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The beachhead in East Asia

Amiti Sen | Updated on July 24, 2013

Trade pact with South Korea helped India enhance its presence in the region

The India-South Korea Comprehensive Economic Partnership Agreement (CEPA), now in its third year, was not just the first comprehensive trade deal that India signed with another nation, but an arrangement that firmly put the country on the path of greater integration with East Asia.

“It opened our eyes to how we should negotiate and what we should negotiate. Prior to the partnership, India had very little experience in the area as it had only signed a free trade agreement with Sri Lanka. It paved the way for negotiating and concluding more such agreements in the future,” said Rahul Khullar, who was Commerce Secretary when the deal was signed in August 2009.

Work on the India-South Korea trade pact in the form of a joint working group feasibility report started in 2005, within a year of the United Progressive Alliance Government coming to power. Prime Minister Manmohan Singh’s Look East policy for greater political and economic integration with East Asian countries added urgency to the whole exercise.

Apart from economic interest, increasing the country’s presence in the region was strategically important to counter China’s growing influence. Since South Korea already had substantial commercial interest here with companies such as LG and Samsung doing well, it wanted a bilateral trade and investment pact to be concluded soon.

Winning deal

Full-fledged negotiations, therefore, were launched as early as 2006 and a team of four officials from the Commerce Department that included Khullar, Joint Secretary Dinesh Sharma and two Under Secretaries left for Seoul to carve a winning deal for India.

The work at hand was not easy as the Comprehensive Economic Partnership Agreement was to be a much broader agreement than a Free Trade Agreement going beyond goods to include services, investments and also non-trade barriers such as technical barriers to trade and sanitary and phytosanitary (SPS) measures.

“Imagine our situation when we reached Seoul and found that there were 30 officials waiting to negotiate with our team of four,” recalls Khullar, who is now TRAI chairman. The four officials then decided to form four groups with eight officials each from the other side and divided the issues amongst themselves.

The negotiations gave Indian officials lessons both in aggression as well as restraint. “We realised that agriculture was a very sensitive area for the country as most Korean farmers were old and tariff protection was a sort of social protection there. Similarly, we told them of our sensitive areas. We learnt to respect red lines,” Khullar added.

The pact did not just give a boost to India’s exports to South Korea, but also generated investment-spurred exports. For instance, South Korean auto company Hyundai uses it to import auto parts and assemble them in its Chennai plants for re-export.



Increased importance

More important, the deal helped India to establish its foothold firmly in East Asia and also the entire Asia-Pacific region.

It prompted Japan, which too was engaged in trade negotiations with India, to seal the deal within months after the South Korean deal was signed. The India-Asean FTA, too, came on the heels of the pact while the one with Malaysia was signed two years later.

Published on July 24, 2013

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