Foreign trading partners getting more out of free trade agreements.

NEW DELHI: Are free trade agreements (FTAs) really a win-win deal as the government is making them out to be? Experience with half-a-dozen pacts that India has signed since 2004-05 shows that usually, it is the trading partner that ends up being the winner.

Be it Thailand, Asean, South Korea, Japan, Singapore or Malaysia, in almost all cases, imports have grown at a faster pace than exports after the government agreed to slash tariffs. In case of Singapore, where the spurt did not take place in the first year, the growth in imports from the island nation in the second and third years more than made up for the absence of the trend at the start.

"In general, for India, imports will grow at a faster clip than exports and advantage will accrue to the foreign trading partner given that the relative tariff structure is high here," said Abhijit Das, who heads the Centre for WTO Studies at the Indian Institute of Foreign Trade (IIFT).

The government has also failed to strike a tradeoff between goods and services, which accounts for more than half the economic activity in India.

PMO, ministers forced hasty deals

In case of Asean, almost three years after the goods agreement was signed, the much talked about services agreement is yet to be inked. The failure of Indian negotiators, due to the unnecessary haste shown by the PMO and some Indian ministers, has now forced India to enter into separate trade deals with Asean members such as Malaysia, Indonesia and Thailand.

But negotiators led by commerce and industry minister Anand Sharma seem to have learnt little from their mistakes. During the talks with the European Union for the proposed Bilateral Trade and Investment Agreement, the government has been going on giving concessions without getting much in return on services and visa rules.

On Monday, Sharma is due to meet EU trade commissioner Karel De Gucht in what many believe would be the final set of talks.

Officials pointed out that India has gone around giving tariff concessions that make it cheaper to import goods into India. But in return, the government has not managed to get EU and Asean to amend rules that would allow Indian banks or insurance companies to operate in all member countries on the basis of a single licence. Ditto for visas as EU and Asean have said that this was a sovereign issue and each country had its own norms.

Government officials conceded that there were several problems with the way India had gone about negotiating the deals. "We must realize that the countries with which we are negotiating, be it Asean, EU or Australia and Canada, have a much more efficient production set up, which gives them additional advantage," said a former trade negotiator, who did not wish to be identified.

Besides, the rules of origin — meant to check routing of third-party exports through the FTA — are seen to be lax. "They are not implemented properly. Who has gone and checked the certificates?" asked the former commerce department official.

When it comes to goods, Indian negotiators have failed to get countries to drop the export duty provision that will help maintain price stability for essential goods. For instance, when it comes to Asean, a cap or restrictions on export duty would mean that countries such as Indonesia or Malaysia would not be able to put curbs on coal or palm oil exports, items that are of key interest to India.

Industry is also complaining of the government failing to educate the industry adequately on the concessions that companies can make use of to export goods to Asean, Korea or Japan. "We need to do a lot of homework as there is some inadequacy on information flow," said CII director general Chandrajit Banerjee.

"The idea of signing the FTAs was to increase exports, but we have not seen the benefits. We should not just sign and leave it ... We will release the potential areas that exporters can tap, something that the government should have done," Fieo president M Rafique Ahmed said recently.

With usual government backers complaining, there is clearly a problem with the way India has signed and implemented trade agreements.


Source : timesofindia.indiatimes.com