Context:

• There is a view that Free trade agreements (FTAs) had not served India well, and had even actively damaged Indian industry. However this article highlights that they have not been a disaster for Indian industry, but India has not seen the benefits from the FTAs that it expected.

India’s FTA history

• Through 2012, India signed trade agreements with Sri Lanka, Bangladesh, Asean, Japan and South Korea. After a long gap, India has returned to the FTA negotiating table.
• Agreements have been signed with the UAE and Australia, and negotiations are at various stages of conclusion with the UK, Canada and the EU.

Issues surrounding India’s FTA agenda

• FTAs have had little effect on trade, accounting for 16 percent of our trade in 2000 and 18.5 percent of it now.
• Our major trading partners remain non-FTA countries: The US, China and the EU.
• FTAs that we signed are inherently limited, leaving out many of the highest consumption items or imposing extended tariffs with long adjustment periods.
• By withdrawing from the Regional Comprehensive Economic Partnership or RCEP in 2019 India has limited itself from engaging with Asia’s supply chain.

What should our FTA agenda be?

Sign FTAs that matter: 

• FTAs with countries and areas that matter to us today or in future have to be prioritized. For  instance,
  • with top current export markets — the US, EU and Bangladesh
  • top future export markets namely, Africa and Latin America
  • immediately join the trade pillar of the Indo-Pacific Economic Framework as it includes many countries of greatest interest to us including the US, Indonesia, Japan, South Korea, Singapore, Vietnam and excludes China.

Expand ambition: 

• Focus on signing FTAs with more and more countries.
• Focus on making FTAs wider and deeper by including more items into the list.
  • For instance, India can aim for Zero for Zero agreements, where zero items are excluded from the FTA and a zero tariff often apply in both directions.
• India should have greater confidence in its own capabilities, and include both automobiles and auto-components in all the FTAs it is signing.

Foster trade competitiveness

• India should use FTAs to force competitiveness on firms and firms in turn must force change in all those areas such as infrastructure, regulation, ease of doing business  that reduce competitiveness.

Integrate trade and industrial policy

• Combine the sectors covered under the production-linked incentive scheme with our trade policy and make sure that all subsidies carry an export obligation
• Ensure that all items covered by PLI are explicitly included in every FTA we are signing.

Capitalise on China+1 strategy:

• • India should take advantage of China+1 supply resilience, the world is looking for.
  • For which it should target items that not only that matter now such as white goods, textiles and garments, chemicals and pharmaceuticals, and engineering  but also the items that matter in the future such as e-commerce, electric vehicles, and data privacy in FTAs.

• China-plus-one is a strategy in which companies avoid investing only in China and diversify their businesses to alternative destinations.