What are FTAs or Free Trade Agreements & what are its key benefits between trading partners?

Summary

India has been actively pursuing free trade agreements (FTAs) with various countries, including Australia, the UAE, and the European Union. These agreements aim to reduce trade barriers, enhance market access, and improve intellectual property protections. FTAs can lower tariffs, making Indian exports more competitive, and also ensure fair treatment for investors. However, India faces challenges in negotiating these deals, especially with high import tariffs and intellectual property enforcement. Despite the progress, India still has a long way to go in finalizing these trade agreements.

Takeaways

• 😀 India is actively pursuing Free Trade Agreements (FTAs) with countries like Australia, the UAE, the European Union, the UK, and Israel.
• 😀 FTAs are agreements between countries to reduce trade barriers such as tariffs, and protect intellectual property, investors, and government procurements.
• 😀 India has already signed FTAs with 13 countries, including Sri Lanka, Nepal, Thailand, Singapore, South Korea, Japan, and Malaysia.
• 😀 The primary goal of FTAs is to make exports more competitive by reducing or eliminating tariffs, making it easier for companies to trade.
• 😀 India faces challenges in negotiating FTAs due to its relatively high import tariff rate of 15%, the highest in the Asia-Pacific region.
• 😀 Trade deals with countries like the UK and Australia include demands for India to reduce its tariffs on agricultural products and specific items like British whiskey.
• 😀 Intellectual Property (IP) protection is a key feature of FTAs, ensuring the creators and investors are granted exclusive rights to protect their inventions and products.
• 😀 India’s IP enforcement system is considered one of the most challenging among major global economies, complicating trade negotiations.
• 😀 FTAs also enable access to government procurement markets, and India has opened its central government procurement market to UAE companies under the recent trade deal.
• 😀 Despite fast-tracking its FTAs, India still faces many hurdles and challenges before these agreements can be fully concluded.

Q & A

What are Free Trade Agreements (FTAs)?

Free Trade Agreements (FTAs) are signed between two or more countries, where they agree to reduce barriers in trade, such as tariffs, and enhance protections for investors and intellectual property. The main goal is to make trade smoother and more predictable.

Why does India need to sign FTAs?

India signs FTAs to reduce trade barriers, enhance its corporate sector's ability to compete globally, and create a more predictable and transparent trading environment. This can help reduce the costs of exporting goods and services.

Which countries has India signed FTAs with so far?

India has signed FTAs with 13 countries, including Sri Lanka, Nepal, Bhutan, Thailand, Singapore, South Korea, Japan, and Malaysia. Recent agreements also include deals with Australia, the UAE, and the European Union.

What are the key benefits of FTAs?

FTAs provide several key benefits, including the reduction or elimination of tariffs, protection of intellectual property, access to government procurement markets, and fair treatment for investors.

How do FTAs affect tariffs on goods?

FTAs often lead to the reduction or complete elimination of tariffs. For instance, if a country imposes a 12% tariff on incoming products, an FTA can eliminate that tariff for goods originating from the partner country, making exports more competitive.

What challenge does India face in negotiating FTAs?

India faces challenges in negotiating FTAs because it has the highest import tariffs in the Asia-Pacific region, with tariffs rising from 13.5% in 2016 to 15% in 2020, especially on agricultural products and industrial goods.

What role does intellectual property play in FTAs?

FTAs help protect intellectual property, ensuring exclusive rights for creators or investors in sectors like medicines and artistic works. This protection is essential for encouraging research and development, which can involve high investment and uncertainty.

Why is intellectual property protection a challenge for India?

India faces challenges in protecting and enforcing intellectual property rights. Despite its importance for innovation, India's IP protection system is often seen as less robust compared to other major economies.

How do FTAs help companies access government procurement markets?

FTAs enable companies from partner countries to bid on government procurement contracts in each other's markets. For example, India opened up its central government procurement market to the UAE, allowing UAE companies to bid on tenders as if they were Indian companies.

What is the significance of investor protection in FTAs?

FTAs ensure that investors from one country are treated fairly and equitably in the partner country. This means that foreign investors will be treated no less favorably than domestic investors in terms of their investments, providing legal protections against unfair treatment.

What progress has India made in signing FTAs?

India is fast-tracking its trade deals with multiple nations, but while there is fresh enthusiasm, it still has a long way to go before completing all the agreements it is currently negotiating.