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Trade minister Nirmala Sitharaman.  Photo: Pradeep Gaur/Mint
Trade minister Nirmala Sitharaman. Photo: Pradeep Gaur/Mint

India to negotiate FTAs with emerging market nations

Focus under the new govt is shifting towards countries where India may have strong exporting interest

New Delhi: India will negotiate free-trade agreements (FTAs) with emerging market nations in Latin America, Africa and some other regions to increase market access for Indian exports, a departure from the earlier policy of signing such accords with developed nations that has, among other reasons, led to a widening of India’s trade deficit.

While the previous United Progressive Alliance (UPA) government had mostly signed FTAs with developed countries, including Japan, South Korea and the Asean region, and was in talks for similar agreements with the European Union, Canada, Australia and New Zealand, the trade ministry on Wednesday said that the focus under the new government is shifting towards countries in Latin America, West Asia, Commonwealth of Independent States (CIS) and Africa, regions where India may have an upper hand in finding market access for its exports.

“Free-trade agreements is an instrument of improving our export capacities. We will negotiate FTAs with countries with which we feel India has a strong exporting interest. For us those regions are Latin America, Africa, West Asia, CIS where we will look for partners. We are already doing that," commerce secretary
Rajeev Kher said while addressing reporters along with trade minister Nirmala Sitharaman on the achievements of his department in the first 100 days of the Narendra Modi government.

In his Independence Day speech, Prime Minister Modi had focused on making India an exporting powerhouse by reviving the manufacturing sector and import substitution wherever possible.

Kher said the mandate that the department has got from the Prime Minister is to create an institutional mechanism to promote exports, and that FTAs should be negotiated keeping in mind India’s dignity, position and ability to leverage its market potential.

“Exports are not merely as a function of marketable surplus but exports are a means of pulling up the economy," the commerce secretary said.

FTAs should be negotiated with a lot of strategic understanding, said a commerce ministry official, declining to be named. “Suppose, we go to Latin America, we should find a country which is at a level of development whose industrial character will be such that with India it will be complementary," he added.

An institutional mechanism has been put in place in the department of commerce for a periodic, regular import appraisal and in consultation with relevant departments to take policy measures to try keep the trade deficit within manageable limits, Kher said.

On the proposed EU-India FTA which has been negotiated since 2007, Kher said the EU has to reconsider its current position and once it does that, India is willing to negotiate. “You are asking for the moon, we cannot give you the moon," he added.

Sitharaman said EU needs to show real interest in the proposed deal. “When plurilateral agreements are being signed such as TPP (Trans-Pacific Partnership) and TTIP (Transatlantic Trade and Investment Partnership), then you find interests of countries being more focused towards these. So it’s not like we are holding back with a sense of reservation. It’s more a question of starting all over again," she added.

On the other FTAs being negotiated such as those with Australia and New Zealand, Kher said the two countries are asking India to open up its dairy sector. “I am not in a position to do that," he said.

Kher said the upcoming foreign trade policy to be announced within a month’s time will provide a long-term, stable, sustainable environment and will facilitate improving the manufacturing and services capacities.

The commerce secretary also said that the government is considering allowing dual use of infrastructure in the processing and non-processing area. Sitharaman added that the move is intended for optimum utilization of special economic zones (SEZs) and to help SEZ developers recover costs quickly.

On the stalemate at the World Trade Organization over India’s insistence on finding a permanent solution on the food subsidies issue, Sitharaman said India is in favour of the trade facilitation agreement (TFA), “but we shall not wait for an interminable period to get an agreement on public stockholding of foodgrains, which we think is important for India".

Sitharaman said today countries better understand why India took the position of delaying the TFA in July. “There is a greater sense of understanding and appreciation. During my recent visit to China, China’s trade minister very clearly said that he is able to see where we are coming from and what arguments we have placed," she added.

Manoj Pant, professor at the Jawaharlal University, said the stand of the NDA government on FTAs is logical as it comes from the realization that India’s trade is moving more towards the emerging markets in the developing world. “Developing countries should first try finish trade agreements with developing countries to bring down their tariff levels to the WTO level. Since the tariff levels of developed world are already low, there is not much that countries like India can gain through tariff negotiations with them," he added.

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