On FTAs, India Quietly Shifts Focus From US Trade Deal

While the focus of industries and exporters is on the ongoing negotiations over the proposed bilateral trade agreement (BTA) between New Delhi and Washington, policymakers are now aggressively working to conclude the free trade agreement (FTA) with the European Union (EU).

Meanwhile, Donald Trump has announced at an event that tariffs on steel and aluminium imports into the US will be doubled, from 25 per cent to 50 per cent. The EU has slammed the move and warned that it could impose retaliatory tariffs.

“Amid rising risks and uncertainties, it has become imperative for India to rechart its trade policy and actively look for new trade partners and export destinations,” Pankaj Chadha, Chairman, Engineering Export Promotion Council (EEPC) told The Secretariat.

India-EU FTA Talks Gain Momentum 

On an immediate basis, the contours of the India-UK free trade agreement — which was signed on May 6 — will serve as the template for the pact New Delhi is looking to ink with the European Union. “The deal with the EU is expected to be on similar lines as the one with the UK,” a government source said.

The Double Contribution Convention Deal, or the social security pact, which exempts Indians working in the UK from paying social security for up to three years, is one of the highlights of the India-UK FTA.

This has brought much cheer to India’s skilled tech talent, even though many have raised questions over the issue in the UK, despite the country already having similar agreements with other countries, like the US, Canada, and Japan.

“Breaking the traditional template for a bilateral trade pact was important,” said Ashwani Mahajan, national co-convener of the Swadeshi Jagaran Manch (SJM). “India needs to follow this template for its other trade pacts. This will largely help the country,” he added.

India is the EU’s 9th largest trading partner. India and the EU had earlier halted their FTA negotiations due to differences in the scope and expectations from the deal. 

India-US BTA

Negotiations between India and the US have been caught in a bind due to Trump's continuous alterations to the US tariff policy. That's why, instead of focusing on the India-US BTA, the government’s thrust is now on inking other trade deals, in a bid to diversify markets.

India’s annual exports of steel, aluminium, and their derivatives to the US currently stand at around US$ 5 billion.

“While many issues are continuously coming up, the important thing is that both India and the US are now referring to the India-UK FTA as a template, despite these hiccups. The deal with the US will have its own dynamics, but the India-UK pact is being taken into account for thrashing out several areas,” a person familiar with the development told The Secretariat.

The Reserve Bank of India in its annual report noted that the export sector is expected to encounter some headwinds from rising geopolitical tensions, inward-looking policies and risk of potential tariff-war among major economies. However the central bank also said that the existing trade deals along with the the new one under negotiation "may support growth in trade."

Until 2012, almost all of India’s FTA signatories were to its east, namely, the Association of Southeast Asian Nations (ASEAN), Singapore, Japan, South Korea, and Sri Lanka, according to the Carnegie Endowment for International Peace.