Diplomatist Magazine Diplomatist April 2018 - Page 12

COVER STORY Indo–Gulf Cooperation Council FTA: A framework agreement between India and the Gulf Cooperation Council (GCC) was signed on 25 August 2004. The fi rst round of negotiations was held in Riyadh in March 2006, wherein the GCC side agreed to include services as well as investment and general economic cooperation along with goods in the proposed agreement. The GCC is India’s largest trading partner with $137.7 billion trade in 2014-15, up from 5.5 billion in 2001. More than 50 percent of India’s oil and gas come from the GCC countries that host 7 million Indian nationals. During the 9th Ministerial Meeting of the foreign ministers of the GCC countries and India in October 2015, India invited the GCC nations to participate in the “Make in India” campaign, in particular the Mumbai-Delhi industrial corridors. INDIA and RCEP Since November 2012, India has been engaged in negotiating another FTA known as Regional Comprehensive Economic Partnership (RCEP) with ASEAN nations and fi ve other nations namely South Korea, Australia, China, Japan and New Zealand. The agreement includes goods and services, investments, intellectual property rights, economic and technical cooperation and dispute settlement; and seeks to liberalise tariff amongst the member countries, thereby granting easier access to the markets. If negotiated and enforced, RCEP would be one of the largest trading bloc constituting of about 3.4 billion of world population with combined GDP of $49.5 trillion or about 39 percent of world’s GDP. As India is not a part of any major trade bloc such as APEC or TPP, becoming a part of RCEP is a massive opportunity for the country. Not only will this agreement complement India's existing FTAs with ASEAN, Japan and South Korea, it would give comparative advantage to India in trade of services, especially in IT services, healthcare services and educational services. The 16-member trade bloc agreement also poses a threat to India's current account as it faces a $97 billion trade defi cit to the RCEP nations, especially China which accounts for 54 percent of this defi cit. Despite India's frequent use of anti- dumping duties, safeguard duties and other countervailing measures, China continues to dump its unfairly low-priced goods in India. Since 2006, the trade defi cit of India with China has risen linearly from $7.8 billion to $52 billion in 2015. Granting tariff-free access to Chinese goods will not only add to the trade defi cit with China but would also hamper the ”Make in India” campaign being aggressively promoted by the Indian government. Moreover, facing manufacturing powerhouses such as China, South Korea and Japan would place extreme pressure on the domestic players and can destroy the manufacturing industry. Another critical issue before India in signing the RCEP agreement is the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement plus the proposal being pushed aggressively by Japan and South Korea. It seeks to gain India's agreement on data exclusivity, extending patent terms and undue strong enforcement measures. It is feared that these terms would weaken India's generic pharmaceutical sector and make medicines expensive and inaccessible to Indians as well as citizens of other developing nations. It would also make India lose its status of being the pharmaceutical hub of the world. Even the agricultural and allied sectors, already fl ooded with cheap products such as rubber, coconuts and palm oils from ASEAN nations, are likely to be further hit by cheap processed food and dairy products from Australia and New Zealand. With many RCEP members refusing to accept the three-tier approach to tariff reduction in the service sector proposed by India, Indian service sector may lose its competitive advantage against other RCEP nations. India and EU: The negotiations for the India-European Union (EU) FTA, offi cially known as the Broad-Based Trade and Investment Agreement (BTIA), began in 2007. However, the negotiations broke down in 2013. Following Brexit and the breakdown of Transatlantic Trade and Investment Partnership (TTIP), both EU and India are keen to negotiate on trade, investment protection and intellectual property rights. EU wants India to reduce import duties on alcohol and automobiles. India employs high import tariff on Scotch Whiskey originating from Scotland and was reluctant to reduce tariff on alcohol. With Brexit, it would be easier for India to negotiate with EU on these lines. Critical Evaluation of India's FTA Engagements The preferential treatment under FTAs often distorts markets and creates hurdles for Indian products as well. For instance, India’s apparel exports attract an average duty of 10.2 percent in the ULȁɍЁѡTݡɕ)ѡɕ́ѕɽȁȁѥѽ́Ս(Ʌɑ䁅AѕѥѥЃY؃%ՔЃɥఁ9