TRADE AGREEMENTS – THE INDIAN PERSPECTIVE
TYPES OF TRADE AGREEMENTS
Trade agreements is an accord between two or more countries for a specific terms of trade, commerce, transit or investment. They mostly involve mutually beneficial concessions.
Depending on the terms and concession agreed on by the participating bodies, there are several types of trade agreements-
Free Trade Agreement
A free trade agreement is an agreement in which two or more countries agree to provide preferential trade terms, tariff concession etc. to the partner country. Here a negative list of products and services is maintained by the negotiating countries on which the terms of FTA are not applicable hence it is more comprehensive than preferential trade agreement. India has negotiated FTA with many countries e.g. Sri Lanka and various trading blocs as well e.g. ASEAN.
Preferential Trade Agreement
In this type of agreement, two or more partners give preferential right of entry to certain products. This is done by reducing duties on an agreed number of tariff lines. Here a positive list is maintained i.e. the list of the products on which the two partners have agreed to provide preferential access. Tariff may even be reduced to zero for some products even in a PTA. India signed a PTA with Afghanistan.
Comprehensive Economic Partnership Agreement
Partnership agreement or cooperation agreement are more comprehensive than an FTA. CECA/CEPA also looks into the regulatory aspect of trade and encompasses and agreement covering the regulatory issues. CECA has the widest coverage. CEPA covers negotiation on the trade in services and investment, and other areas of economic partnership. It may even consider negotiation on areas such as trade facilitation and customs cooperation, competition, and IPR.
India has signed CEPAs with South Korea and Japan.
Comprehensive Economic Cooperation Agreement
CECA generally covers negotiation on trade tariff and TQR rates only. It is not as comprehensive as CEPA. India has signed CECA with Malaysia.
Framework agreement primarily defines the scope and provisions of orientation of the potential agreement between the trading partners. It provides for some new area of discussions and set the period for future liberalisation. India has previously signed framework agreements with the ASEAN, Japan etc.
Early Harvest Scheme
An Early Harvest Scheme (EHS) is a precursor to an FTA/CECA/CEPA between two trading partners. For example early harvest scheme of RCEP has been rolled out. At this stage, the negotiating countries identify certain products for tariff liberalization pending the conclusion of actual FTA negotiations. An Early Harvest Scheme is thus a step towards enhanced engagement and confidence building.
Following is a detailed explanation of some trade agreements where India is playing a role.
Under agreement establishing GSTP, tariff concessions are exchanged among developing countries, who have signed agreement. Presently, 46 countries are members of GSTP and India has exchanged tariff concessions with 12 countries on a limited number of products. EIC is sole agency authorised to issue Certificate of origin under GSTP. The Sao Paulo Round of the GSTP was concluded among 8 countries but only Cuba, India and Malaysia have ratified the Protocol as of October, 2014.
Participating countries under Global System of Trade Preferences (GSTP) are Algeria, Argentina, Bangladesh, Benin, Bolivia, Brazil, Cameroon, Chile, Colombia, Cuba, Democratic People’s Republic of Korea, Ecuador, Egypt, Ghana, Guinea, Guyana, India, Indonesia, Iran, Iraq, Libya, Malaysia, Mexico, Morocco, Mozambique, Myanmar, Nicaragua, Nigeria, Pakistan, Peru, Philippines, Republic of Korea, Romania, Singapore, Sri Lanka, Sudan, Thailand, Trinidad and Tobago, Tunisia, Tanzania, Venezuela, Viet Nam, Yugoslavia, Zimbabwe.
APTA is a preferential trading arrangement designed to liberalise and expand trade in goods progressively in Economic and Social Commission for Asia and Pacific (ESCAP) region through liberalization of tariff and nontariff barriers. At present, Bangladesh, Sri Lanka, South Korea, India and China are exchanging tariff concessions under APTA. The 43rd Standing Session in May, 2014 saw the accession of Mongolia into APTA. It is the only existing PTA between India and China.
Participating countries under Asia Pacific Trade Agreement (APTA) are Bangladesh, China, India, Lao PDR, Republic of Korea, and Sri Lanka.
The India-MERCOSUR PTA provides for five Annexes. MERCOSUR is an economic grouping among the South American countries. It comprises of Argentina, Brazil, Paraguay, Uruguay, and Venezuela. On the side lines of G-20 (2005) India MERCOSUR finalised the PTA. The PTA widely covers 5 areas- Offer List of MERCOSUR for tariff concession on Indian products in MERCOSUR and vis a vis. Indian offer list for concession in India contains 450 products while MERCOSUR offer list for concession covers 450 products. The PTA also discusses Rules of Origin, Safeguard Measures and Dispute Settlement Procedure (DSP).
The major products covered in Indian offer list are meat and meat products, organic & inorganic chemicals, dyes & pigments, raw hides and skins, leather articles, wool, cotton yarn, glass and glassware, articles of iron and steel, machinery items, electrical machinery and equipment, optical, photographic & cinematographic apparatus. The major product groups covered in the offer list of MERCOSUR are food preparations, organic chemicals, pharmaceuticals, essential oils, plastics & articles, rubber and rubber products, tools and implements, machinery items, electrical machinery and equipment. India – MERCOSUR PTA came into effect from 1st June, 2009.