In November 2019, the Indian government (“IM‘) surprised the international trading community by withdrawing from the negotiations of the Regional Comprehensive and Economic Partnership (RCEP) agreement, in which it had participated for several years. The Indian government’s apprehensions focused primarily on expanding market access for goods from China. This was followed by a careful review of some of the existing trade agreements that India has entered into with some Asian countries in which India has faced a negative trade balance. Based on this experience, India sought to partner with countries that could provide more balanced trade opportunities and market access for Indian products. Almost two years after RCEP’s withdrawal, the Indian government has found new trading partners to open doors for increased international trade.
The first half of calendar year 2022 marked two important milestones in this regard. In February 2022, India signed the Comprehensive Economic Partnership Agreement with the United Arab Emirates. After that, in April 2022, India signed the Economic Comprehensive Trade Agreement with Australia (this agreement has not entered into force yet). Both agreements demonstrate India’s commitment to deepening its trade and economic relations with the rest of the world.
While these comprehensive trade agreements are not the first of their kind, they are not the last either. In fact, in a bid to reach more comprehensive trade agreements, the Indian government has also entered into negotiations with a number of other countries.
The objective of this article is to provide a broad consultative perspective of comprehensive trade agreements for trade and industry in India. It begins by briefly discussing India’s past and recent comprehensive trade agreements as well as those in the pipeline. It then discusses some aspects of these comprehensive trade agreements that are relevant from the perspective of trade and industry in India.
India’s Commitments in Comprehensive Trade Agreements – Past and Future
Apart from being a founding and active member of the World Trade Organization at the multilateral level, India has also actively focused on trade initiatives at the bilateral and plurilateral levels. At present, India has concluded comprehensive trade agreements with more than ten countries. As the nomenclature suggests, the agreements are comprehensive in that they contain not only provisions relating to customs duties on goods, but also chapters such as non-tariff measures, intellectual property rights, trade electronics and market access for trade in services.
Among these, comprehensive trade agreements with ASEAN, Korea and Japan have facilitated significant trade flow with India. Regarding recent trade deals, India’s Comprehensive Trade Agreement with Australia is worth mentioning for providing market access to Indian traditional rulers and yoga teachers.
It should be noted that a limited number of India’s comprehensive trade agreements, such as those with Singapore, have a chapter on the protection and promotion of investments, so much so that they include a chapter on the settlement of investor-state disputes. However, in light of India’s unpleasant experiences with the provisions of the investment treaty, India has consciously walked away from any negotiations over them. In fact, even though the India-Australia trade agreement contains provisions on investment, the chapter only serves to clarify that decisions and requirements under their respective investment frameworks are expressly excluded from the applicability of the dispute settlement chapter.
Apart from the above-mentioned agreements, and as mentioned earlier, India has also started negotiating comprehensive trade agreements with other countries. Some of these countries are Canada, United Kingdom, GCC and European Union (‘EU‘).
Among these countries, the negotiations with the EU, which have resumed after a long break, are being closely followed by all stakeholders for the significant trade potential between the two countries that could be unlocked. However, they are also being watched closely as they raise contentious issues such as standards for protecting intellectual property rights, market access for automobiles and spirits, and more. It remains to be seen how these delicate issues will be resolved and what form the final agreement will take. take.
Mapping Benefits in Trade Agreements
One of the main advantages of trade agreements is the availability of customs duties on the import of goods at preferential or zero rates. However, it is important to note that a country may have many trade agreements and a trading partner may be covered by more than one of these trade agreements. For example, India is a signatory to the comprehensive trade agreement with ASEAN in which Thailand is a partner country. At the same time, India also has a separate trade agreement with Thailand. In such a scenario, importers and exporters in both countries may need to map benefits under applicable trade agreements to derive maximum benefits.
Also, the preferential tariff rates for a particular tariff heading may not be consistent across trade agreements. In fact, there may be a number of goods that will not be eligible for tariff advantages under a trade agreement with a particular country. In such a scenario, it becomes important to have a thorough understanding of not only the tariff benefits available under a particular trade agreement, but also the tariff benefits available under other trade agreements. In order to have a better understanding, it becomes important to engage in the exercise of cartography pricing benefits available under a trade agreement.
Trade and industry would be well advised to closely map the benefits arising from the various trade agreements, as this would also help them to formulate the inputs to be provided to the GOI for the purposes of the negotiations.
Rules of origin and CAROTAR
In order to be eligible for tariff concessions available under a trade agreement, the trade agreement requires that goods must arise from of the partner country. The provisions governing them, called rules of origin, vary from product to product (product-specific rules) and from agreement to agreement.
It will be recalled that in the 2020 budget, the Indian government introduced Section 28DA in the Customs Act 1962 to strengthen the rules of origin mechanism. To give effect to Section 28DA, the Government of India has introduced the Customs Rules (Administration of Rules of Origin under Trade Agreements), 2020 (‘CAROTAR‘), which impose comprehensive substantive and procedural obligations on the importer to ensure that the rules of origin imposed by trade agreements are respected.
So while members of trade and industry in India may be enthusiastic about using the tariff advantages available under trade agreements, they must be equally cautious about complying with rules of origin. applicable. Furthermore, since CAROTAR requires certain information that only the producer/exporter can provide, the cooperation of the producer/exporter becomes important for the importer to demonstrate that the imported goods meet the origin criteria.
Chapter on Dispute Settlement in Trade Agreements
One of the salient features of almost all trade agreements these days is the presence of a dispute settlement chapter to resolve any disputes between partner countries. With the exception of an appeal system, these dispute settlement chapters largely mirror the dispute settlement system in the WTO under the Dispute Settlement Understanding.
Although dispute settlement provisions in trade agreements have been rarely used, the existence of such provisions provides legal certainty for their application and indicates that partner countries are committed to them.
At a time when progress in WTO negotiations is sluggish due to deep political differences among its members, it is welcome that India has resorted to comprehensive trade agreements to strengthen its global footprint in the global trading system. While these comprehensive trade agreements would surely boost bilateral trade between India and its trading partners, it is expected that these comprehensive trade agreements will also enhance political relations not only between governments but also between their peoples and members. of commerce and industry.
However, it is important for all stakeholders, including Indian government, trade and industry, to remember that engagement through comprehensive trade agreements should not end with the signing or entry into force of these. All stakeholders should periodically and intensively review whether these trade agreements have delivered the expected benefits and exercise options, where appropriate, to course course appropriately.