FICCI urges caution in trade pacts

The Federation of Indian Chambers of Commerce and Industry (FICCI) on Thursday urged the Centre to adopt a cautious strategy on signing trade agreements like 'free trade agreement' or 'comprehensive economic co-operation agreement' with other countries. There should not be any deflection of trade through these countries, resulting in losses for local Indian industries.

Giving an example on how this might affect Indian industries, Amit Mitra, secretary general, FICCI said: "One such instance which we have observed is of the export of copper from Sri Lanka to India. Sri Lanka has hardly any copper production but it imports from other countries and re-exports to India, based on agreements with our country. This should not be allowed and the rule of origin should be strictly implemented in such agreements."

He advised that the recent agreement with Singapore should also be closely monitored as there is a possibility that Chinese goods are dumped into India through Singapore.

FICCI has further stated that India should sign trade agreements with developed countries such as Japan and Europe where India will benefit from their high-level of technological expertise. "As far as the US is concerned, we are pushing for trade agreement only in the services sector as it will allow our knowledge workers easy movement between India and US," Mitra said.

He added, FICCI is preparing an India strategy paper on such issues arguing that trade agreements should be handled properly by the government.

According to a study done by FICCI, the explosive surge in India's engagement with Free Trade Agreements (FTA) and Preferential Trade Agreements (PTA) is attributed to expectations of greater market access for India's goods and services.

"This will be through preferential deals, positive impact of regional liberalisation for accelerated domestic reforms, promotion of political, security and strategic objectives and pursuance of non-trade concerns such as core labour standards or protection of the environment," Mitra noted.

The FICCI study points out that FTAs open up sizeable opportunities for Indian business. For instance, SAFTA opens up a combined market with $750 billion strong GDP and 1.4 billion population and holds the prospect of formalising unofficial trade.