china has proposed a free trade agreement (FTA) with India. The value of Sino-Indian trade was of the order of R2,77,380 crore during April-December 2012 and India had a balance of trade deficit of R1,71,670 crore over the same period. Currently, there is a surfeit of FTAs and some of them have not proved beneficial for the country. Or, to put it differently, India has not been able to reap the benefits initially envisaged out of these agreements.
It is now being established that developed countries with surplus capacities in many industrial products are seeking destinations with lower duty provisions, resulting in duty-free access for their products. Further, the import baskets of these countries comprise many low-priced raw materials that are not domestically produced primarily on environmental concerns, thereby fuelling the need for duty-free imports.
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In recent FTAs with South Korea and Japan, the Indian steel industry has suffered due to massive volumes of low-duty imports of CR sheets and coils, which exceed its requirements and cause injury to domestic producers in the form of loss of market share, prices and profitability. India could have retaliated with a safeguard duty to combat the surge in imports, but that will only bring temporary relief and not compensate for the losses already suffered.
In view of these developments, signing an FTA with China requires a careful analysis on the product-wise impact of bilaterally tradable items, of which steel occupies a major share. In 2012-13, China exported to India 0.832 million tonne of carbon steel worth R3,580 crore and 0.855 million tonne of alloy/stainless steel. Its major import from India was iron ore. In 2012, India cut down its overall exports of iron ore, shipping 33.1 million tonne of the commodity valued at $3.68 billion to China. This resulted in China finding alternate suppliers such as South Africa, Iran and other countries.
Without going into the details