extended Visas:<\/b> Treaties with Australia and the UK include dedicated clauses granting extended post-study work visas (up to four years) for Indian STEM graduates.<\/li>\n<li><b data-path-to-node=\"16,1,0\" data-index-in-node=\"0\">Mutual Recognition Arrangements (MRAs):<\/b> India has begun signing MRAs where foreign countries legally recognize Indian professional qualifications. <span class=\"citation-97 citation-end-97\">For example, recent pacts have streamlined cross-border recognition for Indian IT professionals, engineers, accountants, and even traditional AYUSH\/Yoga experts, allowing them to practice abroad without repeating expensive local degrees.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li><strong>Strategic &amp; Geopolitical Gains<\/strong>: Deepening ties with Gulf states (UAE, soon potentially Saudi Arabia and GCC) anchors energy security and diaspora remittance flows. Agreements with developed economies signal India&#8217;s openness, supporting its &#8220;Viksit Bharat&#8221; and supply-chain-diversification narrative. Thus, FTAs help India position itself as an alternative to China in global supply chains. Thus, beyond economics, FTAs have served India&#8217;s strategic interests.<\/li>\n<\/ol>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><strong><a id=\"h6\"><\/a>What are the challenges associated with Free Trade Agreements (FTAs) for India?<\/strong><\/span><\/h2>\n<ol>\n<li><strong>Widening Trade Deficits<\/strong>: Since implementing older agreements, India\u2019s trade deficit with ASEAN countries has ballooned by over 380%, with South Korea by roughly 268%, and with Japan by nearly 318%. <span class=\"citation-220 citation-end-220\">This trend persists even in recently concluded deals.<\/span> <span class=\"citation-219\">In fiscal year 2025, India exported $48.6 billion to its newer partners (UAE, Australia, Mauritius, and EFTA) but imported nearly $100 billion from them, triggering a trade deficit exceeding <\/span><b data-path-to-node=\"5,1,0\" data-index-in-node=\"260\"><span class=\"citation-219\">$50 billion<\/span><\/b><span class=\"citation-219 citation-end-219\">.<\/span><\/li>\n<li><strong>Tariff Asymmetry<\/strong>: India\u2019s FTAs often yield asymmetric tariff benefits because many partner countries already have highly liberalized trade regimes. Countries such as Singapore, Japan, Australia, and the UAE maintain very low import tariffs, whereas India\u2019s trade-weighted tariff averages around 12.6%. As a result, when tariffs are eliminated under an FTA, foreign exporters gain a significant price advantage in the Indian market. In contrast, Indian exporters receive limited additional market access benefits since partner markets were already largely open before the agreement<span class=\"citation-214 citation-end-214\">.<\/span><\/li>\n<li><strong>Low &#8220;Utilization Rates&#8221;<\/strong>: <span class=\"citation-212 citation-end-212\">Getting a great tariff discount on paper is meaningless if businesses do not actually use it.<\/span> <span class=\"citation-211\">India\u2019s FTA utilization rate stands at a poor <\/span><b data-path-to-node=\"11\" data-index-in-node=\"140\"><span class=\"citation-211\">20% to 30%<\/span><\/b><span class=\"citation-211 citation-end-211\"> for eligible exports.<\/span> <span class=\"citation-210 citation-end-210\">In stark contrast, developed economies sit at 70% to 80% utilization, and competitors like Vietnam and Mexico operate at 40% to 50%.<\/span><\/li>\n<li><strong>Inverted Duty Structure<\/strong>: FTAs have aggravated India\u2019s inverted duty structure, where duties on raw materials exceed those on finished products. Domestic manufacturers may pay 7.5\u201310% import duties on inputs such as steel and aluminum, while fully assembled machinery and engineering goods from FTA partner countries often enter duty-free. This creates a cost disadvantage for Indian producers, raising domestic production costs and making it difficult for local industries to compete with cheaper imported finished goods in the domestic market<span class=\"citation-207 citation-end-207\"><span class=\"citation-205 citation-end-205\"><span class=\"citation-204 citation-end-204\">.<\/span><\/span><\/span><\/li>\n<li><strong>Non-Tariff Barriers<\/strong>: <span class=\"citation-201 citation-end-201\">Indian agricultural and pharmaceutical exports are frequently rejected or delayed by European and American authorities citing sanitary, phytosanitary, and rigorous packaging measures.<\/span> <span class=\"citation-200 citation-end-200\">Furthermore, newer-generation FTAs (like the India-EU FTA) introduce new NTBs for e.g. <span class=\"\">EU&#8217;s\u00a0<\/span><strong><span class=\"\">Carbon Border Adjustment Mechanism (CBAM)<\/span><\/strong><span class=\"\"> effectively imposes a carbon tax on imports like steel and aluminum. This adds significant costs for Indian manufacturers who may not yet have green technologies. <\/span><\/span><\/li>\n<li><strong>Services Liberalisation Asymmetry<\/strong>: India&#8217;s core comparative advantage lies in services &#8211; IT, software, healthcare, education, professional services. Yet most FTAs India has signed are heavily weighted toward goods, not services. Partner countries are reluctant to liberalise <strong>Mode 4<\/strong> (movement of natural persons) &#8211; the most relevant mode for Indian services exports. Visa restrictions, work permit quotas, and mutual recognition of qualifications remain barriers even within FTA frameworks.<\/li>\n<\/ol>\n<table style=\"width: 100%; border-collapse: collapse; background-color: #f2f2f2; border-color: #f2f2f2; border-style: none;\">\n<tbody>\n<tr>\n<td style=\"width: 894px;\">\n<div class=\"page\" title=\"Page 9\">\n<div class=\"section\">\n<div class=\"layoutArea\">\n<div class=\"column\">\n<h2><strong>India-South Korea CEPA and Zinc Trade:<\/strong><\/h2>\n<ul>\n<li>The India-South Korea Comprehensive Economic Partnership Agreement came to force in January 2010. At that time, India used to export considerable amount of Zinc to South Korea (Refer graph). Korea had low production and India had a weak domestic demand. As part of CEPA, the duties on zinc trade were eliminated.<\/li>\n<li>Since 2010, South Korea has increased its manufacturing and smelting capabilities. It has also lowered logistical costs. In addition, it was also helped by the \u2018smart free trade agreement negotiations\u2019.<\/li>\n<li>Zinc trade between two countries has completely reversed since then. South Korea now contributes 52% of India\u2019s Zinc imports. This has adversely impacted India\u2019s domestic zinc smelting firms, especially in the MSME sector.<\/li>\n<li>South Korea does not possess zinc reserves\/mines. It exports zinc from abroad, processes it and re- exports. Experts feel if India had a minimum 35% value addition clause under Rules of Origin, the zinc trade would not have distorted.<\/li>\n<li>This shows that India must be very careful and <strong style=\"font-family: inherit; font-size: inherit;\">consult industry at every stage while signing new FTAs<\/strong><span style=\"font-family: inherit; font-size: inherit;\">. Clauses, such as related to say Rules of Origin, should be carefully negotiated.<\/span><\/li>\n<\/ul>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-220306 size-full\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/India-South-Korea-Zinc-Trade.jpg?resize=750%2C399&#038;ssl=1\" alt=\"India South Korea FTA\" width=\"750\" height=\"399\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/India-South-Korea-Zinc-Trade.jpg?w=1587&amp;ssl=1 1587w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/India-South-Korea-Zinc-Trade.jpg?resize=300%2C160&amp;ssl=1 300w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/India-South-Korea-Zinc-Trade.jpg?resize=1024%2C545&amp;ssl=1 1024w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/India-South-Korea-Zinc-Trade.jpg?resize=768%2C409&amp;ssl=1 768w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/India-South-Korea-Zinc-Trade.jpg?resize=1536%2C818&amp;ssl=1 1536w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2022\/12\/India-South-Korea-Zinc-Trade.jpg?resize=1568%2C835&amp;ssl=1 1568w\" sizes=\"auto, (max-width: 750px) 100vw, 750px\" \/><\/p>\n<p style=\"text-align: center;\"><em>Source: Mint. India\u2019s zinc trade with South Korea reversed in 2013-14 when India\u2019s trade balance in Zinc became negative, i.e., India became a net importer of zinc.<\/em><\/p>\n<p><strong>Rules of Origin:<\/strong><\/p>\n<ul>\n<li>Rules of Origin (RoO) are the criteria needed to determine the national source of a product. Their importance is derived from the fact that a number of trade policy measures are applied on the basis of source of imports.<\/li>\n<li>RoOs have become vital because of globally integrated supply chains, where value addition occurs across different nations (e.g. manufacturing of a component in Vietnam and Taiwan, assembly in India etc.).<\/li>\n<li>Restrictions like tariffs and duties are applied on the basis of country of origin, e.g. India may want to restrict imports from China but Chinese goods may find their way into Indian markets through indirect route via another country. Hence, it becomes necessary to have clearly defined rules of origin.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><strong><a id=\"h7\"><\/a>What should be India&#8217;s approach regarding the FTAs?<\/strong><\/span><\/h2>\n<ol>\n<li><strong>Create a Dedicated &#8220;FTA Impact Monitoring Authority&#8221;<\/strong>: India needs an independent monitoring authority tasked with:\n<ul>\n<li><b data-path-to-node=\"6,0,0\" data-index-in-node=\"0\">Real-time tracking<\/b> of import surges to trigger early warning &#8220;safeguard duties&#8221; before foreign goods overwhelm local markets.<\/li>\n<li><b data-path-to-node=\"6,1,0\" data-index-in-node=\"0\">Aisling performance audits<\/b> on a sector-by-sector basis to see exactly which industries are winning or losing under active FTAs.<\/li>\n<li><b data-path-to-node=\"6,2,0\" data-index-in-node=\"0\"><span class=\"citation-284\">Accountability mechanisms<\/span><\/b><span class=\"citation-284 citation-end-284\"> for trade negotiators to ensure the concessions they win translate into actual shipments.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li><strong>Eliminate the &#8220;Inverted Duty Structure&#8221;<\/strong>: The government must proactively restructure its domestic customs duties. Before a new FTA kicks in, standard MFN (Most-Favored-Nation) tariffs on critical components, raw minerals, and chemicals used by local factories must be reduced below the tariff levels of the fully assembled products arriving from trade partners.<\/li>\n<li><strong>Launch an &#8220;FTA Utilization&#8221; Outreach Program<\/strong>: Set up dedicated trade helpdesks across industrial hubs (like Surat for textiles or Tiruppur for garments) to educate small-scale entrepreneurs on how to price and package their goods to clear foreign FTA criteria.<\/li>\n<li><strong>Fight Non-Tariff Barriers (NTBs) via Mutual Recognition:\u00a0<\/strong><span class=\"citation-279\">India\u2019s negotiators must prioritize <\/span><b data-path-to-node=\"16\" data-index-in-node=\"36\"><span class=\"citation-279\">Mutual Recognition Agreements (MRAs)<\/span><\/b><span class=\"citation-279 citation-end-279\"> and conformity assessments.<\/span> If an Indian regulator (like the FSSAI for food or the CDSCO for pharma) tests and certifies a product inside India, partner nations must be legally bound to accept that certification without demanding repeating, redundant local testing at European or American ports.<\/li>\n<li><strong>Building Digital Capabilities<\/strong>: The Government must work on building its digital capabilities and infrastructure in key export sectors through a \u2018<strong>Digitally Informed Foreign Trade Policy<\/strong>\u2019, with a focus on <strong>enhancing India\u2019s trade competitiveness<\/strong>. This can be achieved by developing digital infrastructure for trade, building digital skills in trade-able sectors, increasing the share of technology content in exports, and leveraging advanced technologies (Big Data Analytics, IoT, and Blockchain) for evidence-based and informed trade policy decisions.<\/li>\n<\/ol>\n<h5>Conclusion:<\/h5>\n<p><span class=\"\">India&#8217;s approach to should involve<\/span><span class=\"\">\u00a0learning from past imbalances, targeting high-opportunity partners, innovating with investment-linked and digitally-enabled agreements, and building a robust domestic ecosystem to enforce and benefit from them. The goal is to transform FTAs from static documents into dynamic tools for economic resilience and growth.<\/span><\/p>\n<table style=\"border-collapse: collapse; width: 100%;\">\n<tbody>\n<tr>\n<td style=\"width: 100%;\"><strong>Syllabus<\/strong>: GS III, Indian Economy and Issues related to Growth<br \/>\n<strong>Source<\/strong>: <a href=\"https:\/\/www.business-standard.com\/article\/economy-policy\/ftas-and-their-discontents-do-free-trade-agreements-benefit-india-122120101062_1.html\" target=\"_blank\" rel=\"noopener\">Business Standard<\/a>, <a href=\"https:\/\/www.thehindubusinessline.com\/opinion\/changing-contours-of-indias-ftas\/article65915078.ece\" target=\"_blank\" rel=\"noopener\">The Hindu BusinessLine<\/a>, <a href=\"https:\/\/indianexpress.com\/article\/business\/economy\/window-for-ftas-shrinks-as-india-braces-for-set-of-non-tariff-barriers-8343909\/\" target=\"_blank\" rel=\"noopener\">Indian Express<\/a>, <a href=\"https:\/\/economictimes.indiatimes.com\/news\/economy\/foreign-trade\/is-india-recalibrating-its-approach-towards-fta-negotiations\/articleshow\/87599925.cms\" target=\"_blank\" rel=\"noopener\">Economic Times<\/a>, <a href=\"https:\/\/www.ibef.org\/blogs\/india-s-shifting-focus-on-ftas\" target=\"_blank\" rel=\"noopener\">IBEF<\/a>, <a href=\"https:\/\/www.eepcindia.org\/about-fta\" target=\"_blank\" rel=\"noopener\">EEPC<\/a>, <a href=\"https:\/\/indianexpress.com\/article\/opinion\/columns\/india-fta-efta-asean-tariff-mfn-trade-deficit-10729899\/\" target=\"_blank\" rel=\"noopener\">Indian Express<\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>India has recently accelerated its pursuit of Free Trade Agreements (FTAs) as part of its strategy to deepen global economic integration, diversify export markets, and strengthen supply-chain resilience. Moving beyond its earlier cautious approach, India has concluded FTAs with countries such as United Arab Emirates and Australia, while actively negotiating agreements with the European Union,&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/indias-foreign-trade-agreements-ftas-approach-and-challenges-explained-pointwise\/\">Continue reading <span class=\"screen-reader-text\">India&#8217;s Foreign Trade Agreements (FTAs): Approach and Challenges &#8211; Explained Pointwise<\/span><\/a><\/p>\n","protected":false},"author":10391,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130],"tags":[],"class_list":["post-364774","post","type-post","status-publish","format-standard","hentry","category-7-pm","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/364774","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\/10391"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=364774"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/364774\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=364774"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=364774"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=364774"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}