Bilateral, Regional and Global Groupings and Agreements involving India

India’s Regional Trading Agreements

  1. Indian trade policy has made an important shift in the year 1991, when we have gone for globalisation, trade liberalisation and other market reforms. Thus year 1991, stands as a benchmark year for India’s trade policy.
  2. The next big event in World trade is setting of WTO in 1995, the successor of erstwhile GATT. WTO’s multilateral approach towards trade and as an institution of trade ombudsman is remarkable. It acts as platform between developed and developing countries to negotiate with each other.
  3. The successive rounds of WTO have made rules of trade game much transparent and nearly equal for all. But things have started to change after famous ‘Doha Round’ of 2001 gets staled.
  4. In the initial year differentiation between developed and developing countries was taken as basic principle, with larger responsibility lying on developed World. However since Uruguay round focus has shifted towards reciprocity. This has resulted in conflict between developed and developing countries over trade negotiations and subsequent staling of conferences.
  5. All these have lead to development of what is known as Regional groupings, RTAs and FTAs.
  6. Countries were signing these agreements earlier also, but they were concentrated on some part of world. These agreements give easy market access and tariff benefits to member countries.

There are many form of integration in world. Economist Jacob Viner has given his theory of ‘Custom Union’ followed by work of J.E Meade. To summarise followings are the ways of integration;

Preferential trade union; two or more countries can form a trading union and reduce tariffs on imports of each other. They maintain their individual tariffs against Rest of world.

Free trade area; two or more countries come together and abolish all tariff duties on their trade but retains individual tariffs against ROW.

Custom union; two or more countries abolish all tariff among themselves and adopts a common tariff barrier against imports of ROW.

Common market; common market is formed, when two or more countries form a custom union and in addition allows free movement of factor of production among member countries.

Economic union; it is the highest form of integration where two or more countries forms a common market and in addition proceeds to harmonise and unify their monetary, fiscal and exchange rate policies.

All of the above forms of integration have trade creation as well as trade diversion effects. To check for such diversion effects WTO has come up with most favoured nation clause, which states that,

“Any advantage, favour, privilege or immunity granted by any contacting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for territories of all other parties”.

India’s Regional and Free Trade Agreements

Agreement Member Countries Total Members Type of Agreement Start Date Coverage Area
Asia Pacific Trade Agreement (APTA) Bangladesh, China, South Korea, India, Sri Lanka 5 Preferential Trading Agreement 1976 All Goods
India-ASEAN Trade in Goods Agreement Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam and India 11 Free Trade Agreement 2010 All Goods
BIMSTEC- Bay of Bengal Initiative for Multi Sectoral Technical Economic Cooperation Bangladesh, India, Thailand, Myanmar, Sri Lanka, Bhutan and Nepal 7 Under Negotiations Under Negotiation
IBSA- India, Brazil and South Africa Agreement India, Brazil and South Africa 3 Under Negotiations Under Negotiation
SAFTA- South Asian Free Trade Agreement India, Pakistan, Nepal, Bhutan, Bangladesh, Afghanistan and Maldives 7 Free Trade Agreement 2006 All Goods
India-Sri Lanka FTA India and Sri Lanka 2 Free Trade Agreement 2001 All Goods
India-Malaysia Comprehensive Economic Cooperation Agreement India and Malaysia 2 Free Trade Agreement 2011 Goods and Services
India-Singapore Comprehensive Economic Cooperation Agreement India and Singapore 2 Free Trade Agreement 2005 Goods and Services
India-Japan Comprehensive Economic Partnership Agreement India and Japan 2 Free Trade Agreement 2011 Goods and Services
India-Korea Comprehensive Economic Partnership Agreement India and South Korea 2 Free Trade Agreement 2010 Goods and Services
India Chile FTA India and Chile 2 Free Trade Agreement 2007 All Goods
India-Afghanistan FTA India and Afghanistan 2 Free Trade Agreement 2003 All Goods
India-Bhutan FTA India and Bhutan 2 Free Trade Agreement 2006 All Goods
India- Nepal FTA India and Nepal 2 Free Trade Agreement 2009 All Goods
European Union and India FTA EU member countries Under Negotiations Under Negotiation
MERCOSUR India FTA Argentina, Brazil, Paraguay, Uruguay 5 Free Trade Agreement 2009 All Goods
India-ASEAN Trade in Services Agreement Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam and India 11 Free Trade Agreement 2015 Services
India-Thailand FTA India and Thailand 2 Free Trade Agreement 2004 All Goods
Source: Ministry of Commerce and WTO

By
Himanshu Arora
Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University

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