Exporters less than thrilled by FTAs
By By Jagdeep Worah | 22 Dec 2012
While the government's policy-makers see the FTAs and other trade liberalisation pacts with South-East Asian nations, recently inked or on the anvil, as 'transformational', Indian exporters are more sceptical about the value of such agreements, which they see as one-way traffic. While facilitating imports from nations like those of ASEAN, they do not help exports much.
This is because most ASEAN nations already have low tariff barriers, and lowering them a little further for Indian exports won't make much difference. On the other hand, if India lowers tariff barriers by a similar percentage, it will give a great incentive to exporters from those countries.
"The Comprehensive economic cooperation agreements (CECA) or comprehensive economic partnership agreements (CEPA) or free trade agreements (FTA) have facilitated more imports than exports from India. The recent export figures point to revisiting our strategy for exploiting the markets with which we have signed FTA, CECA or CEPA," the president of the Federation of Indian Export Organisations (FIEO), M Rafeeque Ahmed, said earlier this month in anticipation of this week's events.
India's exports to ASEAN went down to $14.66 billion in first six months of the financial year as compared to exports of $36.74 billion achieved in 2011-12. A further disaggregation of exports shows that exports to Singapore, Japan, Korea, Malaysia and Thailand in April-September was much less than the pro-rata exports in the corresponding period in 2011.
"The idea of signing the FTAs was to increase exports, but we have not seen the benefits. We should not just sign and leave it ... we must relalise the potential areas that exporters can tap, something that the government should have done," Ahmed said.
Even officials in the commerce department who are responsible for negotiating the trade agreements have long complained that the benefits actually accrue to India's trading partners rather than to India.
They said that countries such as Japan and ASEAN members have low average tariffs, and any further reduction in duties cannot be significant. In contrast, India agrees to substantially lower its duties - and even remove them for thousands of items - in return for more service sector gains; a prospect that doesn't usually materialise.
