Strengthening India’s Negotiating Capabilities for FTA with UK, EU
May 24, 2024

Why in News?

The Union Ministry of Commerce and Industry has started looking at ways to strengthen India’s negotiating capabilities for free trade agreements (FTAs) with the UK, EU, etc.

Experts pointed out that the country’s negotiating strategy cannot rely on transferable generalist civil servants and could need a separate service to handle trade negotiations.

What’s in Today’s Article?

  • Major Pending FTAs of India
  • Why India’s Major FTAs Pending for Years?
  • What are the Issues with India’s Negotiating Capabilities for FTA?
  • What Needs to be Done to Strengthen India’s Negotiating Capabilities for FTA?

Major Pending FTAs of India:

  • India is currently negotiating FTAs with the United Kingdom (UK), the European Union (EU), Oman, Australia, and a review of the 2009 trade pact with the Association of Southeast Asian Nations (ASEAN).
  • Following the general elections, the government has made indications that it intends to reopen talks with the Eurasian Economic Union (EEU), which is led by Russia.
  • After years of discussions, India has already made the decision to pull out of the Regional Comprehensive Economic Partnership (RCEP) agreement, which was led by China.
  • Trade deals with more competitive countries such as the UK and EU have been stuck for years, despite India's ability to manage early harvest accords with these countries.

Why India’s Major FTAs Pending for Years?

  • Trade agreements are becoming more and more complex and India’s trade partners conduct detailed studies in areas ranging from India’s informal labour market to entire product value chains.
  • However, India lacks such deep research and despite having one of the best trade negotiators, there is an information and process gap.
  • One of the prime reasons for delays in negotiating major FTAs is that India is a high tariff country and it spends a lot of time in tariff negotiations. 

What are the Issues with India’s Negotiating Capabilities for FTA?

  • Loss of institutional memory: On account of the routine transfer of key civil servants steering extended trade negotiations.
  • Lack of efficient file-keeping: The Ministry of Commerce and Industry does not have an efficient database and that is one of the reasons for loss of institutional memory.
  • Lack of permanent institutional structure: India’s bilateral and multilateral talks fall short while facing subject matter experts, especially from developed nations.
    • These experts from developed nations tend to deploy considerably larger teams of negotiators and researchers with decades of experience.
  • Serious shortage of accountability: Indian negotiators fail to map research deliverables, which makes it challenging to pinpoint blame when there is a shortcoming.

What Needs to be Done to Strengthen India’s Negotiating Capabilities for FTA?

  • Clarity of thoughts:
    • India needs clarity on the motivation behind the FTA, i.e., what it wants to achieve and how FTA can help to get there.
    • If India can streamline and reduce unilateral tariffs, and focus on areas like having time bound Mutual Recognition Agreements (MRAs) to address non-tariff barriers, the benefits of trade agreements will be more.
  • Briefing Cabinet, Parliament: Experts suggest detailed reporting and periodically informing the parliament and cabinet about the negotiations.
  • Setting accountability:
    • Before going for any negotiating meeting, each official had to get the brief for the meeting approved.
    • On return, they must file a detailed report on what happened in the meeting.
  • Need for permanent institution:
    • When new officers join the negotiating table with little knowledge on what was negotiated before, India loses out on institutional memory-wise.
    • Other countries have dedicated negotiation institutional structures, where the same officers enjoy a tenure of 30-40 years.
    • Therefore, India must create an institutional structure in various centres namely,
      • Centre for WTO studies,
      • Centre for Trade and Investment Laws and
      • Centre for Regional Trade.
  • Preparing standard operating procedures (SOP): The Ministry of Commerce and Industry is working on preparing a set of fresh SOPs on streamlining trade talks.
  • Understanding fast changing contours of trade talks: That go beyond traditional areas such as tariffs concessions to labour and environment.
  • Extensive record keeping: To build institutional memory, the ministry should revive practise of extensive record keeping on negotiations.
  • Audit: The extent of the issue might be discovered by a third-party audit of the ongoing negotiations.