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  • Context (IE): India is likely to lower tariffs on a range of goods and services for the first time under the free trade agreements (FTAs) with developed economies.
  • India is currently negotiating FTAs with the UK, the European Union (EU), Australia and Oman.

Free Trade Agreements (FTAs)

  • Free Trade Agreements (FTAs) are agreements between two or more countries or economic blocs. It is aimed to facilitate trade and eliminate or reduce barriers to the exchange of goods and services.
    • Example, The North American Free Trade Agreement (NAFTA)

Key features of Free Trade Agreements

  • Tariff Reduction or Elimination
  • Greater market Access
  • Trade in Services
  • Investment Protection
  • Agreements on intellectual property rights
  • Rules of origin
    • It defines the criteria for determining the country of origin of a product. It helps to prevent third-party goods from taking advantage of the agreement.
  • Address non-tariff barriers to trade.
    • Such as quotas, licensing requirements, and technical standards
  • Provisions for customs cooperation

India & FTA’s

  • A screenshot of a computer Description automatically generatedIndia has signed 13 Free Trade Agreements (FTAs) with its trading partners.

Factors Affecting India’s FTA

Tariffs/Customs duties

  • High tariffs are among the key concerns raised by trade partners India is negotiating FTA.
  • India has the highest import duty compared to most major economies with an average Most Favored Nation. It is twice the global average (WTO).
    • The most-favored-nation clause requires WTO members to offer the same trade terms to all trading partners.
  • Tariffs are customs duties on goods imported into a country.
    • Customs Duty is a kind of indirect tax that is levied by the government on the imports and exports of goods.

Other factors affecting India’s Trade

  • Technical barriers to trade (TBT)
  • Sanitary and Phyto-sanitary (SPS) measures
  • Deviation from internationally agreed standards
  • Discrimination based on legislative or administrative measures by India.

Technical Barriers to Trade (TBT)

  • A technical barrier to trade (TBT) is any regulation, standard or procedure that could make exporting goods to another country more difficult.
  • TBT measures are intended to protect consumers, human health, and the environment but can sometimes be used to restrict trade.
  • The WTO Agreement on Technical Barriers to Trade is in place. It ensures TBT measures are not more trade-restrictive than necessary.

Various Forms of Technical Barriers to Trade (TBT)

  • Technical Regulations: Setting up of specific characteristics for products, such as quality, safety, and performance standards.
  • Product Standards: They dictate the specific features and characteristics a product must meet to be sold in a particular market.
    • For instance, food safety standards may require specific labeling, packaging, or ingredient information to ensure consumer safety.
  • Testing and Certification Requirements: Countries may impose testing and certification requirements to ensure that products meet certain standards.
    • For example, a country might require certification for the safety of imported toys.
  • Labeling and Packaging Regulations: Requirements may include language, font size, and the inclusion of specific information.
    • For instance, nutritional labeling requirements for food products.
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