The slew of Free Trade Agreements (FTAs) that India is looking to wrap up?particularly those with Australia, Japan, European Union?may not favour all the industries in the Indian export sector due to the high cost of complying with the health and safety standards in those developed countries.
The other factors that can add to the cost of Indian exports are import restricting trade barriers like anti-dumping and countervailing duties.
Commerce ministry officials told FE that though FTAs aim at progressively lowering cost of exports by reducing and eliminating industrial tariffs, complying with regulations in terms of standard of goods is becoming costlier than tariffs.
?The EU is putting up stiff technical walls for trade in both goods and services and the biggest problem for the Indian exporters is the standard rating agencies, which are mostly European,? K Rangarajan, head of the Indian Institute of Foreign Trade?s (IIFT) Kolkata centre said. Union commerce secretary GK Pillai earlier told FE that though tariffs would come down to zero, non-tariff barriers (NTBs) would play the game of market protection.
?In India, we have to build our own technical barriers to trade in terms of our speciality. The regulation in trade will be wholly in terms of standards within the next two years,? Pillai said. India, currently negotiating eight FTAs, is betting on its service sector competence, while the counter parties are looking at the country as a big market for goods export. In 2007-08, India was the sixth largest market in value terms for goods exports.
Rangarajan said any hurry in concluding the FTAs would affect domestic industries as they enjoy some sort of protection through tariffs. ?India is now looking at FTAs as a stepping stone towards international integration while assuring the rest of the world that it is implementing the liberalisation and deregulation measures of the corporate globalisation agenda,? Rangarajan said.
IIFT prepares the FTA fine prints on India?s behalf. Rangarajan said India is currently negotiating FTAs with Malaysia, and Mexico. ?Although we have concluded the FTA talks, we need a testing time,? Rangarajan said.