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In 2023, Commerce ministry looking at ways to increase bandwidth to negotiate free trade pacts

Commerce ministry looking at ways to increase bandwidth to negotiate free trade pacts

As multiple countries express their interest in negotiating bilateral free trade agreements (FTAs) with India to strengthen economic ties, the Ministry of Commerce is exploring methods to enhance its capacity to undertake these talks, which require substantial time, human resources, and energy, according to a senior official. Currently, officials from the commerce ministry are engaged in negotiations for several FTAs with countries such as the United Kingdom, Canada, and the European Union.

The official stated that negotiations for FTAs demand significant time, energy, and human resources. In response, efforts are being made to bolster the ministry’s capabilities by increasing its bandwidth, thereby enabling it to effectively manage and engage in FTA negotiations.

What are Free Trade Agreements (FTAs) and why are they important?

Indian trade service officers are expected to play a more active role in the negotiations of free trade agreements (FTAs). Additionally, there is interest from Latin American countries, including Peru, to engage in FTA negotiations with India, which India is also exploring in-depth, according to the official.

Furthermore, the South American trade bloc MERCOSUR is interested in expanding the scope of existing preferential trade agreements to establish an FTA with India. Additionally, India is looking to negotiate a trade pact with the Gulf Cooperation Council (GCC) group.

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Moreover, India has expressed an interest in conducting bilateral or individual FTA negotiations with countries in Africa.

In summary, Indian trade service officers are expected to be more involved in FTA negotiations, and there is interest from various regions such as Latin America, South America, the GCC group, and Africa to engage in FTA discussions with India.

MERCOSUR, consisting of Brazil, Argentina, Uruguay, and Paraguay, with Bolivia and Chile as associate members, was established in 1991 with the aim of promoting the free movement of goods, capital, services, and people within the region.

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In trade agreements, countries involved agree to significantly reduce or eliminate customs duties on a wide range of traded goods. Additionally, they work towards facilitating trade in services and promoting increased investments by easing regulatory norms.

According to a trade expert, the Department of Commerce takes the lead in negotiations for free trade agreements (FTAs). Other important ministries involved in these negotiations include the Departments of Revenue, Chemicals, Pharmaceuticals, Fertilizers, Textiles, Heavy Industries, and the Department for Promotion of Industry and Internal Trade (DPIIT).

To summarize, MERCOSUR is a regional bloc aimed at facilitating free movement within its member countries. In FTAs, participating countries reduce or eliminate customs duties, while also focusing on enhancing trade in services and investments. In India, the Department of Commerce spearheads FTA negotiations, with involvement from various other ministries depending on the specific sectors covered by the agreement.

As free trade agreements (FTAs) become more comprehensive, involving new subjects like e-commerce, labor, environment, gender, and sustainability, officers from different ministries who specialize in these areas play a crucial role in negotiations. Institutes such as the Centre for WTO Studies, private experts, and lawyers also contribute to the discussions.

The Department of Commerce is considering restructuring, with a proposal to establish a Global Trade Promotion Organization (GTPO), which would have trade service officers in key positions and contribute to future export promotion initiatives. It is important for government officials involved in negotiations to listen to stakeholders’ views and develop clear strategies and roadmaps to ensure consistency even if personnel changes occur within departments.

Trade negotiations are an ongoing process aimed at securing better market access for Indian exports and creating business opportunities. India has signed 13 FTAs with countries such as Japan, Korea, and the UAE, as well as six preferential pacts with trading partners to enhance market access for domestic goods and promote exports. Recent agreements have been signed with Mauritius, the UAE, and Australia.

Core subjects negotiated in FTAs include trade in goods, services, rules of origin, technical barriers to trade, customs procedures, trade remedies, legal and institutional issues, and movement of professionals. Additional subjects in trade pacts cover areas such as sustainability (environment, labor), Geographical Indications (GIs), Intellectual Property Rights (IPRs), digital trade or e-commerce, government procurement, competition, gender, SMEs, anti-corruption, transparency, innovation, trade and development cooperation, and good regulatory practices. The focus is on obtaining greater market access and harmonizing regulations.

Ajay Srivastava, Co-founder of the Global Trade Research Initiative (GTRI), highlights the importance of assessing the potential increase in India’s exports post-FTA. Real Additional Market Access (RAMA) is a key factor to consider, which refers to the export value of Indian products where partner countries reduce MFN (most favored nation) duties to zero, making Indian products more competitive. He emphasizes that weak export performance with FTA partners in the past can be attributed to higher tariffs in India compared to lower tariffs in FTA partners.

In summary, as FTAs cover a broader range of subjects, specialists from various ministries, institutes, and experts contribute to negotiations. India aims to assess the potential benefits in terms of market access and export growth, emphasizing the importance of RAMA in evaluating the outcomes of FTAs.

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