Economic Survey Free Trade Agreement

“The current international trade environment offers India an unprecedented opportunity to establish a labour-intensive export trajectory similar to China`s, creating unprecedented employment opportunities for our emerging young people. Since an India with erroneous uncertainty on the trade front is unlikely to seize this opportunity, our trade policy must be a facilitator,” he adds. “China`s remarkable export performance is driven primarily by deliberate large-scale specialization in labour-intensive sectors, particularly `networked products`, where production takes place beyond multinational global value chains (GvCs). China has taken advantage of this specific strategy to export mainly to rich countries` markets. Similarly, India needs to focus on lasers to enable assembly operations on a gigantic scale in networked products.¬†Explain how the success of a free trade agreement should be measured against its objective of strengthening trade. Some analysts point out that, in the face of strong global protectionism, it is essential to ensure that more and more Indian products gain market access from trading partners without tariff or non-tariff barriers. In this regard, it is desirable to review existing free trade agreements. However, if the government decided to freeze such agreements, to establish customs barriers solely to promote domestic industry, it would reverse the progress already made since the liberalization of the 1990s and would harm the country`s long-term interests. Calls for a less liberal foreign trade policy are growing and reaching a crescendo, with more parties in the government extending loyalty to the newly found cause. Niti Aayog proposed to the Office of the Prime Minister (PMO) to set up a body to review India`s free trade agreements, including with Asean, in order to curb “full import coverage” in the country. In a recent presentation to the PMO, Niti Aayog CEO Amitabh Kant learned to say that the panel could be set up under Vice President Niti Rajiv Kumar for “assessing the performance of free trade agreements.” Bilateral agreements with South Korea, Japan and Sri Lanka are the only ones where the percentage increase in imports is greater than that of exports, the survey added. The 2019-20 economic survey showed that free trade agreements were generally beneficial to India. Between 1993 and 2018, India`s exports of manufactured goods increased by an average of 13.4% for the partners with whom it entered into trade agreements, and those imports increased by 12.7%, it is claimed.

In comparison, total exports of goods increased by 10.9% on average during this period and imports by 8.6%. But it also wants to review its existing free trade agreements with Asean, Japan, Malaysia and South Korea in order to reduce its trade deficit with these nations. Earlier this month, Trade and Industry Minister Piyush Goyal called on Tokyo to reduce its huge trade surplus with New Delhi by about $8 billion. “One of the fears is that most of the free trade agreements signed by India in the past have not worked in India`s favour. It is argued that the agreements have resulted in a widening of India`s trade deficit with the partner countries with which the agreements were signed. This is the mercantilist way of assessing the benefits of trade,” the survey says.