India must tread with caution on early-harvest deals, say experts

While signing early-harvest agreements can be a good strategy since it signals commitment from both nations and kicks off trade in a small way, some experts believe targets are too grandiose

With India warming up to sign at least three early-harvest and full-blown trade deals within the next five months, experts harked back to the past, saying the country must be circumspect in such deals.

India is currently negotiating free trade agreements (FTAs) with the UK, the European Union, the United Arab Emirates, and Australia. In most cases, India is approaching a strategy to first ink a mini trade or early-harvest deal, which will be a precursor to an FTA that will be signed eventually.

Without disclosing names, Union Commerce and Industry Minister Piyush Goyal had last week also said that two more countries and a group of nations have evinced an interest to start FTA talks with India - a harbinger of the world wanting to do business with India.

While industry and government officials have said signing early-harvest agreements (EHAs) can be a good strategy since it signals commitment from both nations and kicks off trade in a small (albeit limited) way, some experts believe the targets are too grandiose right now.

“We are understaffed at present. Due to such ambitious targets, (hope) we don’t end up making any mistake while signing EHAs by March,” said Pradeep S Mehta, secretary-general, CUTS International, a global public policy think tank on trade, regulation, and governance.

Anwarul Hoda, Chair professor of Indian Council for Research on International Economic Relations’ trade policy and World Trade Organization research programme, said India should be mindful of the past experience of FTAs, especially concerning EHAs, since they have resulted in adverse developments for India.

“EHAs have to be drafted carefully. Earlier, we had signed an FTA with Thailand, which also had an EHA component. It only resulted in an inverted duty structure and India suffered quite a bit. One has to ensure that there is no adverse effect through an inverted duty structure,” said Hoda.

Until now, India has signed an early-harvest deal with Thailand and Singapore.

Hoda also said that as far as bilateral deals are concerned, they should be cast as widely as possible and not riddle them with exceptions. "It is the exceptions that make them bad," said Hoda.

In the past, India has signed trade deals with lots of exceptions by excluding various sectors, such as agriculture. Besides, the biggest challenge for India as far as FTAs are concerned is that the country didn’t gain much and trade deficit, too, with those nations expanded.

TRADE DEAL & TIMELINES

UAE: Comprehensive Economic Partnership Agreement by March 2022
 

UK: Interim trade deal by March 2022, followed by a comprehensive FTA
 

Australia: Comprehensive Economic Cooperation Agreement by the end-2022; early-harvest agreement to be signed by December 25
 

EU: Talks expected to start by year-end