After successfully sealing the talks for a free trade agreement (FTA) covering goods with the Association of South East Asian nations (Asean), India is pushing on the pedal to wind up negotiations for two Comprehensive Economic Partnership Agreements (CEPAs) involving free trade of goods, services and investments with Japan and South Korea.
The talks are likely to be concluded by the year-end. However, ongoing talks for concluding a similar treaty with Thailand will spill over to the next year.
The talks with Thailand on the proposed CEPA have been going on since 2002, almost parallel to the Asean talks. A functional Early Harvest Scheme between the two countries is in place since 2004, under which 84 items, including automotive components, are being freely traded without any duties.
“We have just concluded talks on the Asean FTA. We will concentrate on its implementation now. Negotiations on a similar pact with Thailand are going on, but are likely to spill over to next year,” said a government official.
This could be because the Thailand CEPA will have to have more trade-related concessions than the ones provided for in the Asean FTA.
Moreover, the current political situation in Thailand is also not conducive for speeding up FTA talks. It seems that the negotiations on the FTA will be sealed only when a new government takes over after the general elections next year.
The CEPAs with South Korea and Japan are likely to be concluded in September and October, respectively. While the pact with South Korea is likely to have only a moderate impact on the economic relationship between the two countries, the one with Japan will immensely help the Indian industry in gaining market access in the world’s second largest economy.
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Currently, bilateral trade between India and Japan, which is currently close to $4 billion, is expected to double once the CEPA comes into existence.
“Japan imports pharmaceuticals worth $60 billion annually, while India’s share in it is only $200 million. Moreover, Japan imports textiles worth $23 billion annually, while India’s share in that is not more than $100 million. The CEPA will help us get those markets,” the official added.
Moreover, India expects large flow of investments from Japan after the CEPA is finalised. “Japan has invested over $300 billion in China, but only $10 billion in India. The CEPA will lead to easier investment norms for Japanese companies and investments are likely to shot up to at least $30 billion initially,” the official said.
Moreover, the Indian professionals will have greater access to the Japanese job market. “For example, Japan has an aging population and there are shortage of nurses. We are pushing for sending 20,000 Indian nurses to Japan.”
While Indian companies will be able to access hi-tech and capital goods at lower cost from the island country, there was a threat of cheap agriculture imports from Japan, officials added.