Trade Agreements in India

A Hot Tip about Trade Policy and Regulations in India

Posted on: 5 Jan 2010

Trade Agreements


India has entered into bilateral and regional trading agreements over the years. These agreements, besides offering preferential tariff rates on the trade of goods among member countries, also provide for wider economic cooperation in the fields of trade in services, investment, and intellectual property.


The preferential arrangement/plans under which India is receiving tariff preferences are the Generalized System of Preferences (GSP) and the Global System of Trade Preferences (GSTP). Presently, there are 46 member countries of the GSTP and India has exchanged tariff concessions with 12 countries on a limited number of products.


Other such preferential arrangements include the SAARC Preferential Trading Agreement (SAPTA), the Bangkok Agreement and India–Sri Lanka Free Trade Agreement (ISLFTA). These arrangements/ agreements prescribe Rules of Origin that have to be fulfilled for exports to be eligible for tariff preference.


India and Singapore have signed a Comprehensive Economic Cooperation Agreement, which is an integrated package of agreements embracing trade in goods, services, investments and economic co-operations in education, science and technology, air services, and intellectual property. The agreement, which came into effect on August 1, 2005, provides wide-ranging exemptions and reductions on basic customs duty on products imported from Singapore into India.


The Indian Ministry of Commerce projected recently that 60 percent of India's future trade would be accounted for by free trade agreements (FTAs), with such countries as Paraguay, Argentina, Brazil, Pakistan and even China. The Indian government is in talks with the Mercusor (a trade association comprising Argentina, Brazil, Chile, Paraguay and Uruguay) and the SACU (South African Customs Union) and is looking to increase bilateral engagements with more countries. In a major policy shift, the government has decided to convert all Preferential/Free Trade Agreements (PFA/FTA) into Comprehensive Economic Cooperation Agreements (CECA). This goes beyond the Indian government's bid in recent months to embrace bilateralism aggressively. The decision seems to be aimed at mollifying the World Trade Organization (WTO), which cautioned India against negotiating exclusively PFAs/FTAs. PTAs/FTAs usually involve structured reduction in tariffs between two countries.


CECAs would cover preferential relaxation of FDI rules vis-à-vis the partner country, tax holidays on investment and income, easing of visa restrictions etc. Trade in services too would come under the purview of CECA. The proposed free trade agreements (FTAs) with Thailand, Mercosur and Asean would now be made CECAs. This has already been done with Sri Lanka.


The preferential trade agreement (PTA) with the South Africa Customs Union (SACU) would be merged with new CECA with South Africa. The Minister added that efforts were on to convert the SAARC Preferential Trade Area into a full-fledged FTA to be called SAFTA. This came into effect in January 2006. Other proposed alliances with Russia, China and Israel would also be CECAs, rather than mere FTAs. The proposed agreement with the Gulf Cooperation Council (GCC) is envisaged to be a CECA, as is the India-Singapore agreement.


The Indian government has also nominated certain authorized agencies to issue a Non Preferential Certificate of Origin in accordance with Article II of International Convention Relating to Simplification of Customs formalities, 1923. These Certificates of Origin evidence the origin of goods and do not bestow any right to preferential tariffs. India and the U.S. are not part of any specific free trade conglomerate of nations, and this, experts feel, is an imperative to bolster both trade and partnership between the two countries.



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Posted: 05 January 2010

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