India should focus on products and services with maximum export potential while signing free trade agreements (FTAs) with trading partners, a research note by NITI Aayog member V K Saraswat has said.
It said that before getting into a trade deal, India should review and assess its existing FTAs in terms of benefits to various stakeholders like industry and consumers, trade complementarities and changing trade patterns in the past decade. Under FTAs, countries cut or eliminate duties on most number of goods traded between them besides liberalising norms to promote services trade and investments.
India has so far implemented several such agreements including with Singapore, Japan, South Korea and Association of South East Asian Nations (ASEAN). It is also negotiating similar pacts with nations including Chile, Australia, New Zealand and European Union.
“The over-arching conclusion of this report is that FTAs have to be signed keeping two things in mind, mutually reciprocal terms and focusing on products and services with maximum export potential,” it said. The note also recommended negotiating bilateral FTAs with countries where trade complementarities and margin of preference is high.
It added that proper safety and quality standards should be set to avoid dumping of lower quality hazardous goods into the domestic market. Besides, circumvention of rules of origin should be strictly dealt with by the authorities.
Citing an example, it said: “In case of India- Sri Lanka FTA, Sri lanka had started exporting copper to India by under invoicing of imported scrap in order to show higher value addition for qualifying for preferential rates under the FTA. Thus, Rules of Origin (ROO) norms can easily be circumvented by simple accounting manipulation to flood Indian markets”. The note on free trade agreements and their costs were prepared by Saraswat along with Mumbai-based economist Prachi Priya and Aniruddha Ghosh.