Exports grew negligibly from FTAs: ASSOCHAM study

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SME Times News Bureau | 09 Nov, 2013
In the aftermath of signing 15 regional and bilateral free trade agreements (FTAs), while India's imports from these countries and regions increased significantly but our exports to these partner countries either stagnated or registered minimal growth, according to a just-concluded study undertaken by apex industry body ASSOCHAM.

"India has signed as many as 15 FTAs including preferential trade pacts, while 19 are under negotiations and eight are in the pipeline but India is still grappling with slow growth of exports and sluggish foreign direct investment (FDI) flows from its FTA partners," said D.S. Rawat, secretary general of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) while releasing a study titled 'Free Trade Agreements: Boon or Bane of India'.

"These engagements have achieved limited results in terms of increasing trade volumes with member countries and thus main objective of these market opening pacts is only partially being met," said Rawat.

"There is an urgent need for the government to revisit its strategy of FTAs, bring greater transparency and involve more effective administrative process in their design and implementation to make FTAs more beneficial for India."

"Out of the seven major trading partners viz., ASEAN (Association of South-East Asian Nations), Indonesia, Japan, Malaysia, Singapore, South Korea and Sri Lanka with whom India has operationalised FTAs, it has trade surplus with only Sri Lanka and Singapore," highlighted the study prepared by the ASSOCHAM Economic Research Bureau (AERB).

Even on the investment front these free trade pacts have not given any extra edge to India so far as during April 2000-June 2013, India received FDI worth USD 1.25 billion and USD 14.75 billion from South Korea and Japan respectively and this year during April-June, India attracted only USD 224 million worth FDI from Japan while the figure was USD 2.23 billion in 2012-13 and USD 2.97 billion in 2011-12.

Considering the negative impact of these agreements on India's manufacturing sector, ASSOCHAM has suggested that trade agreements should be 'self-regulatory' to evade scope of 'safeguard measures' and the advanced partners must not be allowed to salvage "Surplus" capacities through exports and "exploiting" concessional duty rates under trade agreements.

Besides, it should be seen that trade agreements do not become a means to fill the country's short-term supply-deficit through exports made at concessional duty rates as it adds an anti-competitive element vis-a-vis imports from other countries.

Therefore, it needs to be complemented with "Specific & Time-bound commitment for inflow of Investment", otherwise the purpose of a Trade Agreement gets defeated, highlighted the ASSOCHAM study.

Considering that India's negotiations for comprehensive FTA with European Union (EU) is at an advance stage, ASSOCHAM has suggested the Ministry of Commerce and Industry to from a special team of experts to negotiate FTAs, besides the government should organize FTA outreach programmes to create awareness amid various stakeholders.

As the feasibility/ joint studies conducted by the government before commencing talks for any FTA form the basis of negotiations, ASSOCHAM has also suggested for broadening the base of such studies and inviting participation from various stakeholders like academicians, representatives of the marginal, small and medium enterprises (MSMEs) and state government officials. Besides, Indian embassies in these countries should also be engaged to gather sensitive information while conducting such studies.

Amid other significant points suggested by ASSOCHAM include - constant updation of publicaly accessible information, consultation with governments at state level before finalizing the pacts, emphasis should be laid on sectors lucrative for domestic players and tariff rates of specific sectors where Indian traders can penetrate aggressively must be looked at.

So far, India has concluded 10 Free Trade Agreements, 5 Limited scope Preferential Trade Agreements and is in the process of negotiating or expanding 17 more Agreements. Besides, at least 9 more proposals for FTAs are under consideration and when completed, these Agreements would cover over 100 countries spread across 5 continents.