Government to recalibrate FTA strategy to ensure economic and strategic benefits


(This story originally appeared in on Jul 22, 2020)

NEW DELHI: The government is recalibrating its strategy on entering into free trade agreements (FTAs) in a bid to ensure that the treaties provide economic and strategic benefits. Separately, the focus is on alliances with “peaceful” countries, especially those with which India does not have a significant trade deficit.

Discussions have begun at the highest level with finance minister Nirmala Sitharaman, commerce and industry minister Piyush Goyal and chairman of the Economic Advisory Council to Prime Minister (EAC-PM) Bibek Debroy leading the deliberations on a revamped strategy.

The three of them met on Monday, which coincided with external affairs minister S Jaishankar’s statement that FTAs haven’t helped India build capacity. “I think there are ways of engaging the world which do not necessarily have to be FTA-centric,” the minister said at an event.


There is expected to be greater thrust to FTAs with Australia and the European Union, with the UK and the US among countries with which India will engage more aggressively, while recognising that there is no need to rush into a deal.

Goyal has already indicated a keenness to rework the agreements with Asean and Japan, as imports are seen to have gained more than exports due to a sharp reduction in tariffs. At the same time, India was expected to benefit more on the services front, with software professionals and nurses getting easy access to markets such as Japan, Singapore, South Korea and Malaysia.

Off late, Singapore has been a miser in giving out fresh visas, citing domestic issues, while Japan has denied access to Indian nurses, pointing out a lack of language skills. What has also complicated matters is the presence of Chinese companies in Asean countries, which use the benefit of lower tariffs to route goods into India.

In any case, the government suspects that some Chinese goods are merely repackaged in a few of the FTA countries and shipped to India without any value addition.

The finance ministry also has concerns over loss of revenue due to the trade agreements. Besides, these countries have been reluctant to address India’s concerns, prompting the government to review the treaties amid suggestions that some of them should be terminated. Going forward, sources indicated, India will harden its stance and ensure that its companies are equal partners in the trade deals.

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