Taking binding commitments on new issues like environment, labour and sustainability in the proposed free trade agreements (FTA), being negotiated by India, may hamper the country's exports in the future, according to a report by Global Trade Research Initiative.
India's already "weak" FTA outcomes may worsen if it takes obligations in the new issues, the report -- FTAs: Fabulous, Futile, or Flawed? An evaluation of India's FTAs with ASEAN, Japan and South Korea -- said.
It added that like many developing countries, India has an evolving regulatory framework on most new issues.
"International commitments must be taken only after the domestic regulatory framework is in place. And both must be in sync. New non-trade issues may serve as non-trade barriers and hamper our exports in the future," GTRI (Global Trade Research Initiative) report said.
Developed regions like European Union and the UK are pushing to include these new issues in the proposed trade pact with India.
Ajay Srivastava
Former Indian Trade Service officer Ajay Srivastava is the co-founder of GTRI. He took voluntary retirement from the Government of India in March 2022. He has a rich experience in trade policy making, and issues related to the World Trade Organisation (WTO) and FTAs.
He was involved in the negotiations process of India's free trade agreements with Japan and Australia.
Topics under FTAs not directly related to trade
The report said that in the FTAs under negotiations, India is discussing many new subjects not directly related to trade.
The subjects have been included at the request of developed countries and that include environment, labour, intellectual property rights, data governance, digital trade, gender, SMEs, anti-corruption, good regulatory practices, and sustainable food systems.
Most of these subjects are important and are being discussed in the specialised multilateral and regional institutions where most countries, including India, are active participants, it said.
FTAs could impact cost of manufacturing and services
"Commitments on these issues in FTAs may prove too onerous and would increase the cost of manufacturing and services," it added.
Citing an example, it said, if India's exports fail to meet the stringent environment or labour obligations specified in the agreement, India's apparel exports may become ineligible for benefits under the pact.
"Similarly, taking commitments in data flows and digital trade when the domestic policy frameworks are not ready may not be in India's best interests," it added.
Negative Impacts of FTAs
This report also claims to dispels eight myths surrounding these agreement such as FTAs weaken WTO, lead to accelerated increase in exports, promote domestic manufacturing, and that countries are rushing to do FTAs and such agreements promote investment and lower price.
On the existing trade agreements of India, it said, the increase in trade deficit pattern as noticed in the FTAs with ASEAN (Association of South east Asain Nations), Japan and South Korea will continue in the new agreements.
"The key reason would remain higher import duties in India compared to new FTA partners," it said, adding that less than 20 per cent of world trade happens at concessional customs duties and because of that India needs additional strategies to promote its trade happening outside of such agreements.
"India's weak export performance with FTA partners should not surprise us. It happened because of high tariffs in India and significantly lower tariffs in its FTA partners," it sad.
