In what seems like a shift from its position towards the end of 2014, the Centre is pursuing free trade agreements (FTA) with a surprising burst of enthusiasm. Finance Minister Arun Jaitley expects an “early conclusion” of talks with Australia. While negotiations with the EU have been ‘on’ and ‘off’ for close to a decade, Prime Minister Narendra Modi tried to give it a push during his recent visit to Brussels. Talks with Canada, which began in 2010, are moving ahead in fits and starts. The latest Economic Survey takes a guarded if favourable view of FTAs, but suggests a lack of conclusive evidence. It says: “Increased trade has been more on the import than export side, most likely because India maintains relatively high tariffs and hence had larger tariff reductions than its FTA partners.” It is widely believed that Asean exports have hurt India’s plantation and fisheries sectors. The Survey observes: “The trade increases have been much greater with the ASEAN than other FTAs and they have been greater in certain industries, such as metals on the import side. On the export side, FTAs have led to increased dynamism in apparels, especially in ASEAN markets.”
On the whole, it is a pretty mixed picture. Apparel, pharma and textiles exports appear to have benefited from the 42 FTAs that India has entered into so far. Automotive component-makers fear the effects of an FTA with the EU. Small industries are apprehensive of the EU forcing changes in government procurement laws. However, the EU has a valid case when it complains of discriminatory duties on wines and spirits. Australia, New Zealand and Canada have always pushed for more market access in agriculture, an area on which India should move carefully. The Centre needs to take a holistic view of FTAs — pursuing new markets to lift its sagging exports without compromising livelihoods and jobs in the process. The worldwide push for FTAs and mega trade blocs such as the Trans Pacific Partnership (TPP) stems from the stagnation in world growth and trade, and the urgency, particularly in the OECD camp, to prise open new markets. In this rush, the niceties of the Doha Round, which allows poorer countries some space to protect livelihoods and pursue sovereign goals, have been cast aside. Instead, a WTO-plus agenda, spearheaded by the TPP countries such as Canada, Australia and New Zealand, with a focus on labour standards, IPRs and government procurement, tends to set the tone for FTA talks as well. India can sidestep most of this, and yet prevent ‘trade diversion’ by offering creative solutions.
It could open up services such as accountancy, higher education, e-commerce and law. Above all, it can improve the ecosystem for investors and exporters in particular. Rather than fret so much over the twists and turns in FTA talks, India should focus on moving up 50 places in the ease of doing business rankings (now at 130 out of 189 countries). The world will then seek Indian markets on our terms.