Exclusive | India gets ready for next set of FTAs after PMO push; Israel, Canada top list

Representational Image (PC-REUTERS/Amr Abdallah Dalsh)

After signing two major trade deals in record time earlier this year with Australia and the United Arab Emirates, the central government is now eyeing Israel and Canada. Officials told Moneycontrol that the Prime Minister's Office (PMO) has pushed for more Free Trade Agreements (FTAs) in the next one year to be completed, and work has begun to identify the key areas of convergence.

Multiple officials at the Commerce Department said ongoing talks with the United Kingdom are fast drawing to a close, even as those with the much larger and complicated European Union gather steam. However, work has already begun on fast-tracking the next set of trade deals and identifying the 'early deliverables', they added.

Officials stress 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 long stagnated.

The UAE is the second-largest export destination for India while Australia was the first service-oriented developed economy that New Delhi tackled in a long time. Negotiations on the pact with the UAE were completed in a record 88 days.

Small but effective cadre

Despite being one of the smallest components of the nation's civil service, officers of the Indian Trade Service (ITS) are currently in the limelight. Overseeing the country's foreign trade policy, export growth, economic diplomacy, and running the Commerce and Industry Ministry, the officers have been commended by the PMO for kickstarting India's push toward having trade deals after the pandemic.

Prime Minister Narendra Modi himself lauded the ITS while inaugurating the new headquarters of the Ministry last month. "In a bureaucracy replete with competition and departmental loyalty, this was not unnoticed. Our trade negotiators have ably protected the country's interests in a series of talks recently. But the main reason behind their newfound praise is a calculated move by the PMO to churn out more FTAs in the next year," a senior person in the know said.

Ex-Niti Aayog Vice Chairman Arvind Panagariya, currently in India for a visit, gave a presentation on the urgent need for more FTAs to senior officials across ministries on July 21 at the Commerce Department. Senior officials said that a large number of secretaries of various ministries were present at the briefing which focussed on expanding India's manufacturing reach through an unprecedented focus on FTAs.

"We have learned from Commerce Department colleagues that the efficacy of the early harvest model of talks has now been proved. They plan to deploy that in all trade 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.

Disparate partners

Two rounds of talks have already been held with Canada since both governments relaunched trade talks in March this year. Commerce Minister Piyush Goyal, his Canadian counterpart Mary Ng and their chief negotiators have also held talks on the sidelines of the recent World Trade Organization (WTO) ministerial conference in Geneva.

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.

"While the pace of talks has been encouraging, it is up to India to decide when it will be finished. Canada, as always, wants a comprehensive agreement fit for the next few decades which spans environmental and gender standards," a Canadian diplomatic source said. India has till now remained averse to making such topics part of its negotiated trade deals.

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).

On the other hand, while Israel has repeatedly suggested its desire to share its technology to push 'Make in India’, it has also expressed concerns over violation of Intellectual Property norms.

Bilateral trade with Israel stood at $7.8 billion, a ten-year high. This was due to exports shooting up to a record $4.79 billion in FY22. The previous highest had been $4 billion in 2011-12. In the first two months (April-May) of the current financial year, exports have seen a 63.6 percent growth.

However, trade flows have remained skewed in favour of a few commodities. Processed petroleum worth $1.6 billion and polished diamonds worth $1.4 billion made up the bulk of exports.