What India should strive for in trade deals

Context: India decided to enter into trade agreements with key partners like the UK, UAE and Australia and announced an ambitious plan for an early harvest deal by March 2022.

Issues

• Fear of Tariff liberalisation: India has one of the highest tariffs in the world. Trade agreements lead to tariff liberalisation which Indian industry is always worried of intensifying competition in the domestic market.
• Policy uncertainty: Sometimes policies are designed to meet certain objectives, like reducing the trade imbalance with China, but they may adversely affect countries other than China.
• Ban on the procurement of imported liquor/GI products:  Ban on the sale of imported items/GI products in Canteen Stores Department (CSD) and replace them by locally produced items, following the geo-political tensions with China has hardly hit companies from UK, EU, Australia and the USA but not of China as there are hardly any liquor imports from China.
• TRIPS violation: India being founding member of the WTO is a signatory to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement), which includes protection of GI products.
• TRIPS Agreement provides higher levels of protection for wines and spirits
• The EU and the UK have a strong interest in market access for GI alcoholic beverages.

Way Forward

• Focus on long-term gains: In any trade agreement, some sectors will gain at the cost of the others. A defensive negotiation can lead to a “stalemate” situation. So it is important to look at the wider objective of a trade agreement in the current geo-political situation.
• Phasing out of tariffs and cess in alcoholic beverages to zero by India can be traded for removal of immigration skills surcharge and all surcharges other than the health surcharge as has been agreed to in the UK-EU free trade agreement.
• Policy consistency and transparency: Domestic policy objectives that align to the desire to sign trade agreements will strengthen India’s position in trade negotiation.
• Curtail Import substitution: It is important to make India a bigger player in the global value chain, but import substitution may not lead to greater global integration.
• Vietnam has successfully signed trade agreements which show that manufacturing can grow with global integration and reduction of trade barriers.