India must negotiate well on free trade pacts: Experts

'Reduction in tariff equally crucial while working towards any agreement'

Experts are of the opinion that resolving contentious issues would be tricky even as India is revamping its strategy on freetrade agreements (FTAS) with top trading partners.

While negotiations on trade deals with the European Union (EU), Canada, Gulf Cooperation Council (GCC) nations and Israel are on, New Delhi is eyeing an ‘early harvest’ deal with countries such as Australia and the UK.

Experts say that reduction in tariff is equally crucial while working towards any deal.

“If we need a trade agreement to be deeper and really beneficial for our industry, we need to be well prepared on what we want from our trading partners and what we are willing to give in return. Unless we can give more than what we had given in the past, we cannot sign deals,” said Arpita Mukerjee, professor at Indian Council for Research on International Economic Relations (ICRIER).

Mukherjee added that if a trade agreement is to move forward, New Delhi should not restart discussions in areas where consensus has been reached. “Let’s take the case of the EU. If India and the EU reached an agreement on over 70 per cent tariff lines in 2013, it would be better not to touch them. Start discussion around areas where there were differences. It is only then can we move faster towards signing a deal,” she said.

On Thursday, commerce and industry minister Piyush Goyal had said that India is at a ‘positive momentum’ with respect to inking trade deals with the UK, Australia, Canada, Bangladesh, EU, GCC nations and Israel.

In the past, trade deals with Australia and the EU were put on hold as they were not able to reach a consensus due to differences on various issues. As far as the UK is concerned, government officials have said that preparatory work will be elaborate since negotiations are starting for the first time owing to the country’s exit from the EU.

India’s emphasis on fast tracking trade deals comes after its decision to walk away from the China-backed trade bloc Regional Comprehensive Economic Partnership (RCEP), which is also the world's biggest free trade grouping.

In this backdrop, and with a consistent surge in exports over the last few months, experts believe that it is even more important to sign such deals.

“These markets are very important for India’s exports, more so for employmentintensive sectors. We should also look at FTAS as these will be effective in attracting investment, under the PLI (performance-linked incentive) scheme, as we want to develop India as a global hub,” said Ajai Sahai, director-general (DG) and chief executive officer (CEO), Federation of Indian Export Organisations (FIEO).

On its part, the government has reiterated that it will accelerate trade talks with nations for fair and balanced pacts, and not repeat the ‘same mistakes’ of the past.

Recently, Goyal sent a strong message to the industry and urged it to become more competitive and not just keep seeking protection from the government.

“We are engaging with the industry to ensure that FTAS are fairly and equitably crafted. At the same time, FTAS cannot be one-way traffic. We also need to open our markets, if we want a larger share in foreign markets. So, we need to identify areas where we can withstand competition,” Goyal told export promotion councils last week.

Earlier, certain sectors such as the dairy industry had expressed apprehensions over an India-eu FTA.

“We have not yet heard from the government regarding the dairy sector (being reconsidered as part of the FTA). So far, the EU has only been exporting dairy products to India and not importing. We had told the government that dairy should be kept out of the India-eu FTA purview,” said R S Sodhi, managing director (MD) of Gujarat Cooperative Milk Marketing Federation (GCMMF), popularly known as Amul.

According to sector experts, Indian dairy products are costlier than the EU.

This could lead to increased competition for the domestic industry.