Why is India pursuing FTAs? It's not just economics, Pg12

Key Highlights:

• India is pursuing Free Trade Agreements (FTAs) with countries like New Zealand, Oman, Chile, Israel, and Canada.
• FTAs often formalize existing trade flows rather than creating new trade opportunities.
• FTAs are serving as platforms for cooperation in services, investment, and other WTO-plus commitments.
• Many of India's Regional Trade Agreements (RTAs) have not led to a significant increase in trade.
• Strategic objectives, such as those related to the QUAD, are driving some FTAs.

Detailed Insights:

• Empirical evidence suggests that FTAs tend to formalize existing bilateral flows rather than creating new trade.
• India has about 18 RTAs/PTAs in force across Asia, the Asia-Pacific, Latin America and Africa, but only a few include services agreements.
• India's RTAs with countries like the UAE reflect a clearer services-and-investment rationale.
• Geopolitical shifts are causing the purpose of RTAs to shift from economic instruments to political safety nets.
• Intra-RTA trade should rise relative to global trade for preferential trade deals to achieve their economic purpose.
• India's comparative advantage in services remains underutilized because some countries resisted meaningful services liberalization.

Key Concepts Involved:

• Free Trade Agreement (FTA): An agreement between two or more countries to reduce or eliminate trade barriers.
• Regional Trade Agreement (RTA): A trade agreement between countries within a specific region.
• WTO-plus commitments: Provisions in trade agreements that go beyond the requirements of the World Trade Organization.