The return of trade policy as an instrument of statecraft, Pg12

Key Highlights:

• India is strategically utilizing trade policy as a tool of statecraft, moving away from comprehensive agreements like RCEP.
• India focuses on incremental agreements and trade corridors to manage geopolitical and economic risks in the Indo-Pacific region.
• Concerns persist regarding import surges, exploitable rules of origin, and structural asymmetries, especially with China.
• India aims to tighten terms in existing agreements like the India-ASEAN FTA to improve its effectiveness.
• Newer trade agreements, such as with EFTA, emphasize long-term industrial objectives and investment commitments.
• India's trade agreement with New Zealand strategically extends its trade footprint across the RCEP geography.

Detailed Insights:

• India's withdrawal from RCEP in 2019 reflected concerns about domestic political constraints and sectoral risks, leading to a shift towards bilateral agreements.
• The India-ASEAN FTA faces challenges including tariff anomalies, difficult-to-enforce rules of origin, and non-tariff barriers hindering market access.
• The India-EFTA partnership includes a significant $100 billion investment commitment over 15 years, advancing India's industrial objectives.
• India's geoeconomic approach involves smaller, tailored trade bargains that protect sensitive sectors while opening competitive exports, exemplified by the agreement with Australia.
• Future trade outcomes will depend on addressing behind-the-border frictions like professional mobility, investment protections, and regulatory pathways.
• India's trade strategy aims to avoid excessive dependence on China, influenced by persistent deficits and strategic considerations.
• Varying rules of origin and standards across multiple agreements can raise compliance costs for smaller exporters, necessitating domestic trade facilitation.

Key Concepts Involved:

• Rules of Origin: Criteria used to determine the national source of a product.
• Non-Tariff Barriers: Trade barriers that restrict imports or exports through mechanisms other than simple imposition of tariffs.
• Trade Facilitation: Simplification and harmonization of international trade procedures.