Seemingly enthused by US President Barack Obama?s promise to keep its economy ?open,? India on Tuesday sought to revive the idea of a bilateral free trade agreement between the two countries. As soon as Obama boarded the flight to Jakarta, commerce minister Anand Sharma told an industry conference here that ?both countries should work together to seriously engage in negotiating for a comprehensive economic partnership agreement (Cepa).?

A Cepa is an agreement that comprises liberalisation of trade in goods by cutting/eliminating tariffs on most or all goods on either side, besides easing of investment flows and special treatment to each other in other areas like IPR.

Even earlier, there was talk of an FTA/Cepa with the US, but neither side appeared keen for different reasons. While the US was disinclined to give free access for India?s service professionals to its market, New Delhi felt unless the agreement paved the way for augmenting its services exports to the US, especially through migration of professionals, it would be of little benefit.

Tuesday?s statement by Sharma signals a rethink on India?s part. Trade experts, however, were sceptical about the US backing the proposal at this juncture, given the high unemployment rate of 9.6% in the country.

Major US demands would include cutting Indian tariffs on farm products and changes in the IPR regime, both tough options for New Delhi. With tariff levels on industrial goods already very low on either side, there is no major discord on that front.

Stating at a Ficci seminar that the two countries should ?seriously? consider entering into a Cepa, Sharma said the two governments could use the memorandum of understanding signed last year to expand bilateral trade and investment as the foundation for the Cepa. ?Economic cooperation between the two countries is the underpinning of our partnership… It would be a defining partnership between India and the US,? he said.

According to a study, the average income of Indian professionals in the US is $60,000, while the national average is around $39,000. This offers India an immense opportunity to expand its workforce into the US, if visa-related issues are resolved through a Cepa.

Over the last few years, India?s exports to the US have outpaced imports. Total bilateral merchandise trade stood at $36.5 billion in 2009-10, down 8% from $39.7 billion in the previous year. The highest trade recorded between the two was in 2007-08 when it grew 36% to $41.4 billion. Some of India?s important export items to the US are IT software, carpets, gems & jewelery and medical appliances.

India?s applied import tariff on agricultural products ranges 40-60% while the peak customs duty that represents import tariff on most industrial products is 7.5%. Although there is no political decision on India-US Cepa, a feasibility study is under way at an academic level. The Washington-based Peterson Institute for International Affairs has started working on a paper to gauge the potential of such an agreement between the two countries.Trade experts welcomed Sharma?s comments but said any significant breakthrough in dialogue was unlikely because of the economic conditions of the US.

Former director at New Delhi-based Icrier and currently the director-general of Ficci Rajiv Kumar said India and the US should broach this subject and sense the feasibility of entering into such a vast trade agreement. ?If India and the EU are discussing an FTA, there is no harm in approaching the issue (of signing a Cepa with the US),? he said. Kumar, however, added that given the nature of the US administration, it was highly unlikely that such a trade treaty would be signed immediately.

Chairman of CII?s national committee on IT, ITeS & e-Commerce Ganesh Natarajan said the Obama visit has created an opportunity to explore a Cepa. ?We need to go to the next level of economic engagement with the US and Cepa could be the way forward,? he said.

Sources said the US could use a carrot-and-stick policy to enhance economic cooperation with India, especially on the Cepa front. ?One issue the US companies have repeatedly raised is that of the IPR regime. If any progress on Cepa front has to happen, then the US would demand that India strengthen its IPR regime,? he said. US trade secretary Gary Locke, however, did not give any commitment on starting talks on Cepa, but said it would be taken up in stages. Locke said that currently, the US administration was discussing various trade agreements. ?Everything would have to be done in stages,? he said.

The US has recently faced severe criticism for its protectionist policies at home and its attitude towards concluding the Doha round in the WTO. It was only after much protests that the US finally appointed Michael Punke, who is also the deputy trade representative, as WTO ambassador in September last year.The two countries set up a trade policy forum in July 2005, which is co-chaired by the Indian commerce minister and the US trade representative.