About FTAs

• A Free trade Agreement (FTA) is an agreement between two or more countries or trading blocs that primarily agree to reduce barriers to imports and exports among them. 
• FTAs normally cover trade in goods or trade in services. FTAs can also cover other areas such as intellectual property rights (IPRs), investment, government procurement and competition policy, etc. 

WTO & FTAs

• The General Agreement on Tariffs and Trade (GATT) for goods and the General Agreement on Trade in Services (GATS) for services of the World Trade Organization (WTO) allows countries to form FTAs if the agreements cover “substantially all the trade” between the parties and do not raise barriers to trade with non-participating countries. 
• These rules are designed to ensure that FTAs complement rather than undermine the multilateral trading system.

Major Types of FTAs 

1. Preferential Trade Agreement (PTA):

• In a PTA, two or more partners agree to reduce tariffs on an agreed number of tariff lines. The list of products on which the partners agree to reduce duty is called a positive list. 
• Example: India-MERCOSUR PTA.

2. Free Trade Agreement (FTA):

• In FTAs, tariffs on items covering substantial bilateral trade are eliminated between the partner countries. 
• Example: India-Sri Lanka FTA.
• The key difference between an FTA and a PTA is that while in a PTA there is a positive list of products on which duty is to be reduced; in an FTA there is a negative list on which duty is not reduced or eliminated. 
• Thus, compared to a PTA, FTAs are generally more ambitious in coverage of tariff lines (products) on which duty is to be reduced.

3. Comprehensive Economic Cooperation Agreement (CECA) and Comprehensive Economic Partnership Agreement (CEPA):

• These terms describe agreements which consist of an integrated package on goods, services and investment along with other areas including IPR, competition etc. 
• Example: India-South Korea CEPA.

4. Custom Union:

• In a Customs Union, partner countries may decide to trade at zero duty among themselves, however they maintain common tariffs against the rest of the world. 
• Example: Southern African Customs Union (SACU) amongst South Africa, Lesotho, Namibia, Botswana and Swaziland. 

5. Common Market:

• Integration provided by a Common Market is one step deeper than that by a Customs Union. 
• A Common Market is a Customs Union with provisions to facilitate free movements of labour and capital, harmonize technical standards across members etc. 
• Example: European Common Market.

6. Economic Union: 

• Economic Union is a Common Market extended through further harmonization of fiscal/monetary policies and shared executive, judicial & legislative institutions. 
• Example: European Union.

India & FTAs

• India has so far concluded 13 FTAs and 6 PTAs. The most recent in the list are the India-UAE Comprehensive Economic Partnership Agreement (CEPA) which entered into force in 2022 and the India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA), which entered into force in 2022. 
• The list of FTAs signed by India is as under:
  • India-Sri Lanka Free Trade Agreement (FTA)
  • Agreement on South Asian Free Trade Area (SAFTA)
  • India-Nepal Treaty of Trade
  • India-Bhutan Agreement on Trade, Commerce and Transit
  • India-Thailand FTA – Early Harvest Scheme (EHS)
  • India-Singapore Comprehensive Economic Cooperation Agreement (CECA)
  • India-ASEAN CECA – Trade in Goods, Services and Investment Agreement 
  • India-South Korea Comprehensive Economic Partnership Agreement (CEPA)
  • India-Japan CEPA
  • India-Malaysia CECA
  • India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA)
  • India-UAE CEPA 
  • India-Australia ECTA
• In addition, India has signed the following 6 limited coverage Preferential Trade Agreements (PTAs):
  • Asia Pacific Trade Agreement (APTA)
  • Global System of Trade Preferences (GSTP)
  • SAARC Preferential Trading Agreement (SAPTA)
  • India-Afghanistan PTA
  • India-MERCOSUR PTA
  • India-Chile PTA.
• In addition to these, India recently signed the Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA), an intergovernmental organization of four member countries that are not part of the European Union (EU): Iceland, Liechtenstein, Norway, and Switzerland.

Why in News?

• The 10th Round of India-Australia CECA Negotiations was held recently in Sydney.

https://pib.gov.in/PressReleasePage.aspx?PRID=2048684