India's Trade Deals With Oman, UK, EFTA Bloc Reflect Worldwide Economic Integration: GTRI

GTRI emphasised that free trade agreements have emerged as crucial tools for India's economic growth and its integration into the global market

The successful finalisation of India's proposed trade agreements with the UK, Oman, and the four-nation bloc EFTA in Europe will underscore its dedication to trade liberalisation and economic integration. This commitment comes at a crucial juncture, as global tendencies towards protectionism are on the rise, according to a report by the economic think tank Global Trade Research Initiative (GTRI).

GTRI emphasised that free trade agreements (FTAs) have emerged as crucial tools for India's economic growth and its integration into the global market. It further stated that these nations and the bloc are keen to conclude these agreements before the upcoming general elections, noting that the negotiations are nearing completion.

The signing of these three agreements will increase India's FTA count from 13 to 16, and the number of countries with comprehensive FTAs will rise from 22 to 28. Additionally, India has six small-scale PTAs (preferential trade agreements). The most recent pact was signed with Australia in March 2022.

"Everyone wants to do an FTA with India. The main reason for this is India's high import duties, which make it difficult for these countries to access India's large and rapidly growing market," the report states.

The report further highlighted that the three agreements with the UK, Oman, and the European Free Trade Association (EFTA) indicate a transition in India's preference for trade alliances from east to west. Notably, India's key FTAs have traditionally been with nations situated in the eastern region, including ASEAN, Japan, South Korea, and Australia.

Across all new FTAs, India is engaging in negotiations covering various non-trade aspects such as sustainable development, digital economy, intellectual property rights (IPR), labour standards, gender equality, support for micro, small, and medium-sized enterprises (MSMEs), government procurement, and competition policy.

"India is reluctantly changing its earlier approach to focus only on traditional market access subjects like merchandise and services trade to also include new issues. Most new issues restrict policy space for domestic regulations by forcing the adoption of developed country regulations," GTRI Founder Ajay Srivastava said.

He mentioned that discussions for the trade agreement with EFTA (EFTA members include Iceland, Liechtenstein, Norway, and Switzerland) commenced in January 2008. Following 20 rounds of negotiations, they are nearing completion.

India faces a substantial trade deficit with EFTA, particularly with Switzerland. In the fiscal year 2023, India's imports from EFTA surpassed its exports significantly, resulting in a trade deficit of USD 14.8 billion, he noted.

Furthermore, it was highlighted that gold, representing 80 per cent of India's imports from Switzerland, plays a pivotal role in this agreement. "The complexities surrounding the inclusion of gold in the FTA and its compliance with Rules of Origin conditions pose a significant challenge. EFTA's demand for TRIPS-plus (trade related aspects of intellectual property rights) protection for strengthening intellectual property rights in India could conflict with India's domestic regulations and interests," it said.

Srivastava noted that India could significantly boost its exports following the Free Trade Agreement (FTA) since currently, more than 80 per cent of its goods enter Oman with an average import duty of 5 per cent, and there are few trade barriers.

According to the report, there are over 6,000 India-Oman joint ventures in Oman, representing an estimated investment exceeding USD 7.5 billion. Indian companies are the primary investors in the Sohar and Salalah Free Zones of Oman.

Oman's import duties vary from 0 to 100 per cent, with specific duties also in place. Certain products such as meats, wines, and tobacco items incur a 100 per cent duty.

"Government procurement is one of the limited policy tools still available to the government to incentivise domestic producers. India should not agree to stop preferential treatment to domestic suppliers in the government procurement chapter," reveals the report.

Moreover, it indicated that India's trade pact with the UK is poised to benefit various domestic export sectors, including silver, metal scrap, petroleum products, alcohol, machinery, and medicine.

"India may reduce, but not eliminate, tariffs on automobiles and Scotch whiskey from the UK. For luxury cars like those from JLR, Bentley, Rolls-Royce, and Aston Martin, the UK might want zero tariffs, but India could reduce them from 100 per cent to 50 per cent. India might also consider allowing a few thousand units at a 25 per cent tariff," he opined.

According to the report, India has the potential to gradually decrease tariffs from 150 per cent to 50 per cent over a span of several years, mirroring the approach taken with Australian wines. It noted that these sectors in India have historically enjoyed high tariff protection, surpassing even that of agricultural products.

"Significant tariff cuts, especially for wines, will help the Indian market grow. In the UK too, India may face challenges in obtaining a large number of short-duration business visas for its professionals, as the UK erroneously associates it with immigration, a sensitive issue since Brexit,” the report said.