Textiles, pharma sectors to gain most from trade pact with Japan

India and Japan, with a combined GDP of around $7 trillion, on Wednesday inked a Comprehensive Economic Partnership Agreement (CEPA) to liberalise their markets and boost not only their bilateral trade in goods and services but also investments.

India has now set a bilateral trade target of $25 billion by 2014 with Japan, an official statement said. It said, “This is the most ambitious (such) agreement signed by India so far,” adding that India stands to gain significantly from the pact.

The move comes at a time when India-Japan trade had fallen in 2009-10 by 5 per cent to $10.36 billion from $10.91 billion in 2008-09. Trade balance has been in Japan's favour with India imports being $6.7 billion and exports only at $3.6 billion in 2009-10.

The pact covers around 90 per cent of India's tariff lines of around 12,000 lines and about 95 per cent of Japan's 9,000 tariff lines. The agreement will result in elimination of tariffs in these items within 10 years of the pact coming into force.

Boost to Japan

Recently, Japan had fallen behind China to be the world's third largest economy in terms of GDP. The market-opening pact with India, the second fastest growing emerging economy after China, is expected to perk up Japan's growth.

Among those imports from Japan that will be duty-free immediately after the pact is implemented are SIM and memory cards, electronics-indicator panels of LCDs and LEDs, calculators and battery chargers.

The sectors in India that would gain the most from the CEPA are textiles (they will immediately get duty-free access to the Japanese market) and pharmaceuticals. Indian pharmaceuticals will get access to a highly developed Japanese market and for the first time ever Japan has committed to give the same treatment for Indian generics (off-patent drugs) as their domestic industry, the statement said.

The pact was finalised in October 2010, during the Prime Minister, Dr Manmohan Singh's visit to Tokyo.

The CEPA was signed on Wednesday by the Union Commerce and Industry Minister, Mr Anand Sharma, and the Japanese Minister for Foreign Affairs, Mr Seiji Maehara, at the Japanese capital.

Protracted talks

The CEPA negotiations were protracted as they had begun as early as in January 2007 and were spread over 14 rounds. This was the third CEPA signed by India, which has signed similar pacts with Singapore and South Korea. However, this was Japan's 12th such Economic Partnership Agreement.

In the services sector India has obtained considerable concessions from Japan, the statement said.

Indian professionals who be able to provide services in Japan include contractual suppliers, accountants, researchers, tourist guides, management consultants, computer engineers, engineering services professionals, yoga practitioners, classical musical and dance practitioners, chefs and English language teachers.

Also, talks are on for creating greater opportunities for Indian nurses and care givers in Japan.

India's negative list (items excluded from any duty cuts) include vegetables, edible oil, betel nut, apples, coffee, spices, wheat, rice, edible oils, wines and spirits, tobacco, fish, milk and its products, honey, flowers and certain categories of industrial products such as plastics, polymers, sanitary ware, rubber, tyres, fans, air compressors, split air-conditioners, freezers, water purifiers, colour TVs, auto and auto parts.

India Inc welcomes trade pact

India Inc, including the country's exporters, on Wednesday welcomed the signing of the landmark India-Japan Comprehensive Economic Partnership Agreement (CEPA).

Mr Ramu S. Deora, President, Federation of Indian Export Organisations (FIEO), termed the CEPA as historic and said since the agreement was with a developed country such as Japan, it heralds India's arrival on the global scene.

“This will cement the ‘Look East' policy of Dr Manmohan Singh, the Prime Minister,” he said in a statement.

Elimination of tariff for textile, shrimps, prawns and black tea will result a quantum jump of their exports, he said. Mr Deora welcomed provision for expeditious clearance of registration of Indian pharmaceuticals as the absence of such a provision was impeding the exports of pharmaceuticals from India to Japan.

He hoped that India's total exports to Japan will increase from $3.63 billion in 2009-10 to $15 billion by 2014-15.

Meanwhile, Mr Hari S Bhartia, President, CII, said, “We are certain that CEPA will lead to a quantum increase in bilateral trade and investment flows.”

Dr Amit Mitra, Secretary-General, FICCI, said, “India accounts for just over 1 per cent of Japan's textiles and garments imports worth $31 billion, while pharmaceuticals from India constitute a miniscule 0.06 per cent of Japan's import market. With Japan's tariff set to become zero or substantially reduced for our exports, we are confident of doing far better.”

> arun.s@thehindu.co.in