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India in demand for trade deals as negotiations calendar heats up: Officials

Commerce and Industry Minister Piyush Goyal has attributed the upcoming flurry of trade talks to a direct impact of India’s firm, yet inclusive, leadership at the recently-concluded 12th Ministerial Conference (MC12) of the World Trade Organisation (WTO).

June 24, 2022 / 11:20 AM IST
Commerce and Industry Minister Piyush Goyal with Britain's Secretary of State for International Trade Anne-Marie Trevelyan the last time they met to discuss the FTA

Commerce and Industry Minister Piyush Goyal with Britain's Secretary of State for International Trade Anne-Marie Trevelyan the last time they met to discuss the FTA

Indian trade negotiators are currently the most sought-after officials as a series of trade delegations head to New Delhi to take part in talks related to Free Trade Agreements (FTA) being negotiated by the government with the European Union (EU), United Kingdom (UK), Israel, and Canada.

Commerce and Industry Minister Piyush Goyal has attributed the upcoming flurry of trade talks to a direct impact of India’s firm, yet inclusive, leadership at the recently-concluded 12th Ministerial Conference (MC12) of the World Trade Organisation (WTO).

“Almost every WTO decision bears India’s signature. India is seen leading from the front and India’s concerns are visible prominently in the outcome documents. We have been cent percent successful in stating our point of view, getting our agenda approved at the talks,” the Minister told the press in his first briefing post MC12.

However, officials say the negotiations calendar had always been expected to get staggered, especially since most nations had been focused on crafting their positions and preparing for the ministerial conference since May. This had added to the overall slowdown in negotiations brought on by the impact of the pandemic.

But they also stressed that India signing two key trade deals with major economies immediately after the pandemic has sent a message to other trade partners that the country is prioritising the completion of talks that had stagnated. Earlier in February this year, India signed a trade pact with the United Arab Emirates (UAE), followed by a comprehensive trade deal with Australia in April.

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Both nations are key trade partners of New Delhi, and large complex export-based economies, and talks were completed at an unprecedented pace. Negotiations on the pact with the UAE were completed in a record 88 days. "This has proved the efficacy of the early harvest model of talks. We plan to deploy that in all of our talks wherever they may be applicable," an official said.

An early harvest trade deal is one in which both parties sign off on a set of relatively easily achievable deliverables. Such pacts target specific goals such as tariff reduction and market access on select items while leaving more contentious topics off the agenda.

Currently, Commerce Department officials remain most keen on the second round of talks with the EU set to take place from June 27-July 1 in New Delhi.

Eyes on Europe

The two sides revived the talks on June 17 after a gap of more than eight years during the visit of Goyal to Brussels. “The first round has set the ground. This upcoming round will get the ball rolling fast,” a senior official said.

After being proposed in 2007, the trade negotiations saw 16 formal rounds of talks till 2013. But they hit a wall after India decided to terminate existing bilateral investment treaties with 23 European countries in 2016. Since then, the EU had insisted that a bilateral investment pact with India would only be discussed in tandem with a proposed FTA, a rider that had complicated the negotiating process for both treaties.

Sources said it had also led to talks on the easier-to-conclude investment pact being dragged out. The thaw in positions came last year when the EU decided to decouple the talks, which had been a key ask from New Delhi.

Now, both sides are eyeing three separate agreements on trade, investments and geographical indications (GI). A GI is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.

The investment deal is expected to open India up to more foreign direct investment (FDI) from the EU and ensure that European companies enjoy legal protection in India. A case in point: despite the exit of the United Kingdom from the EU, other EU members Netherlands and Germany are the fourth-largest and seventh-largest global investors respectively, in India.

Both ways trade with the 27-nation EU stood at $116.2 billion. Exports made up $64.9 billion in FY22, up from $41.3 billion, while imports stood at $51.3 billion, up 30 percent.

Diwali deadline for UK

The government has also confirmed that it is currently sticking to the Diwali deadline for a draft FTA with the UK. The tight timeline of talks had been agreed on during British Prime Minister Boris Johnson's talks with Prime Minister Narendra Modi during the former's visit to India in April.

As is often the case, one of the main sticking points in the pact continues to be India's hesitation in opening up its market to foreign products and the equally aggressive push by foreign sellers in entering large segments of India's growing market that remain underexplored. In the case of this pact, this has been true for London's insistence on allowing high-value British goods such as scotch whiskey and automobiles into India at zero or low tariffs.

However, officials say the issue has now almost been resolved, as India has offered the UK lower duties on alcohol. The recent FTA India signed with Australia reduced the tariff on imported wine with a minimum import price of $5 per 750 ml bottle from 150 percent to 100 percent. Going forward, tariffs are set to be brought down to 50 percent over 10 years.

Canada talks

Talks with Canada are also expected in the first week of July. India has maintained a positive trade balance with Canada for the past few years, mainly due to the export of pharmaceutical products ($292 million), organic chemicals ($218 million), diamonds and jewellery ($203 million), products made of iron and steel ($193.8 million) and flat-rolled steel and ferro alloys ($150 million).

While India’s trade with Canada has remained relatively low, the North American country is seen as a major base for re-export across the border to the US. This is due to Canada’s favourable trade arrangements with the US. Meanwhile, Canada is keen on expanding its footprint beyond Europe and has focussed on South and Southeast Asia for the past few years.
Subhayan Chakraborty has been regularly reporting on international trade, diplomacy and foreign policy, for the past 7 years. He has also extensively covered evolving industry issues and government policy. He was earlier with the Business Standard newspaper.
first published: Jun 24, 2022 11:20 am
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