The ongoing debate on the precise role multilateral and bilateral trade pacts play in boosting global trade seems to have in no way curbed the enthusiasm of nations in signing free-trade agreements (FTA). This is particularly true of most Asian countries where the number of FTAs signed has shot up from just 17 in 2000 to 123 in 2009. And surprisingly, it is now India, which has been a slow convert to the use of FTA as an instrument of trade policy, which is leading the way, setting in motion a flurry of bilateral and plurilateral FTA negotiations.

Most recent statistics compiled by the Asian Development Bank show that apart from the 9 FTAs India has concluded so far, the country is already negotiating 12 more and has also proposed an additional 10 by initiating consultations and setting up joint study groups to detail out their feasibility. Once the current initiatives fructify, India will have as many as 31 FTAs. This will not only increase India?s share of total FTAs in Asia from the current level of 7% to as high as 12%, but also make it the leading FTA hub in Asia outpacing even Singapore which was at the forefront of FTA activities till now.

For India, the sharp increase in FTAs is a radical change from the relatively conservative FTA stance India had taken earlier. India?s progress on the FTA is not only impressive in terms of numbers but also in terms of the size of the economies with which these trade pacts are being negotiated. While the early Indian FTAs were restricted to small neighbours like Nepal and Sri Lanka, the later ones have opted to link up with comparatively larger economies like the Mercosur countries and Singapore. And the biggest achievement so far has been the Asean FTA which has opened up India merchandise trade to serious competition for the first time.

Still, the biggest may be yet to come. The FTAs, on which the negotiations are currently in progress, are even more ambitious and will open up substantially larger markets. These include the People?s Republic of China-India Regional Trading Arrangement, India-Egypt Preferential Trade Agreement, India-European Free Trade Agreement, India-Korea Comprehensive Economic Partnership Agreement, India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement, Japan-India Economic Partnership Agreement and the Malaysia-India Comprehensive Economic Cooperation Agreement.

Equally impressive are the new FTAs proposed by India that include India-Australia Free Trade Agreement, India-Colombia Preferential Trading Arrangement, India-Indonesia Comprehensive Economic Cooperation Arrangement, India-Israel Preferential Trade Agreement and the India-Russia Comprehensive Economic Cooperation Agreement

The evolution of India?s FTA agreements shows that the country has largely followed the classical pattern in Asia where the initial forays were dominated by the hub and spoke arrangement with India as the hub and the neighbouring smaller economies as the spokes. But the FTA treaty with Asean pushed the concept into a different orbit as it enabled India to extend the trade linkage to a new regional hub with vastly larger markets. Such cross regional FTAs have been particularly important in Asia which has shown a definite preference for opening trading relations with the rest of the world rather than the inward-looking pacts favoured in most other regions.

Asian economies which currently have a high level of FTAs with cross regional orientation include China, India, Korea, Singapore and Taiwan. These economies also stand out as the share of their trade with the FTA partners in their total trade is much lower than that of the small economies. While Japan?s trade share with its FTA partners in 2008 was only 11%, India?s was 23% and China?s was 25%. In contrast, in the case of smaller countries it was much higher as in the case of Singapore, Malaysia and Myanmar, where the share exceeded 50%.

India?s ongoing and proposed FTA negotiations that will open up new markets in the EU, China, Canada, Australia, Russia and Egypt are not only a further acceleration of the moves towards cross regional FTA but also radically different from the earlier agreements where the agreements were rather limited with the focus largely restricted to merchandise trade.

This is because India?s more recent FTA efforts have followed what is now known as the WTO plus approach, where the FTA includes issues that go beyond the WTO framework. The India-Singapore Comprehensive Economic Cooperation Agreement was one of India?s first experiments with WTO plus approach.

Moreover, India has also made efforts to expand some existing FTAs to include WTO plus provisions, the most visible example being the negotiations for an India-Sri Lanka CEPA. Overall, India now seems all set to squeeze the maximum of the full FTA potential.

p.raghavan@expressindia.com