India will not rush into signing free trade deals: Goyal
- The UK is still pushing to advocate for a more extensive opening of the Indian economy under the free trade agreement (FTA) being negotiated.
- With general elections looming and the Model Code of Conduct (MCC) expected to come into effect soon, signing the deal before the elections appears unlikely.
Key Points of Contention
- India's high tariff regime has been a concern for trade partners, with it having one of the highest import tax rates globally.
- The UK seeks reductions in duties on cars and whisky, while India aims for improved access for its service sector workforce in the UK.
- Talks are also progressing on the proposed bilateral investment treaty (BIT).
FTA Potential and Significance
- The FTA with the UK holds significance as the first comprehensive deal with a major western country, promising deeper economic integration.
- It serves as a model for future agreements with larger western trade partners like the European Union and European Free Trade Association (EFTA).
- Economic integration with the West becomes crucial amid the global supply chain reset post-COVID-19 and efforts to diversify away from dependence on China.
Free Trade Agreement (FTA)
- An agreement between countries or regional blocks to reduce or eliminate trade barriers, through mutual negotiations with a view to enhancing trade.
- It includes goods, services, investment, intellectual property, competition, government procurement and other areas.
- This concept of free trade is the opposite of trade protectionism or economic isolationism.
- FTAs can be categorised as
- Preferential Trade Agreement
- Comprehensive Economic Cooperation Agreement (CECA)
- Comprehensive Economic Partnership Agreement (CEPA)
Impact of FTA on the Global Economy
- By blending local production with foreign trade, FTAs help boost growth in economies.
- As selected goods are produced by every country at lower costs due to FTAs, international trade increases production and consumption.
- FTAs also help diversify supply chains by making it easier for more businesses to conduct business across borders.
Prelims Takeaway
- Free Trade Agreement (FTA)
- Bilateral Investment Treaty (BIT)
- Model Code of Conduct (MCC)