Existing trade deals, especially the 2009 pact with the Association of the Southeast Asian Nations (Asean) bloc, have been panned by the Centre for not boosting exports but flooding the domestic market with cheap imports.
Subsequently, New Delhi has called for reviewing FTAs with Japan and South Korea. Going by that, a trade deal
with the US is unlikely to be beneficial, say experts. Average import tariffs for India are significantly higher than those of developed nations, and domestic businesses need to become competitive faster, said senior trade policy expert and JNU professor Biswajit Dhar.
History could repeat following the RCEP
drama if the domestic scenario doesn’t improve, given the same issues will continue to crop up, Dhar had warned. Even if the domestic industry is brought on board, the government has to deal with the unenviable task of deciding the exports that could be leveraged upon to boost outbound trade, according to him.
“Besides tariffs, New Delhi needs to be watchful of the US’ strict insistence on maintaining high standards on labour, environment, and intellectual property rights, which may make exports tougher and increase compliance for businesses to an extent for which they are not ready,” said Jayant Dasgupta, former ambassador to the WTO.
In 2019, the revenue department had started assessing flaws in trade deals, which led to a spiralling trade deficit. According to the FY21 receipts budget, the revenue India has had to forego due to all trade pacts amounted to Rs 65,734 crore in FY20, up from Rs 48,793 crore last year. Further, a NITI Aayog study last year used Asean
as a model, given the range of goods covered and volume of trade — saying the utilisation rate of current deals by Indian exporters was very low (5-25 per cent).
Sectors in which the trade deficit has worsened account for 75 per cent of exports to Asean, while trade-surplus sectors showed only marginal improvement, it added.
Among the present FTAs showing significant trade deficit, five are with members of Asean.
Exports to these nations constituted 10 per cent of the total outbound trade, and stood at $31.49 billion in FY20, down 5.1 per cent year-on-year. Conversely, imports were almost double at $55.36 billion as of FY20, down 6.6 per cent from $59 billion in FY19.