There is a paradigm shift in the global trade architecture thanks to the rising number of free trade agreements (FTAs). FTAs are of little use unless they serve their purposes well. Therefore, a careful and calibrated approach is required for having a fruitful FTA.
Thanks to the meteoric rise in the number of FTAs being signed globally, there is a paradigm shift in the global trade architecture. India, too, can’t afford to stay away for too long from this shift. Early 2022, for example, saw a change in stance of India’s approach towards the FTAs. India signed a Comprehensive Economic Partnership Agreement (CEPA) with the UAE in a record 88 days and also signed an Economic Cooperation Trade Agreement (ECTA) with Australia, which is well poised to become a full- fledged FTA by the end of 2022.
Agreements concluded with Australia and the UAE hold great strategic significance too. Both India and Australia are part of the QUAD and are partners in the Supply Chain Resilience Initiative (SCRI). On the other hand, FTA with UAE would facilitate India’s deeper engagement with the Gulf-Cooperation Council (GCC) which is a huge potential market for India’s manufactured goods and can also cater to the ever-increasing needs of energy sector in India. Undoubtedly, these agreements are a significant positive stride, showing promise for constructive engagements with India’s trading partners and gives a glimmer of hope to expand the horizon of business operating across different sectors.
But, it needs to be understood that FTAs are not a zero-sum game. FTAs are of little use unless they serve their purposes well. A classic example would be India’s Comprehensive Economic Partnership Agreement with Japan, where despite having zero tariffs India’s apparel exports to Japan significantly went down in comparison with its competing economies like China, Vietnam and Bangladesh. Therefore, a careful and calibrated approach is required for having a fruitful FTA.
The road ahead lies in how well the Indian business entities equip themselves to grab a pie in the UAE and the Australian markets where they will face stiff competition from countries like China, Japan, Korea, EU etc. already having or negotiating an FTA with Australia or the UAE. Most of the write-ups or opinion pieces have nicely put forth sectors and the areas which will benefit Indian businesses the most. However, to tap those sectors and reap optimum benefit out of it, equally important is to have a holistic understanding of some of the key issues, their legal and the regulatory framework, and compliance requirements which exists in those countries.
Indian businesses can look at few things mentioned below which can pave their way to emerge as a global leader in the market.
Last, but not the least, companies should be following on the famous saying “before you enter the market you must know where the exit lies”. Many businesses before they blossom often face abrupt failures. Therefore, it becomes very crucial for businesses which are eyeing to enter into these markets to be well versed with all the legal and regulatory requirements related to winding up or taking an exit if their business fails or simply it can’t be carried out further.
To conclude, a nuanced understanding of the aforesaid would act an impetus for businesses desirous of expanding their footprints beyond their borders to hit the bull’s eye.
Presently working as a Senior Research Fellow (Legal) at Department of Commerce, Ministry of Commerce and Industry, Government of India. Views expressed are personal.
Well articulated. Very lucidly explained.
Well written..keep it up..
Very well written. Highlighting areas which are less talked about yet needs attention.
Great read. Very aptly written.
You must be logged in to post a comment.
Stay ahead in the dynamic world of trade and commerce with India Business & Trade's weekly newsletter.