Trade

International Trade

India's Current Engagements in RTAs

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

             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 Prime Minister of India made the following major announcements:- 

i.   India will extend special & differential trade treatment to ASEAN countries, based on their level 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 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 ASEAN and India cover FTA in Goods, Services, Investment and other areas of Economic Cooperation. The Agreement also provided for an Early Harvest Programme (EHP) covering areas of Economic Cooperation and a common list of items for exchange of tariff concessions as a confidence building measure. However, due to difference of opinion on Rules of Origin, the EHP could not be implemented.  

5.       After 23 meetings of the ASEAN-India Trade Negotiating Committee (TNC) , India  and the ASEAN have signed the following Agreements on 13th 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. 

6.   These Agreements are available on this web-page under the heading ‘Agreements already concluded’. 

7    All the ASEAN countries have implemented the above Agreement. 

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

 India-Sri Lanka Free Trade Agreement (ISLFTA), which was signed in 1998, has become operational in 2000.  

2.      Sri Lanka is India’s largest trading partner country in the SAARC region.   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.  

3.    The main Indian exports to Sri Lanka are Petroleum (Crude & Products), Transport Equipments, Cotton, Yarn Fabrics, Sugar, Drugs Pharmaceuticals & Fine Chemicals. The main 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 with a view to widen the ambit of ISLFTA and include Services and Investment. Report of JSG was submitted in October, 2003. Based on the recommendation of the JSG, CEPA negotiations were started in February, 2005 and concluded in July 2008 after 13 rounds of negotiations. But due to reservations expressed by Government of Sri Lanka, both sides have still not signed the Agreement.  

2.    Negotiations on Investment and Services have been resumed in December, 2010. 

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India-Thailand Comprehensive Economic Cooperation Agreement (CECA) negotiations 

        In November 2001, the Prime Minister of Thailand, Dr. Thaksin Shinawatra and the Prime Minister of India had agreed to set up a Joint Working Group (JWG) to undertake feasibility study of a Free Trade Agreement (FTA) between India and Thailand. The JWG had observed that the policy regimes in both the countries were conducive to more intensive bilateral economic integration and a FTA 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 JWG has concluded that the proposed FTA between India and Thailand is feasible, desirable and mutually beneficial. Accordingly, a Joint Negotiating Group (JNG) 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 covers FTA in Goods, Services and Investment and other areas of Economic Cooperation. The Framework Agreement also provided for an Early Harvest Scheme (EHS) for elimination of tariff on a fast track basis on 82 items of export interest to the sides.   

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

4.     The India-Thailand Trade Negotiating Committee (TNC) has been constituted to negotiate a comprehensive FTA covering Trade in Goods, Trade in Services, Investment, Rules of Origin, Dispute Settlement Mechanism etc.  So far, 21 meetings of the TNC have been held".

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     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.   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 India’s economic cooperation with South East Asian countries.   

2.     The 2nd BIMSTEC Summit was hosted by India in New Delhi on 13 November 2008.  It was preceded by the 11th Ministerial Meeting and the 13th Senior Official’s Meeting on 11-12 November 2008. The 2nd Summit took place four years after the 1st BIMSTEC Summit which was held 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.      At the conclusion of the 2nd Summit, the leaders expressed satisfaction at the progress that has been made in the negotiations for a FTA in trade in goods and called for its early conclusion. The leaders welcomed the establishment of the Centre for Energy and the Centre for Weather and Climate in India and the BIMSTEC Cultural Observatory in Bhutan. They also expressed concern at the threat posed by terrorism to the region and expressed satisfaction at 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 held 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.

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

 2.       2 rounds of negotiations have been held so far.  The 1st round of negotiations was held in Riyadh on 21st – 22nd March, 2006.  During this round, GCC side has agreed to include Services, Investment and general economic cooperation along with goods in the GCC-India FTA.   Further, the Agreement on the modalities for negotiations was finalized.  The 2nd round of negotiations was also held in Riyadh on 9-10 September, 2008.   Proposed Tariff Liberalization Scheduled was discussed during this round. It was further decided that the 3rd round of negotiations would be held in Delhi.

 3.      The dates for 3rd round of negotiations are being finalized in consultations with Gulf Cooperation Council Secretariat.

          A Joint Study Group (JSG) was constituted in November 2003 to study modalities of the CECPA.  The JSG 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 JSG report on CECPA and both sides agreed to set up a High Powered Negotiating Team for processing and finalizing the recommendations of the JSG report within a 12 month period. Accordingly, an Empowered Team was constituted for negotiating a CECPA with Mauritius.  10 rounds of negotiations have been held so far by the empowered team.

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

4.     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, including the bilateral Double Taxation Avoidance Convention (DTAC) and Bilateral Investment Promotion & Protection Agreement (BIPA). 

5.      However, the 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 10th round of negotiations which was held on 23-24 October, 2006. India’s proposal for modifications to India-Mauritius DTAC has not so far been accepted by Mauritius. Hence, India has put on hold the CECPA negotiations until India’s proposal for modifications to the India-Mauritius DTAC are accepted by Mauritius.

6.      Following Memorandum of Understanding  related to the CECPA were signed by India and Mauritius in October, 2005 under the aegis of CECPA :   

1. MOU in the field of Consumer Protection and Legal Metrology.

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

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

4. MOU on Preferential Trade Agreement (PTA)

        South African Customs Union (SACU) comprises of South Africa, Lesotho, Swaziland, Botswana and Namibia.  So far, 5 rounds of negotiations of India-SACU PTA have been held.  The 1st round of technical discussions for India-SACU PTA took place in Pretoria on 5th–6th October, 2007.  The 2nd round of PTA negotiations was held at Walvis Bay, Namibia on 21-22 February, 2008 while 3rd round was held at New Delhi on 25th–27th November, 2008  During the 3rd round of negotiations, a Memorandum of Understanding (MOU),  was signed on 26th November, 2008 by the representatives of India and SACU to facilitate negotiations. 4th round of negotiations was held at Pretoria on 7th – 8th October, 2009. 

 2.       The 5th round of negotiations was held during 7th – 8th October, 2010.   During this round of negotiations, SACU has presented a revised text of the PTA as a working document. Further, both sides have agreed on the following:- 

     (i) The text on ‘Dispute Settlement Procedures’  

    (ii) To use the text proposed by India on ‘Customs Cooperation and Trade Facilitation’ and TBT as the working text 

     (iii) To use the text on ‘SPS’ proposed by SACU as the working text. 

Second Review of India-Singapore Comprehensive Economic Cooperation Agreement (CECA)

          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. The details of the India-Singapore CECA are available on this web-page under the heading ‘Agreements already concluded’.  

 2.       India-Singapore CECA is reviewed from time to time.  1st Review was concluded on 1st October 2007.   

3.          The 2nd Review of India-Singapore CECA was launched by the Commerce & Industry Minister, India on 11th May, 2010.   The 1st Secretary level meeting of the 2nd Review was held in Singapore on 3rd August, 2010. Thereafter, Working Group meetings on Goods and Services & Investment were held time to time, with the last meeting held in Singapore in September 2011".

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Expansion of India-Chile Preferential Trade Agreement (PTA) 

              A Framework Agreement to promote economic cooperation between India and Chile was signed on January 20, 2005 which envisaged for a Preferential Trade Agreement (PTA) between the two countries as a first step. 

2.       The India-Chile PTA was signed on 8th March, 2006 and has become operational on September, 2007.  The details of India-Chile PTA are available on this web-page under the heading ‘Agreements already concluded’.  

3.           Expansion of  the PTA - During the 1st meeting of the Joint Administrative Committee (JAC), which was held in New Delhi in  February, 2009 to review the implementation of India-Chile PTA,  both sides agreed to initiate the process of deepening and widening of the agreed lists of the existing  India- Chile PTA.  The 1st 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.   

4.        In the 2nd meeting on expansion of India-Chile PTA, which was held in August, 2010, both sides discussed the further modalities of the expansion of the PTA including exchange of initial offer lists .  

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MERCOSUR Preferential Trade Agreement (PTA)  Negotiations 

              MERCOSUR is a trading bloc in South America region comprising of Argentina, Brazil, Paraguay and Uruguay. It was formed in 1991 with the objective of free movement of goods, services, capital and people and became a customs union in January 1995. MERCOSUR’s role model is European Union. It is the third largest integrated market after the European Union (EU), North American Free Trade Agreement (NAFTA).  

2.          A Framework Agreement was signed between India and MERCOSUR on 17th June 2003 at Asuncion, Paraguay to create conditions and mechanisms for negotiations by granting reciprocal tariff preferences in the first stage and, in the second stage, to negotiate a free trade area between the two parties

3.           As a follow up to the said Framework Agreement, a PTA between India and MERCOSUR was signed in New Delhi on January 25, 2004 and five annexes to this Agreement were signed and incorporated on March 19, 2005. The first two Annexes of the PTA relate to the list of products on which the two sides have agreed to give fixed tariff preferences to each other. The remaining three Annexes relate to the Rules of Origin, Preferential Safeguard Measures and Dispute Settlement Procedures respectively. By this PTA, India and MERCOSUR have agreed to give tariff concessions, ranging from 10% to 100% to the other side on 450 and 452 tariff lines respectively. The India-MERCOSUR PTA has become operational with effect from 1st June, 2009.   

4.         The details of the India-MERCOSUR PTA are available on this web-page under the heading ‘Agreements already concluded’.  

5.          Expansion of India-MERCOSUR PTA - Through  IBSA Declaration made by the Heads of India, Brazil and South Africa in 2006, it was agreed that India-MERCOSUR PTA would be expanded by increasing the number of products covered and increasing the tariff concessions agreed by each side.  

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India-Pakistan Trading Arrangement

            India and Pakistan have no formal trade agreement.  India has granted Most Favoured Nation (MFN) 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, please visit Government of Pakistan website  http://www.commerce.gov.pk.   

 2.      Both countries have constituted a Joint Study Group (JSG) at the level of Commerce Secretary.  Apart from the JSG, the issues pertaining to commercial and economic cooperation are 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.   

 3.        Bi-lateral trade and commerce talks were held between Commerce Secretaries of India and Pakistan on 27-28 April 2011, in Islamabad. The two sides, inter-alia, agreed to improve trade infrastructure and expand trade through Attari-Wagah land route. It was agreed to set up a Working Group to address and resolve clearly identified sector-specific barriers to trade. Both sides agreed to undertake new initiatives to enable trade in electricity and Bt. Cotton seeds as also expand trade in petroleum products. It was agreed that cooperation in Information Technology sector would be encouraged through the private sector. Both sides agreed to facilitate grant of Business Visas to encourage expansion of trade. Pakistan recognized that grant of MFN status to India would help in expanding bilateral trade relations. It agreed to replace its present ‘Positive List’ with ‘Negative List’, by October 2011.

4.      Joint Working Groups have been set up for Customs cooperation, trade in electricity and trade in all types of Petroleum Products. A Joint Working Group on ‘Economic and Commercial Cooperation & Trade Promotion’ to be co-chaired by the Joint Secretaries of the respective Departments of Commerce has been set up for reviewing the implementation of the decisions taken during the meeting of the two Commerce Secretaries and also other trade promotion issues.

5.       Pakistan recognized that grant of MFN status to India would help in expanding bilateral trade relations. It has agreed to replace its present ‘Positive List’ with ‘Negative List’, by October 2011.

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.  

2.       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.   

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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. 

2.         Based on the conclusions of JSG, negotiations commenced in October 2008 for the India-EFTA broad based Trade and Investment Agreement (BTIA). 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, Dispute Settlement and IPR.    

3.         8 rounds of negotiations have been held so far, in addition to the meeting of  Chief Negotiators (CNs) held on May 30-31, 2011. The 8th round of negotiations was held during June 14-17, 2011. 

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Global System of Trade Preferences (GSTP)

         The Agreement 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 current round of GSTP negotiations, also known as “São Paulo Round” was launched in 2004 with 22 participating countries, on the occasion of the UNCTAD XI Quadrennial Conference in Sao Paulo in Brazil. At the end of the negotiations, Ministerial Modalities were adopted on 2 December, 2009 wherein Ministers agreed to modalities based on a tariff reduction of at least 20% on at least 70% of all dutiable tariff-lines. Members who were in the process of their WTO accession namely, Algeria and Iran were to be given specific flexibilities. The modalities on market access adopted by the Ministers are 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.   

3.         Based on these modalities, intensive negotiations were held in 2010 for finalisation of the schedules of Members. During this period, Cuba, Egypt, India, Indonesia, Korea, Malaysia, Mercosur and Morocco submitted their schedules and bilateral negotiations were held to finalise the schedule. It is significant to note that India unilaterally offered a tariff reduction of 25% on 77% of its tariff lines for Least Developed Countries (LDCs).