No brakes on FTAs despite CEA review

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The ministry of commerce and industry has decided it will not halt the process of negotiating and concluding free trade agreements (FTAs) with partner countries, even as the finance ministry's chief economic advisor (CEA) has set up a committee to review the pacts.

Presently, there are 19 pacts in various stages of negotiation. Of these, India is aggressively pushing for conclusion of the ambitious agreements with Australia and Canada. Some of the other significant ones are with the European Union (EU), Israel and New Zealand.

The commerce and industry ministry believes the task of reviewing the effectiveness of FTA had already been completed by it last year in October. It was found that FTAs with Japan, Korea and the Association of Southeast Asian Nations (Asean) did not lead to any adverse impact. Rather those have helped India gain in the global value chain.

  • India will continue to negotiate FTAs with potential partner countries

  • Commerce ministry believes it can negotiate deals based on its own study that was concluded in October 2014

  • India is staring at year-end to close talks with Australia for a CEPA and also the RCEP pact, led by China

  • A committee has been set up under CEA Arvind Subramanian to review FTA and its adverse impact on the domestic industry

  • India is aggressively pushing for completing talks with Australia and Canada

  • Some of the significant FTAs are the European Union (EU), Israel and New Zealand

"We have done the exercise already and there is no need for us to wait for the committee's work to be completed. We are on a deadline and we will try to conclude these deals on mutually beneficial terms," a top commerce ministry official told Business Standard.

The official added that according to the study conducted then, it was clear that although imports have increased as a result of the pacts compared to exports, India's domestic industry was not getting hurt. Besides, FTAs also have an adequate safeguard mechanism in the event a particular industry gets hit.

When contacted, CEA Arvind Subramanian declined to comment. The committee headed by him is also likely to set a strategy on how to negotiate and approach these FTAs.

This is not the first time FTAs have come under attack. The ministry of external affairs (MEA) had often complained about lack of negotiating skills in the trade policy division (TPD) of the commerce department entrusted with the job.

When the Narendra Modi-government came to power in May last year, speculations was rife that the TPD might be allocated to the MEA.

However, opinion seems to be divided on this matter. Some also believe it is only the commerce and industry ministry that can negotiate and bargain on deals effectively.

India and Australia had vowed to close the proposed Comprehensive Economic Partnership Agreement (CEPA) by this year-end. The talks are in full swing.

Similarly, the India-Canada CEPA has gained momentum. The ninth round was held in March this year. Both sides are eyeing March 2016 for concluding the talks that will include trade in goods, services and investment.

India is also actively engaged in mega trade pact, Regional Comprehensive Economic Partnership (RCEP) that is being negotiated with the 10-member Asean economies and its six trading partners, which has a December deadline.

India has 22 trade pacts at present, of which some of the big-ticket ones are those with Asean, Japan, Korea, Singapore and Sri Lanka, among others.