B S Raghavan

Getting the best out of India-Japan CEPA

B. S. RAGHAVAN | Updated on November 14, 2017 Published on September 09, 2011

The India-Japan Comprehensive Economic Partnership Agreement (IJCEPA) is the most exhaustive of all the agreements that India has concluded with other countries so far.

It covers more than 90 per cent of trade and an incredible range of provisions in respect of improvement of business environment for greater investment, trade in goods and services, removal of technical barriers to trade (TBT), sanitary and phytosanitary (SPS) measures, movement of natural persons, intellectual property-related protocols, government procurement and mutual cooperation on matters of common interest and global importance.

The readiness shown by Japan in agreeing to abolish, with immediate effect, 87 per cent of its tariff lines, relating to 93 per cent in volume, compared to India's 17.4 per cent, and in conceding to India's plea for phased reduction during a span of 10 years, on the ground of giving sufficient time to domestic industry to adjust to the trade liberalisation, has been nothing short of generous.

The trade volume of items still attracting tariff on the Japanese side is only 2.93 per cent, as against India's 13.62 per cent.

Japan has thus opened up for unrestricted entry a tremendous number of items of export interest to India, besides enabling Indian professionals in information technology-related services, accounting, research and development, tourism, market research and management consultancy, to set up shop in Japan.

But getting the most out of the CEPA hinges on a vital pre-requisite: The willingness on the part of both India and Japan to jointly work the Agreement, in a constructive and accommodating spirit, by laying down, and adhering to, specific milestones and timelines.

BLUEPRINT FOR ACTION

It is from that perspective of giving it a fillip that this column offers the following Blueprint for Action:

Increasing the inflow of Japan's direct investment: Under the Agreement, all direct Japanese investments will be treated on par with domestic investment, as regards concessions, incentives and facilities, and application of regulatory and tax regimes. Japanese investment should be pushed from the present measly $1.2 billion to $20 billion by 2020.

Pushing up trade volume: India's trade with Japan is at present an unmentionable two per cent of its total trade.

With the reduction / abolition of tariff on both sides, it should be possible to push it up to 10 per cent by 2015, or at least equal to India's total trade with China (which at present is eight per cent of India's total trade).

Raising exports in the domain of textiles: Japan is today the fourth largest apparel products importer on the globe, constituting seven per cent of its total imports. India's share in this sector is barely 0.8 per cent, the lion's share going to China, Italy, South Korea, Thailand and Vietnam.

Here is a challenge to India's enterprising artisans in Tirupur and Ludhiana. If they bend their energies towards renovating and revamping production lines, suitably recasting the basket of products and redrawing business plans, they can raise India's share of apparel supplies to Japan, to at least five per cent by 2015.

Likewise, though the demand for knitted garments is very high in Japan, India's share in 2009 was only 0.2 per cent, leaving it to Bangladesh, China, Indonesia, Italy, South Korea, Thailand, Turkey and Vietnam to dominate the market. Since, under the CEPA, Japan has agreed not to levy any import duty on Indian exports of knitted and woven apparel, it is undoubtedly possible to raise India's share to 10 per cent by 2015.

Setting up Technical Woking Groups to anticipate and solve disputes on interpretation: The CEPA extends to many intricate technical areas such as intellectual property rights, TBT, SPS, and procurement, likely to give rise, during implementation, to honest differences in interpretation. Technical Working Groups, constituted in advance, will help iron out these differences.

Establishing a Ministerial level India-Japan Monitoring Group to supervise the pace and progress of implementation: The CEPA has been in the making for more than seven years, and it should not take an equal time to get off the ground.

Not the existence, but the implementation, of the Agreement is the key. Hence, going the extra mile to give it an impetus is eminently worthwhile.

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Published on September 09, 2011
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