Trade

International Trade

India's Current Engagements in RTAs

Association of South East Asian Nations (ASEAN) and India Free Trade Agreement (FTA) negotiations.

1.     India’s engagement with the Association of South East Asian Nations (ASEAN) started with its "Look East Policy" in the year 1991. ASEAN has a membership of 10 countries namely Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. India became a Sectoral Dialogue Partner of ASEAN in 1992 and Full Dialogue Partner in 1996. In November 2001, the ASEAN-India relationship was upgraded to the summit level.

2.     The 1st ASEAN Economic Ministers (AEM) – India Consultations were held on 15th September 2002 in Brunei Darussalam where the Ministers, after discussing the Joint Study Report decided to establish an ASEAN-India Economic Linkages Task Force (AIELTF). The AIELTF was asked to prepare a draft Framework Agreement to enhance the ASEAN-India trade and economic cooperation before the 2nd AEM – India Consultations. Subsequently, at the First ASEAN-India Summit held on 5 November 2002 in Phnom Penh, Cambodia, the erstwhile Prime Minister of India made the following major announcements:-

                  i.       India will extend special & differential trade treatment to ASEAN countries, based on their levels of development to improve their market access to India;

                 ii.             FTA within 10 years timeframe;

3.     A Framework Agreement on Comprehensive Economic Cooperation between the Association of South East Asian Nations (ASEAN) and India was signed by the Prime Minster of India and the Heads of Nation/Governments of ASEAN members during the Second ASEAN – India Summit on 8th October 2003 in Bali, Indonesia.

4.   The key elements of the Framework Agreement on Comprehensive Economic Cooperation between the Association of South East Asian Nations (ASEAN) and India cover FTA in Goods, Services and Investment, as well as Areas of Economic Cooperation. The Agreement also provided for an Early Harvest Programme (EHP) which covers areas of Economic Cooperation and a common list of items for exchange of tariff concessions as a confidence building measure. Due to difference of opinion on Rules of Origin, the EHP, agreed under the Framework Agreement, on Goods could not be implemented. 

Current Status

5.   The ASEAN-India Trade Negotiating Committee (TNC) was constituted and 23 meetings have been held so far. India  and the ASEAN have signed the following Agreements on 13^th August 2009:-

(i)   Trade in Goods Agreement along with its annexes.

(ii)   Agreement on Dispute Settlement Mechanism.

(iii)   Protocol to Amend the Framework Agreement.

(iv). Understanding on Article 4 of the Agreement on Trade in Goods      Agreement.

The Agreements have come into force on 1st January 2010 in respect of India and Malaysia, Singapore, Thailand. In the case of other ASEAN countries, the Agreements will come into force after they complete their internal requirements.

Negotiations in Trade in Services and Investment are underway and are targeted to be concluded by August 2010.

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India-Japan Comprehensive Economic Partnership Agreement (CEPA) negotiations 

            During the visit of Prime Minister Koizumi of Japan to India in April 2005, the Prime Minister of the two countries directed that the India-Japan Joint Study Group(JSG) be launched by June 2005, to submit its report within a year, focusing on measures required for a comprehensive expansion of trade in goods, services, investment flows and other areas of economic relations between the two countries.

 2.         The JSG finalized its report and it was submitted to the two Prime Ministers at St. Petersburg on July 17, 2006. The JSG recommended that the Governments of Japan and India launch negotiations to develop an Economic Partnership Agreement (EPA)/Comprehensive Economic Partnership Agreement (CEPA), within a reasonable period of time. 

 3.         During the Prime Minister's visit to Japan, a Joint Ministerial Statement on the launching of a Joint Task Force (JTF) to develop an EPA/CEPA between India and Japan was issued on 15th December, 2006 . As per the negotiating structure annexed to the Statement, the EPA/CEPA negotiations are to be conducted at the Chief Delegate Level and the Working Level. At the Chief Delegate Level, the Indian delegation is headed by the Commerce Secretary and the Japanese delegation is headed by Deputy Minister for Foreign Affairs of Japan. The Working-level meetings are headed by Director-General/Deputy Director General for the Japanese side and Joint Secretary, Department of Commerce from the Indian side. 

4.         Twelve meetings of the JTF have been held so far (four at chief delegate level and eight at the working level). In the fifth meeting of the JTF held during 8-11 January, 2008, in India both sides agreed to the modalities of negotiations on market access of Trade in goods. The 12th meeting of the JTF was held during September 29th – 1st October, 2009 in Tokyo. An informal meeting between Co-chairs at working level was held on 29th January, 2010 in New Delhi and the next round of negotiations are to be held in March 2010 on mutually convenient dates

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India- Sri Lanka Comprehensive Economic Partnership Agreement (CEPA) negotiations

Background

•       India-Sri Lanka Free Trade Agreement signed in 1998 and became operational in 2000.

•       The bilateral trade between India and Sri Lanka has grown four times in the last nine years increasing from US $   658 million in 2000 to US $ 2719 million in 2009.

•       Sri Lanka is India’s  second largest  trade partner in the SAARC region.  

•       The main Indian exports to Sri Lanka are Petroleum (Crude & Products), Transport Equipments, Cotton, Yarn Fabrics, Sugar, Drugs Pharmaceuticals & Fine Chemicals.

•       The chief Sri Lankan exports to India are ,spices, electrical Machinery except electronic, Transport Equipments, Pulp & Waste, Natural Rubber and Paper Board.

 Joint Study Group (JSG) and Comprehensive  Economic Partnership      Agreement (CEPA)

•       A JSG was set up in April, 2003 to widen the ambit of ISLFTA to go beyond Trade in Goods to include Services and to facilitate greater investment flows between the two countries.

•       Report of JSG was submitted in October, 2003.

•     Based on the recommendation and conclusion of the JSG, CEPA negotiations were started in February, 2005 and concluded in July 2008, after Thirteen Rounds of Negotiations.

•      Both sides had decided to sign the CEPA  during the 15th SAARC Summit held in Colombo but due to reservations expressed by Government of Sri Lanka , both sides have still not signed the Agreement. The Government of Sri Lanka can be asked the reasons of such delays and future course of actions.

•      Both sides after 13 Rounds of Negotiations have agreed to enter into Comprehensive Economic Partnership Agreement, the last round being concluded in July, 2008

SALIENT FEATURES OF CEPA

 Trade in Goods

·    Reduction in Negative List by each country would provide additional market access 

·    The Agreement provides for review of Negative Lists together with TLP within (60) days of signing of CEPA.

·     Both India and Sri Lanka have agreed to reduce tariff to zero percentage for items removed from Negative List  within 3 years.

 Trade in Services

·     Both sides had agreed as a base level to offer their schedule of commitments at the WTO level – India at its Revised Offer to the WTO and Sri Lanka at its Initial Offer to the WTO.

 Economic Cooperation

·     Both countries have also agreed to promote economic cooperation in mutually identified sectors like fish, energy, drugs & pharmaceuticals, textiles, financial, infrastructure, tourism etc. for greater economic integration.

 Investment

·    The Investment Agreement will  provide an institutional framework to create an enabling environment for greater flow of investments between the two countries;

CEPA also has the following agreements:-

·     MRA on standards-The Agreement on Mutual Recognition/equivalence will facilitate recognition of each other’s standards, assessment procedures, equivalence arrangements etc.

·     MOU on Harmonisation of Ayurvedic medicines will enable both countries to cooperate in traditional system of medicines.

·     Custom Cooperation Agreement – The Agreement aims at simplifying custom procedures and expediting custom clearance.

·     Agreement on Consumer Protection and Legal Meteorology aimed at protecting the interest of consumers and creating awareness amongst consumers in both countries.

  CEPA has been negotiated but it has not been signed yet.

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India-Thailand Comprehensive Economic Cooperation Agreement (CECA) negotiations 

1.       In November 2001, the Prime Minister of Thailand, Dr. Thaksin Shinawatra and the Prime Minister of India agreed to set up a Joint Working Group (JWG) to undertake feasibility study on a Free Trade Agreement between India and Thailand. The Joint Working Group observed that the present policy regimes in both the countries were conducive to more intensive bilateral economic integration and a Free Trade Agreement could prove to be a building block for other sub-regional, regional and global economic integration processes of which both countries are a part. Having observed rich potential of trade expansion, the study concluded that the proposed Free Trade Agreement between India and Thailand is feasible, desirable and mutually beneficial. Accordingly, a Joint Negotiating Group was set up to draft the Framework Agreement on India – Thailand FTA.

2.       During the visit of Indian Prime Minister to Thailand, a Framework Agreement for establishing Free Trade between India and Thailand was signed by the Commerce Ministers of the two sides on 9th October, 2003 in Bangkok, Thailand. The Framework Agreement cover FTA in Goods, Services and Investment and Areas of Economic Cooperation. The Framework Agreement also provided for an Early Harvest Scheme (EHS) under which 82 common items of export interest to the sides have been agreed for elimination of tariff on a fast track basis.  

Current Status

3.       The tariff concessions on 82 items of EHS list began from 1.9.2004.  The tariffs on these items have become zero for both sides from 1.9.2006.

4.       India-Thailand Trade Negotiating Committee (TNC) has been constituted and discussions are being held on a comprehensive FTA including Trade in Goods, Trade in Services, Investment, Rules of Origin, Dispute Settlement Mechanism etc. 17 Rounds of negotiations have so far been held. 

      5.       The India-Thailand FTA is expected to be concluded during 2010

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1.   On 20th December 2004, the Hon’ble Dato’ Seri Abdullah H.A. Badawi, Prime Minister of Malaysia and the Hon’ble Dr. Manmohan Singh, Prime Minister of India agreed to the setting up of a Joint Study Group (JSG) to explore the feasibility of Comprehensive Economic Cooperation Agreement (CECA) between the two countries. In accordance with the mandate granted by the two Prime Ministers, the Joint Study Group was duly constituted in March 2005.    

2.   The JSG Report was submitted in January, 2007 and was adopted by both the governments on 11th August 2007.

3.   As per the recommendations of the JSG, negotiations towards India-Malaysia CECA have commenced and two meetings and one video conference of the Trade Negotiating Committee (TNC) has taken place so far.

4.   Negotiations are being carried out simultaneously towards Agreements on Trade in Goods, Trade in Services, Investment and other areas of economic cooperation as a single undertaking which are targeted to conclude by December 2010.

1.     The initiative to establish Bangladesh-India-Sri Lanka-Thailand Economic Cooperation (BIST-EC) was taken by Thailand in 1994 to explore economic cooperation on a sub regional basis involving contiguous countries of South East & South Asia grouped around the Bay of Bengal.  Myanmar was admitted in December,1997 and the initiative was renamed as BIMST-EC.  It may be mentioned that the initiative involves 3 members of SAARC (India, Bangladesh & Sri Lanka) and 2 members of ASEAN (Thailand, Myanmar).  BIMST-EC is visualized as a ‘bridging link’ between two major regional groupings i.e.  ASEAN and SAARC. BIMST-EC is an important element in India’s “Look East” strategy and adds a new dimension to our economic cooperation with South East Asian countries. 

2.   The 2nd BIMSTEC Summit was held on 13 November 2008, preceded by the 11th Ministerial Meeting and the 13th Senior Official’s Meeting on 11-12 November 2008 in New Delhi, India. The Summit has taken place four years after the 1st BIMSTEC Summit in Thailand. 

3.   The Summit was attended by the Chief Adviser of the People's Republic of Bangladesh, H.E. Fakhruddin Ahmed, the Prime Minister of the Kingdom of Bhutan, H.E. Jigmi Y Thinley, the Prime Minister of the Republic of India, H.E. Dr. Manmohan Singh, the Prime Minister of the Union of Myanmar, H.E. Thein Sein, the Prime Minister of the Republic of Nepal, H.E. Pushpa Kamal Dahal 'Prachanda', the President of the Democratic Socialist Republic of Sri Lanka, H.E. Mahinda Rajapaksa and the Prime Minister of the Kingdom of Thailand, H.E. Somchai Wongsawat. 

4.   In conclusion, the leaders expressed their satisfaction at the progress that has been made in the negotiations for a Free Trade Agreement in trade in goods and called for their early conclusion. They welcomed the establishment of the Centres for Energy and Weather and Climate in India and the BIMSTEC Cultural Observatory in Bhutan. They also expressed concern at the threat which terrorism poses to the region and satisfy with the finalization of the BIMSTEC Convention on Combating International Terrorism, Transnational Organized Crime and Illicit Drug Trafficking.

5.   The BIMSTEC Trade Negotiating Committee (TNC) has had 19 sessions of negotiations. The negotiations are spread over the areas of (i) tariff concessions on trade in goods, (ii) customs cooperation, (iii) services and (iv) investments. At the 19th meeting of the TNC parties reached agreement on the text of the Agreement on Trade in Goods as well as the text of the Rules of Origin and the Operational Certification Procedures. Negotiations would continue on finalising the schedules of concessions and on the agreements on services and investment.

          A Framework Agreement on Economic Cooperation between Republic of India and Gulf Cooperation Council was signed on 25th August, 2004.  In this Agreement, it was provided that both the parties shall consider ways and means for extending and liberalizing the trade relations and also initiating discussions on the feasibility of FTA between them. 

            First round of Negotiations was held in the Headquarters of GCC, Riyadh on 21st – 22nd March, 2006.  During this round, GCC side agreed to include services as well as investment and general economic cooperation alongwith goods in the GCC-India FTA.  Another hallmark of this round is Agreement on the modalities for negotiations have been finalized.  It was also agreed to conclude the negotiations at the earliest.

            Second round of Negotiations was held in Riyadh on 9-10 September, 2008.  During this round the discussion progressed in the earlier decided Working Groups. Proposed Tariff Liberalization Scheduled was discussed during this round.

            It was further decided that the third round of negotiations would be held in Delhi .

            Industry consultations were held to ascertain industry views on the matter.  The dates for third round is being finalized in consultations with Gulf Cooperation Council

1.         A Joint Study Group (JSG) constituted in November 2003 to study modalities of the CECPA discussed in detail the complementariness and potential synergies between the two economies and, in its report of November, 2004, identified Investment, Trade in Goods and Services and General Economic Cooperation for developing modalities of CECPA.  

2.         During his visit to Mauritius from March 30-April 2, 2005, the Hon’ble Prime Minister of India conveyed India’s acceptance of the report by the Joint Study Group on Comprehensive Economic Cooperation and Partnership Agreement and both sides agreed to set up a high-powered negotiating team for processing and finalizing the recommendations of this report within a twelve-month period. Accordingly an empowered team was constituted for negotiating a Comprehensive Economic Cooperation and Partnership Agreement (CECPA) with Mauritius. Ten rounds of talks have so far been held by the empowered team.   

a) Chapter on Trade in Goods (Preferential Trade Agreement) which includes Tariffs, Texts of Preferential Trade Agreement (PTA) and its annexures, viz. Rules of Origin, Operational Certification Procedures and Trade Defence Measures has been finalised.

b) Negotiations were held on Trade in Services with a view to creating a more liberal, facilitative, transparent and competitive services regime in the two countries and to strengthen cooperation in services sector. Negotiations were also held on Trade in Investments for improving the legal framework existing in both countries in this regard, including  the bilateral Double Taxation Avoidance Convention (DTAC) and Bilateral Investment Promotion & Protection Agreement (BIPA), and other issues related to facilitation of investment. 

c) Chapters on Trade in Services and Trade in Investment could not be finalized as the two sides did not agree on the definition of 'Enterprise' and treatment to 'Shell Companies'. Consequently, negotiations are at a standstill since the tenth round held on 23-24October, 2006. India’s proposal for modifications to India-Mauritius DTAC has not so far been acceptable to Mauritius. Hence, India has decided to link the finalisation of India-Mauritius CECPA and revision of India-Mauritius DTAC and put on hold the CECPA negotiations until necessary modifications in the India-Mauritius DTAC, as proposed by the Department of Revenue, are accepted by Mauritian side.

CECPA related Memoranda of Understanding

Following MOUs were signed by India and Mauritius in October, 2005 under the aegis of CECPA : 

(i)     MOU in the field of Consumer Protection and Legal Metrology. 

(ii)   MOU between Bureau of Indian Standards (BIS) and Mauritius Standards Bureau (MSB).

(iii)  MOU between Indian Institute of Public Administration (IIPA) and Government of Mauritius.

(iv)  MOU on Preferential Trade Agreement (PTA).   

South African Customs Union (SACU), with a common Custom Tariff Policy, comprises of South Africa, Lesotho, Swaziland, Botswana and Namibia. During the sixth session of the India-South Africa Joint Ministerial Commission Meeting held in New Delhi on 5-6 December 2005 both sides agreed that a comprehensive Free Trade Agreement within a reasonable time, and in the interim, a limited scope agreement providing for exchange of tariff concessions on select list of products between India and SACU would give further impetus to bilateral trade and urged for its early conclusion.

Accordingly, India-SACU PTA is being negotiated and so far four rounds of have been held.  First round of technical discussions for India-SACU PTA took place in Pretoria on 5th–6th October, 2007, second round of PTA negotiations at Walvis Bay, Namibia on 21-22 Feb., 2008, 3rd round at New Delhi on 25th–27th November, 2008 and 4th round of negotiations  was held in Pretoria on 7-8, October, 2009. 

During 3rd round of negotiations a Memorandum of Understanding (MOU), a framework mechanism to facilitate negotiations , was also signed on 26th November, 2008 by the representatives of India and SACU. 

During 4th round of negotiations India submitted to SACU its initial tariff preference request list  and also provided  draft SPS &  TBT texts to SACU for consideration.  The two sides also discussed text of agreement, including annexures relating to safeguard measures and dispute settlement. The 5th round of negotiations is likely to be held in India by 1st week of March 2010.

India-Singapore Comprehensive Economic Cooperation Agreement (CECA)

1.   During the visit of Prime Minister to Singapore in April 2002 to India, a Joint Study Group (JSG) for establishing a Comprehensive Economic Cooperation Agreement (CECA) between the two countries was set up on 8th April 2002. The JSG submitted its report to the two Prime Ministers on 8th April 2003. 

2.   The JSG identified areas of increased economic engagement between the two countries and also recommended measures to be taken. The JSG recommended the early launching of negotiations for a CECA to be structured as an integrated package of agreement between India and Singapore including :- 

a.   A Free Trade Agreement, which would include, inter-alia, trade in goods and services and investment. 

b.   A bilateral agreement on investment promotion, protection and cooperation; 

c.    An improved Double Taxation Avoidance Agreement; 

d.    A more liberal Air Services Agreement and Open Skies for Charter Flights; and 

e.       A work programme of cooperation in a number of areas including health care, education, media, tourism and the creation. 

3.   ‘Declaration of Intent’ was signed between the two countries on 8th April 2003. Negotiations on CECA were launched in New Delhi on 27-28 May 2003. Commerce Secretary headed the team of Indian negotiators while Singapore was led by their Permanent Secretary, Ministry of Trade & Industry, Singapore. Twelve Rounds of negotiations were held alternatively in India and Singapore. 

4.   The Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore was signed on 29th June, 2005 by the Prime Minister Mr. Manmohan Singh and H.E. Mr. Lee Hsien Loong, Prime Minister of Singapore. The CECA has become operational with effect from 1-8-2005. 

5.   India-Singapore CECA has been notified at the WTO on 3rd May 2007 under GATT Article XXIV and GATS Article V. 

6.   The tariff concessions offered by India have been completed on 1^st April 2009. On Singapore’s request to grant additional concessions on specific products, India has approved tariff reduction/elimination on 539 products. The 539 tariff lines have been included in the amendment to India - Singapore CECA which was signed by the representatives of the two countries on 20^th December 2007. These concessions would be completed by December 2014.

7.   India-Singapore CECA is reviewed from time to time and the first round of review was concluded on 1^st October 2007. Both sides have agreed to launch a second review in early 2010.

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Preferential Trade Agreement (PTA) between India and Chile

1.      A Framework Agreement to Promote Economic Cooperation between India and Chile was signed on January 20, 2005. The Framework Agreement envisaged a Preferential Trade Agreement (PTA) between the two countries as a first step.

2.   As a follow up to the Framework Agreement, a PTA was finalized after four rounds of negotiations between the two sides. The last round of negotiations was held in New Delhi in November 2005. The PTA has two Annexes relating to the list of products on which the two sides have agreed to give fixed tariff preferences to each other and three Annexes relating to the Rules of Origin, Preferential Safeguard Measures and Dispute Settlement Procedures

3.   While India has offered to provide fixed tariff preferences ranging from 10% to 50% on 178 tariff lines at the 8 digit level to Chile, the latter have offered us tariff preferences on 296 tariff lines at the 8 digit level with margin of preference ranging from 10% to 100%.

4.   The products on which India has offered tariff concessions relate to meat and fish products (84 tariff lines), rock salt (1 tariff line), iodine (1 tariff line), copper ore and concentrates (1 tariff line), chemicals (13 tariff lines), leather products (7 tariff lines), newsprint and paper (6 tariff lines), wood and plywood articles (42 tariff lines), some industrial products (12 tariff lines), shorn wool & noils of wool (3 tariff lines) and some others (7 tariff lines).

5.   Chile’s offer covers some agriculture products (7 tariff lines), chemicals and pharmaceuticals (53 tariff lines), dyes and resins (7 tariff lines), plastic, rubber and miscellaneous chemicals (14 tariff lines) leather products (12 tariff lines), textiles and clothing (106 tariff lines), footwear (10 tariff lines), some industrial products (82 tariff lines) and some other products (5 tariff lines). 

6.   The Agreement was approved by the Cabinet in its meeting held on February 23, 2006, and consequently the PTA was signed on March 8, 2006. The Parliament of Chile approved it in April 2007 and President of Chile signed the decree on August 16, 2007 to ratify the PTA. The PTA came into force with effect from 17th August, 2007 in Chile and  in India on 11.09.2007. Implementation of India-Chile PTA has been notified to WTO on 13th January, 2009.

7.   During the first meeting of Joint Administrative Committee held in New Delhi in  February, 2009 to review the implementation of India-Chile Preferential Trade Agreement (PTA),  both sides agreed to initiate the process of deepening and widening of the agreed lists of the existing  India- Chile PTA. First Meeting on negotiation on expansion of India-Chile PTA was held in Santiago on 28-29 January, 2010 in which both sides  exchanged their wish list to each other.

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India-Pakistan Trading Arrangement

 India and Pakistan have no formal trade agreement.  India has granted Most Favoured Nation Status to Pakistan, whereas Pakistan maintains a List of Importable Items from India called ‘Positive List’ which now consists of 1938 items.  To see this list visit Government of Pakistan  website  http://www.commerce.gov.pk.  

Both countries had  constituted a Joint Study Group (JSG) at the level of Commerce Secretary; its first meeting was held in February 2005   and the last (third meeting) in New Delhi on 2nd August 2007.  In this meeting both sides are in the process of discussions to address the issues concerning customs cooperation, sanitary, phyto-sanitary measures and technical barriers to trade, standards and conformance to the extent feasible.

Apart from Joint Study Group, the issues pertaining to commercial and economic cooperation are also discussed at Commerce Secretary level within the framework of the Composite Dialogue.  The fourth round of dialogue was held in New Delhi on 31 July – 1 August 2007. 

INDIA-NEPAL Treaty of Trade

Treaty of Trade:  The bilateral trade between India and Nepal is regulated by the Treaty of Trade. The current Treaty has been in force for a period of Seven years with effect from 27.10.2009. Both sides have signed the amended Treaty of Trade which comes into force on  27.10.2009.   Under this Treaty, there is free trade on mutually agreed to  primary products from each other as indicated in Protocol to Article IV of the Treaty.  In the case of industrial goods produced in Nepal, Article V of the Treaty provides for India to give, on a non-reciprocal basis, duty-free access to Nepalese goods without any quantity restriction.  This is subject to fulfilling the twin criterion of four-digit tariff head change and value addition of 30% at ex-factory price in Nepal.  This duty-free access is, however, restricted to annual quotas on four sensitive items in the interest of the domestic industries in these sectors.  These are vanaspati (one lakh metric tones), Copper products and Acrylic Yarn (Ten thousand metric tones each) and Zinc Oxide (2500 metric tones).  The routes for bilateral trade can be mutually decided; in the present Treaty, twenty Seven mutually agreed routes are prescribed for bilateral trade.  The Treaty provides for setting up Joint Committee in the event the imports under the Treaty  result in injury to the domestic industry in each country. 

Treaty of Transit:  India provides transit facilities to the landlocked Nepal under the Treaty of Transit.  The current Treaty which was renewed in 27.10.2009 would be in force for a period of seven years up to 26.10.2016.   This Treaty provides for free movement of traffic-in-transit across territories of each other through mutually agreed routes for trade with third countries subject to taking measures to ensure that this does not infringe legitimate interests/security interests of each other. Traffic in transit is exempted from customs/all transit duties. The Treaty provides for exit/entry points as may be mutually agreed upon.  India has allowed 15 transit routes to Nepal but so far not availed of this facility from Nepal.  Merchant ships of Nepal is accorded treatment no less favourable than that accorded to ships of any other foreign country.  Presently Kolkata/Haldia are the operational entry points for Nepal’s trade with third countries.  They have requested for similar facilities at Mumbai and Kandla. 

Agreement of Cooperation to Control Unauthorized Trade:  India and Nepal have also signed an Agreement of Cooperation to Control Unauthorized Trade between the two countries.  This Agreement was last renewed for Seven years with effect from 27.10.2009. The objective of this Agreement is to check illegal trade (smuggling)  between the two countries.  This Agreement has also been renewed w.e.f. 27.10.2009 in its present form. 

Inter- Governmental Committee (IGC) at Commerce Secretary-level:  Both countries have established a forum known as Inter- Governmental Committee at Commerce Secretary-level to address the problems relating to  bilateral trade, transit facilities and prevention of Unauthorized Trade which meet as often as required.

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Agreement on South Asia Free Trade Area (SAFTA) 

The Agreement on South Asian Free Trade Area (SAFTA) came into force from 1st January, 2006.  India, Pakistan and Sri Lanka are categorized as  Non-Least Developed Contracting States (NLDCS) and Bangladesh, Bhutan, Maldives and Nepal are categorized as Least Developed Contracting States (LDCS). 

 Afghanistan which became the eighth member of SAARC during the 14th SAARC Summit held on 3-4 April 2007 in New Delhi is due to become a party to the SAFTA Agreement as an LDC member. 

Article  7 of the SAFTA Agreement provides for a   phased tariff liberalization programme (TLP) under which,  in two years, NLDCS  would bring down tariffs to 20%, while LDCS  will bring them down to 30%.   Non-LDCS will then bring down tariffs from 20% to 0-5% in 5 years (Sri Lanka 6 years), while LDCS will do so in 8 years.  NLDCs will reduce their tariffs for L.D.C. products to 0-5% in 3 years.   This TLP would   cover all tariff lines except those kept in the sensitive list (negative list) by the member states. 

The salient features of the four Annexes of SAFTA Agreement are as under:  

i. Rules of Origin: 

1. For giving preferential access to the Member Countries under SAFTA, the goods shall have undergone substantial manufacturing process in the exporting countries.  The substantial manufacturing process are defined in terms of twin criteria of Change of Tariff Heading (CTH) at four-digit Harmonized Coding System (HS) and value content of 40% (30% for LDCSs).  
   
2. Apart from the general rules, to provide for Products-Specific Rules (PSR) for 191 tariff lines to accommodate the interest of LDCSs given their limited base for natural resources and undiversified industrial structure. The Products Specific Rules have been provided clearly on technical grounds i.e. where both inputs and outputs are at the same four-digit HS level. 

ii. Sensitive List: 

(a)      In terms of Article Rule 7(3)(a) of SAFTA Agreement, the tariff liberalization Programme of SAFTA would not apply to the tariff lines included in the sensitive lists. The summary of the sensitive list are as under:-

The summary of the Sensitive Lists are as under:

(b)     India has offered Bangladesh duty free  market access for 8 million pieces of Garments, three million pieces of using fabrics from India an additional three million garments with the   condition of using fabrics of either Indian or Bangladesh origin and a further two million pieces  with out any condition.

 iii. Mechanism for Compensation of Revenue Loss (MCRL) for the Least Developed Contracting States: under clause (e) of Article 11 with following main features: 

1. The compensation to LDCSs, except to Maldives, would  be available for four years; to Maldives it would be for six years.  The MCRL to Afghanistan,    will also be at par with Maldives.
   
2. The compensation would  be in the form of grant in US dollar.
   
3. The compensation shall be subject to a cap of 1%, 1%, 5% and 3% of customs revenue collected on non sensitive items under bilateral trade in the base year, i.e., average of 2004 and 2005. 
   The compensation shall be administered by the SAFTA Committee of Experts as per the Administrative Arrangements defined in this Annex.  

iv. Technical Assistance to Least Developed Contracting States in agreed areas. under Article 11 (d) of Agreement of SAFTA

The main areas  covered being -  capacity building in standards, product certification, training of human resources, data management, institutional upgradation  , improvement of legal systems and administration, customs  procedures and trade facilitation, market development and promotion.  

Implementation of SAFTA Agreement:

(a) Tariff Concessions granted under the SAARC Preferential Trading Arrangement (SAPTA) would cease for the LDC Member States once the Non-LDCSs complete the Trade Liberalization Programme (TLP) for LDCSs within three years.  If any items, on which SAPTA concessions are available to LDCSs, appear in the Sensitive List of Non-LDCSs, they shall maintain the same level of concessions through derogation under Article 7(3)(a) and indicate the same in their respective Sensitive Lists, and  if the items under TLP enjoy tariff preferences under SAPTA, the Non-LDCS shall reduce their tariff on those items to a rate not higher than the rate applicable for LDCS under SAPTA on the date agreed for base rate for TLP.

(b) The base rate for the purpose of Tariff reduction to be MFN applied rate existing as on 1^st January, 2006. 

(c) Commencement of SAFTA Trade Liberalization Programme (TLP):    The TLP became operational   from 1st July 2006  with the condition that the TLP for the first two years would be completed by 31st December, 2007, i.e. within two years of SAFTA coming into force.

(d) India, with a view to providing greater market access to its neighbouring least developed countries, unilaterally reduced tariffs to zero per cent for LDCS countries of SAFTA with effect from 1.1.2008 thereby completing the SAFTA tariff liberalization for these countries one year ahead of  31.12.2008 stipulated in the SAFTA Agreement.  The notifications regarding tariff concessions granted by India under SAFTA can be accessed in the website    http://cbec.gov.in.

(e) The notifications issued by  Pakistan  for SAFTA tariff concessions  have an India specific-rider that Indian imports into Pakistan would continue to be as per their Positive List of importable items from India which at present consists of 1938 item. 

For more details of this Agreement  Visit SAARC website http://www.saarc-sec.org.

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India-EU Broad Based Trade and Investment Agreement negotiations

On 28th June 2007, India and the EU began negotiations on a broad-based Bilateral Trade and Investment Agreement (BTIA) in Brussels, Belgium. 

These negotiations are pursuant to the commitment made by political leaders at the India-EU Summit held in Helsinki on 13 October 2006 to move towards negotiations for a broad-based trade and investment agreement. India and the EU expect to promote bilateral trade by removing barriers to trade in goods and services and investment across all sectors of the economy. Both parties believe that a comprehensive and ambitious agreement that is consistent with WTO rules and principles would open new markets and would expand opportunities for Indian and EU businesses.  To achieve this objective,  Eight rounds of negotiations have been alternately held at Brussels and New Delhi respectively, the  8^th Round was held during January 25-29, 2010.  The negotiations cover Trade in Goods, Trade in Services, Investment, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Rules of Origin, Trade Facilitation and Customs Cooperation, Competition, Trade Defence mechanism,  Government Procurement, Dispute Settlement, IPR & GIs. 

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India-European Free Trade Association (EFTA) Negotiations on broad-based Bilateral Trade and Investment Agreement        

The European Free Trade Association (EFTA) comprises Switzerland, Iceland, Norway & Liechtenstein. These countries are not part of the European Union (EU). Recognizing the need for enhancing bilateral trade, a Joint Study Group between India and EFTA was established and mandated to take a comprehensive view of bilateral economic linkages between India and EFTA, covering among other, trade in goods and services, investment flows, and other areas of economic cooperation, and to examine the feasibility of a bilateral broad based trade and investment agreement.

                Based on the conclusions of JSG, negotiations commenced in October 2008 for the India-EFTA broad based Trade and Investment Agreement. Four rounds of negotiations have been held so far, in addition to the meeting of Experts held in August 2009.  The Fourth Round was held in September 2009.   

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Global System of Trade Preferences (GSTP)

TheAgreement establishing the Global System of Trade Preferences (GSTP) among Developing countries was signed on 13th April, 1988 at  Belgrade following  conclusion of the First Round of Negotiations. The GSTP came into being after a long process of negotiations during the Ministerial Meeting of the Group of 77, notably at Mexico City in 1976, Arusha in 1979, and Caracas in 1981.  The Ministers of Foreign Affairs of the Group of 77 in New York set up the GSTP Negotiating Committee in 1982.  The New Delhi Ministerial meetings, held in July 1985, gave further impetus to the GSTP negotiation process.  The Brasilia Ministerial Meeting held in May 1986 launched the First Round of GSTP Negotiations.  At the conclusion of the First Round in April 1988 in Belgrade, the GSTP Agreement was signed on 13 April 1988.  The Agreement entered into force on 19th April 1989.  Forty-four countries have ratified the Agreement and have become participants.   The GSTP establishes a framework for the exchange of trade concessions among the members of the Group of 77.   It lays down rules, principles and procedures for conduct of negotiations and for implementation of the results of the negotiations. The coverage of the GSTP extends to arrangements in the area of tariffs, para-tariff, non-tariff measures, direct trade measures including medium and long-term contracts and sectoral agreements. One of the basic principles of the Agreement is that it is to be negotiated step by step improved upon and extended in successive stages 

2.   The GSTP Negotiating Committee at the Senior Officials’ level also met at Accra on the sidelines of the UNCTAD XII Ministerial Conference and agreed on; a) participants agreed to carry out negotiations on the basis of across-the-board, line-by-line, linear cut of 20 to 40 per cent on dutiable tariff lines, to be combined with request-and- offer and/or sectoral negotiations; and b) agreement was reached among participants to assume commitments on at least 70% of dutiable tariff lines. 

3.   The GSTP Negotiating Committee is expected to meet several times during November 2009 to move the negotiations ahead by trying to form a consensus on the modality of tariff concessions. 

4.   Special Ministerial Session of the GSTP Negotiating Committee held in Geneva on 2 December 2009. A copy of the Ministerial Declaration on Modalities adopted by the Session is also enclosed.

5.   The modalities on market access adopted by the Ministers is as under:

·         Across-the-board, line-by-line, linear cut of at least 20% on dutiable tariff lines; 

·         Product coverage to be at least 70% of dutiable tariff lines; 

·         Product coverage shall be 60% for participants having more than 50% of their national tariff lines at zero duty level; 

·         Tariff cuts shall be made on the MFN tariffs applicable on the date of importation. Alternatively, participants may choose to apply the cuts on the MFN tariffs applicable on the date of conclusion of the Third Round; 

·         The Negotiating Committee shall also consider proposal for revision of the GSTP rules of origin. 

6.   The Ministers have also fixed a time-line of end-May 2010 for participants to exchange their offers and 30 September 2010 for finalisation of the schedules of concessions. 

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Asia Pacific Trade Agreement (APTA)

The Asia-Pacific Trade Agreement (APTA), previously named the Bangkok Agreement, signed in 1975 as an initiative of ESCAP, is a preferential tariff arrangement that aims at promoting intra-regional trade through exchange of mutually agreed concessions by member countries. APTA has five members namely Bangladesh, China, India, Republic of Korea, Lao People's Democratic Republic and Sri Lanka. ESCAP functions as the secretariat for the Agreement. 

2.    During the Second Session of the Ministerial Council at Goa on 26 October 2007 the following important decisions were taken :

(i)    To launch the 4th Round of Negotiations;

(ii)   To adopt modalities for extension of negotiations in other areas such as non-tariff measures, trade facilitation, services, and investment; 

(iii)  A common set of Operational Procedures for the Certificate and Verification of the Origin of Goods for APTA was approved and it was decided that the same would be implemented w.e.f. 1st January, 2008; and 

(iv)  To explore the possibilities of expanding the membership of the Agreement.

3.   Pursuant to the directions of the Ministers, the Standing Committee initiated negotiations in the areas of tariff concessions with an average of 50% MOP on 50% of tariff lines along with framework agreements on (i) trade facilitation (ii) trade in services (iii) investments and (iv) non-tariff measures.

4.   The Framework Agreements on Trade Facilitation, Services and Investments have been agreed upon.

5.   Negotiations are still underway in the areas of (i) tariff concessions and (ii) non-tariff measures.

6.   The 3rd Session of the Ministerial Council was held in Seoul, Republic of Korea on 15 December 2009. The Indian delegation was led by Shri Jyotiraditya M. Scindia, Hon’ble Minister of State for Commerce and Industry.  Mongolia, which has expressed its interest in acceding to APTA, was also invited to participate as an observer to the Session.

7.   While noting satisfaction at the conclusion of the three framework agreements on trade facilitation, services and investments, the Ministers directed the Standing Committee to expedite the negotiations in the areas of tariff concessions and non-tariff measures. The Ministers also directed the Standing Committee to commence negotiations on specific commitments in services and investments.