India’s FTA Agreements

with Rest of the World

Regional Trade Agreement
▪ Regional trade agreements (RTAs) are defined as reciprocal trade
agreements between two or more partners. They include free trade
agreements and customs unions.
▪ Regional trade agreements (RTAs) have risen in number and reach
over the years

▪ Non-discrimination among trading partners is one of the core

principles of the WTO

▪ RTAs constitute one of the exemptions of Non-discrimination among

trading partners and are authorized under the WTO
▪ All RTAs in the WTO have in common is that they are reciprocal
preferential trade agreements between two or more partners.
Regional Trade Agreements of India
 Different Types of Agreements
EHS (Early Harvest Scheme)
• Precursor to FTA
• Identification of Product for Tariff Liberalization
• Confidence Building Measure for Greater Economic Integration
• Example- India & Thailand signed in October’03 to reduce the tariff to Zero on 83 products in a phased
Manner.

CECA & CEPA (Comprehensive Economic Cooperation/Partnership Agreement

• Integrated Package on goods, Services, IPR, Competition, etc.
• Example – India & Korea

PTA (Preferential Trade agreement)

• Reduce tariffs on agreed number of tariff lines
• Positive List approach ( Don’t Cover Substantially all trade)
• Example – India & MERCOUSOR

FTA (Free Trade Agreement)

• Tariffs on items covering substantial bilateral trade are eliminated.
• Negative List approach ( Cover Substantially all trade)
• Example – India & Sri Lanka
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 WTO Multilateralism Vs FTAs
• Article 1of GATT : MFN(Most Favored Nation)
• Derogation from MFN Principle : Permission to form FTAs under Specific Conditions.
• Article XXIV of GATT for goods.
• Article V of GATS

• Specific Conditions Under Article XXIV of GATT for goods permitting FTAs:-
1. Not to raise restrictive tariff or non-tariff barriers with Non-Members existing prior
to FTA.
2. Elimination of tariffs and other trade restrictions be applied to "substantially all
the trade between the constituent territories in products originating in such
territories.“
3. Elimination of duties and other trade restrictions on trade within the FTA to be
accomplished "within a reasonable length of time. (Not more than 10 Years.)

• Moreover, Enabling Clause(Officially “Decision on Differential and More Favourable

Treatment, Reciprocity and Fuller Participation of Developing Countries”) allows
Developing Countries to form PTAs without adhering to Conditions of Article XXIV.
India’s agreements with other Countries

Preferential access, Bilateral trade (CECA /

economic cooperation and CEPA / PTA) with some 18
Free Trade Agreements groups/countries.
(FTA) with about 54 • Examples : APTA, GSTP, etc.
individual countries.
• Examples : ASEAN-India, SAFTA,
Indo-Sri Lanka, etc.
 Some Important FTAs/PTAs
Sr. No. Acroymn Groupings Member Countries FTA/PTA
Bangladesh, China, India, Republic of Korea,
1 APTA Asia Pacific Trade Agreement PTA
Sri Lanka
Brunei, Cambodia, Indonesia, Laos, Malaysia,
India ASEAN
2 India ASEAN Trade in Goods Agreement Myanmar, Philippines, Singapore, Thailand, FTA
TIG
Vietnam and India.
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,
3 GSTP Global System of Trade Preferences Malaysia, Mexico, Morocco, Mozambique, PTA
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.
India, Pakistan, Nepal, Sri Lanka, Bangladesh,
4 SAFTA South Asia Free Trade Agreement FTA
Bhutan and the Maldives
5 ISLFTA Indo Sri Lanka FTA Sri Lanka, India FTA
6 IMCECA Indo Malaysia CECA Malaysia, India FTA
7 ISCECA India Singapore CECA Singapore, India FTA
8 8 JICEPA Japan India CEPA Japan, India FTA
9 IKCEPA India Korea CEPA South Korea, India FTA
 ASEAN-India Free Trade Agreement
• Framework Agreement signed on 8 th October, 2003
• Only Goods Trade was negotiated.
ASEAN- • Services & Investment Trade was Under
India CECA Negotiation

• India negotiated FTA in goods on 13th August,

2009.
Came into force on 1st January, 2010.
ASEAN-
India FTA • FTA in Services signed on 13 th August, 2014.
Came into force on 1st July, 2015.

▪ Notification under Enabling Clause & Art. V of GATS.

▪ End of Implementation Period : 2024

▪ All the member Countries are also WTO Member Countries.

 ASEAN-India :Tariff Reduction Period
▪ Two Ways -(1)Tariff Elimination or (2)Tariff Reduction
Items are categorized according to their extent of tariff reduction;
a) Normal Track – Tariff Elimination
b) Sensitive Track – Tariff reduced to 0 - 5%
c) Highly Sensitive/ Special Products – Tariff reduced to certain
predetermined levels.

2019 : For ASEAN Non-LDCs barring Philippines.

2022 : Philippines.

2024 : For all LDCs like Cambodia, Lao PDR, Myanmar, Vietnam

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 ASEAN-India :Tariff Reduction Period ( Cont.…)
 Elimination of tariffs on 80% of the tariff lines accounting for 75% of the trade in a
gradual manner starting from 1st January, 2010.

 Considering domestic sensitivities, India has excluded 489 tariff lines(HS6 Digit level)
from the list of tariff concessions and 590 tariff lines from the list of tariff elimination to
address sensitivities in agriculture, textiles, auto, chemicals, petrochemicals, crude and
refined palm oil, coffee, tea, pepper etc.

 ASEAN countries have also maintained country wise exclusion list from the proposed
tariff concessions or eliminations.

 Special Products in India's Schedule of Tariff Commitments consists of 40 items from 5

products namely Crude Palm Oil (CPO), Refined Palm Oil (RPO), coffee, pepper and
tea.

 India’s Exclusion List : (1)Vegetables, (2) Fruits & Nuts, (3)Spices, (4)Oilseeds/Oils,
(5)Fish/Fisheries, (6) Textiles, (7)Auto, (8)Petroleum Products (9)Chemical and others
like natural rubber, tobacco, roses, carnations, orchids, milk, butter, ghee, etc.
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 ASEAN-India :Tariff Reduction Period ( Cont.…)
 India-ASEAN negotiations were concluded using lists of tariff lines at HS 6- digit level.
However, all Parties agreed to convert the offers to their respective national levels
which, for instance, is 8-digit for India, 9-digit for Malaysia, 10-digit for Indonesia, etc.

 Safeguard Measures against any sudden Surge in imports –

a) A Party can suspend the further reduction of any tariff rate.

b) Increase the tariff rate on the good concerned to the applied MFN tariff rate level.
c) Maintain this protection for a period of up to four years.

 Dispute settlement mechanism

The parties shall resolve dispute through consultations and negotiations ,failing which
they may resort to an arbitral panel, which shall consist of three members. Each party to
the dispute shall appoint a member and the third member who would be the Chair of the
panel, shall be appointed by mutual agreement.

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 ASEAN-India :Special Clauses
 Rules of Origin : Products under the India-ASEAN TIG Agreement must
meet the triple criteria.

a) Tariff classification change (change in tariff sub-heading, CTSH)

b) Regional value addition i.e., the ASEAN-India Free Trade Agreement (AIFTA)
content of not less than 35% of the Free on Board (FOB) value.
c) Substantial manufacturing/processing excluding minimal operations like
repackaging, simple assembly/disassembly of parts, etc.

* The origin is proved by a Certificate of Origin at the time of import declaration.

For exporters from India, the Certificate must be issued at the time of exporting
the good in order to certify that the product originates in India.

Note : Ministry of Commerce & Industry has authorized EIC to issue Certificates of Origin for
Indian exporters.

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 ASEAN-India : India’s Export Opportunities

 Some of the Export interest products to India on which

ASEAN Countries are eliminating tariffs are :

1) Indonesia: marine products, fruits and vegetables, cereals (excluding rice),

processed food, organic chemicals, pharmaceuticals, textiles, machinery
etc.

2) Thailand: processed food, organic chemicals, pharmaceuticals, textiles and

clothing, footwear, machinery, automotive, etc.

3) Malaysia: marine products, fruits and vegetables, processed food,

petroleum products, organic chemicals, pharmaceuticals, textiles, clothing,
footwear, machinery etc.

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 Challenge in ASEAN – India FTA
• Increasing Trade deficit post FTA

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 India – Sri Lanka FTA (ISLFTA) (India’s First FTA)

 Agreement on Trade in goods signed on 28th December,1998. Notification under

“Enabling Clause”.

 Became operational from 15th December,2001.(Implementation Period :2008)

 Limited to goods sector only. (Services & Investment under negotiation)

 Objectives of the agreements are :

a) To promote through the expansion of trade the harmonious development of the
economic relations between India and Sri Lanka.
b) To provide fair conditions of competition for trade between India and Sri Lanka.
c) In the implementation of this Agreement the Contracting Parties shall pay due regard
to the principle of reciprocity.
d) To contribute in this way, by the removal of barriers to trade, to the harmonious
development and expansion of world trade.

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 ISLFTA – Facts & Figures
 Agreement signed under 17 Articles & 7 annexures

• Article III : Elimination of tariffs -elimination of tariffs on the movement of good in

accordance with the provisions of Annexures A & B.

• Article VII: Rules of Origin - Products eligible for preferential treatment provided they
satisfy the Rules of Origin as set out in Annexure C. However For the development of
specific sectors lower value addition norms for the products manufactured by those sectors
may be considered through mutual negotiations.

• Article VIII :Safeguard Measures - Joint Committee to resolve issue within 60days,
failing to which affected party can call off the agreement

• Article X : Balance of Payments measures - may suspend provisionally the

preferential treatment as to the quantity and value of merchandise permitted to be
imported under the Agreement

• Article XIV :Duration and termination of this agreement - Six Months notice
period
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 ISLFTA – Facts & Figures (Cont.…)
 Annexure – A : Concession offered by India
a) Zero duty access for the items in Annexure ‘E’ of the Agreement

b) 50% margin of preference on the remaining items except on the items listed in “Annexure-D”.
Concessions on items in chapters 51 to 56, 58 to 60 and 63 shall be restricted to 25%.

c) The margins of preference on items (b) shall be increased to 100% in 2-stages within 3 yrs.
Except for the textile items referred in items (b).

 Annexure – B : Concession offered by Sri Lanka

a) Zero duty for the items in Annex ‘F’ – I.

b) 50% margin of preference for the items in Annex ‘F’ –II. The margin of preference in respect of
these items shall be deepened to 70%, 90% and 100%, respectively, at the end of the first,
second and third year.

c) For the remaining items except those in Annexure ‘D’, the tariffs shall be brought down by not
less than 35% before the expiry of three years and 70% before the expiry of the sixth year and
18 100% before the expiry of eight years.
 ISLFTA – Facts & Figures (Cont.…)
 . Tariff Concessions as offered by India & Sri Lanka

Stages India Sri Lanka

No tariff reduction 431 items 1216 items

Immediate tariff elimination 1357 items 319 items

Phased tariff elimination 2870 items 3361 items

 Negative / Exclusion List of Items

India - Edible fruit and nuts, beverages, plastic products, rubber products, paper and
paperboard, silk, vegetable, textile fibres, clothing accessories, knitted or crocheted
and articles of apparel and clothing, etc.

Sri Lanka – Agricultural/Livestock products, paper products, rubber products, electrical

items, etc.

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 ISLFTA – Facts & Figures (Cont.…)

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 ISLFTA – Facts & Figures (Cont.…)
 India is Sri Lanka’s Largest Trading Partner globally.

 Sri Lanka is India’s 2nd largest trading partner in SAARC.

 India account for 20% of Sri Lanka’s total imports (Largest) & 6% of total Exports
( 3rd Largest.)

 India is among top 5 investors in Sri Lanka.

 Indian Visitors account for 27% of total foreign arrivals in Sri Lanka’s Tourism.

 In average, over 70% of Sri Lanka’s exports to India continue to be under the
ISFTA, while India’s exports to Sri Lanka under the ISFTA remains only around 25%

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 ISLFTA – Facts & Figures (Cont.…)

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 ISLFTA – Major Trading Products(source : Sri Lanka customs)
Major Exports to India in 2013 Major Imports from India in 2013
Product In Mn. US $ Product In Mn. US $
Spices 89
Motor Vehicles 383
Natural Rubber & Products 22
Mineral Fuels & oils 403
Poultry Feed 38
cotton 192
Insulated Wires, Cables, etc. 34
Pharmaceutical products 165
Copper & Products 8
Knitted & crocheted fabric 94
Refrigerators, freezers, etc. 7
Plastic articles 84
Paper & Products 24
Ships, Boats, etc. 52 Iron & steel 209

Fiber Board of wood 10 chemicals 56

Furniture, bedding, mattress 16 cement 181

Apparel 34 sugar 77
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 ISLFTA – Criticism
 A frequent complaint heard from the Sri Lankan side is the existence of
barriers to doing business in India, in particular, non-tariff barriers (NTBs) for
market access.

 Given the large size and power of India, most benefits from the ISFTA will be
reaped by India.

 ISFTA has not been effective in reducing the large trade deficit that Sri Lanka
is facing with India.

 Sri Lanka has been forced to open itself to Indian market more than under the
bilateral format of ISLFTA due to SAFTA. ( Effective Negative list of Sri Lanka
is reduced to 1089 items while for India, it increased to 865 items.)

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Prefrential Trade Agreements of India
 India-MERCOSUR PTA
• India-MERCOSUR Preferential Trade Agreement (Trading bloc that gives preferential access to certain products
from the participating countries ) was signed on Jan 2004. The aim was to promote expansion of trade by
granting reciprocal fixed tariff prefernces.
• The India-MERCOSUR PTA provides for five Annexes as follows:-
• Offer List of MERCOSUR for tariff concession on Indian products in MERCOSUR. It contains
452 products.
• Offer List of India for tariff concession on MERCOSUR’s products in India. It contains 450
products.
• Rules of Origin
• Safeguard Measures
• 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 equipments,
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 equipments
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 THANKS!
Any questions?

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