Key points
- 15 active FTAs covering 27 countries, with another 9 agreements with 42 countries nearing completion.
- Nodal Ministry: Ministry of Commerce and Industry (Department of Commerce).
- Legal Status: International treaties executed under executive power, with enabling legislative amendments made to the Customs Tariff Act, 1975, where necessary.
Core Pillars of FTAs
- Tariff Elimination
- Non-Tariff Barriers
- Market Access for Services
- Investment Protection
- Rules of Origin
Architecture of Economic Integration
- Trade pact evolve in stages, growing more comprehensive as integration deepens.
- Preferential Trade Agreement (PTA): Most basic form, where partner countries lower tariffs on a specific, limited list of goods.
- Free Trade Agreement (FTA): tariffs are eliminated on "substantially all trade" between the members.
- Comprehensive Economic Partnership Agreement (CEPA): goes beyond goods to deeply cover services, investment, intellectual property rights, and economic cooperation.
- Customs Union: where member countries eliminate internal trade barriers and adopt a shared, identical external tariff policy toward non-member nations.
Challenges
Four persistent structural challenges
- Rising trade deficits,
- Low export utilization rate,
- Worsening inverted duty structures and
- Relocation of manufacturing capacity overseas.
Way Forward
- Tariff Rationalization
- Simplify RoO Compliance
- Address Non-Tariff Barriers (NTBs)
- Improve FTA Utilization