Free Trade Agreements

As the name indicates, this is an International Agreement to facilitate Free Trade among the countries signing the FTA.

Many Governments through out the world have either FTA or are negotiating signing of such agreement towards international integration into a global free market economy.

Free Trade Agreements (Contd.) It is presumed that Free Trade and

removal of duties will lead to faster economic growth and help in reducing poverty and increasing standard of living and employment opportunities.

Normally FTA covers merchandise exports only. The duty level for the goods traded between the countries could be as low as 0%.

Free Trade Agreements (Contd.) India has signed FTA with Sri Lanka in

2000 and Thailand in 2004.

India’s Trade with Thailand before and after signing the FTA in 2004

2002-03

2003-04

2004-05

2005-06

2009-10

Export 711.20 831.68 901.39

1,075.31

1,740.16

Import 379.00 609.05 865.88

1,211.58

2,931.52

Total 1090.00

1440.73

1767.27

2286.89

4671.68

USD Million

India’s Trade with Sri Lanka before and after signing the FTA in 2000

1998-99

1999-2000

2000-01

2001-02

2009-10

Export 437.13 499.27 640.14

630.89 2,188.01

Import 37.68 44.23 45.01 67.38 392.19

Total 474.81 543.50 685.15

698.27 2580.20

USD Million

Current Engagements in FTAs The Government of India is

negotiating more FTAs with a number of countries including Japan, EU, Chile and MERCOSUR, which may materialize in the near future.

It is hoped that with the revival of global economy and economic growth, these FTAs will have better impact on India’s trade and economic relations with these countries.

Comprehensive Economic Partnership Agreement (CEPA) CEPA is a Comprehensive Agreement which

includes merchandise services, investment and trade barriers.

CEPA is much more advantageous for the signing countries as it has a wider base then FTA, and helps promoting economic growth at a much faster pace.

This Agreement helps the services sector by providing additional favourable treatment to the service providers in these countries and thereby promoting this very important sector.

Comprehensive Economic Partnership Agreement (CEPA) The Agreement also covers investment

climate for the signing countries as more liberal and concessional treatment could be agreed for the investors thereby giving a boost to investment.

India has already concluded CEPA with Singapore and Korea.

On going negotiations are in progress with a number of countries like Malaysia, Japan, Sri Lanka, Thailand, etc.

How FTA/ CEPA benefits exports? Exports get better market access by

reduction in import duty in the country with whom FTA is signed

Encourages inputs of imports at lower or zero duty for manufacture of export goods and also increases competitiveness

Flags Non Tariff Measures in such country for the redressal

In CEPA, services exports also gain momentum due to liberalization of all four modes

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