India’s CEPA with UAE is a good beginning; time has come for a higher level of ambition
The ruling NDA regime has, of late, revamped its strategy for free trade agreements, overcoming a deep-seated ambivalence regarding the benefits of agreements signed in the past. This re-think is to be welcomed as it stems from the compulsions of boosting exports as an engine of growth. From not signing any major FTA in the last 10 years, India inked a comprehensive economic cooperation and partnership agreement (CEPA) with Mauritius in early 2021. The CEPA with the United Arab Emirates, signed last week, is the heart of the deepening strategic partnership between the two nations, which is reinforced by the presence of a 3.5 million-strong Indian diaspora in the UAE. Pacts with Australia, the UK, Canada, Israel and the EU are being fast-tracked. However, the level of ambition with Mauritius and deals with the UK and Australia is for early harvest agreements for trade in a limited set of goods and services. They could be a precursor for full-fledged FTAs, but only much later.
The CEPA with the UAE, however, is deeper as India can export 90% of its products once it comes into effect. A permanent safeguard mechanism is also in place to check misuse. The UAE is India’s third-largest trading partner with two-way-trade of $52.8 billion in the current fiscal (April to December). The UAE is also India’s second-largest export destination, with outbound shipments worth $20 billion or 6.6% of total exports. With India’s imports of $32.7 billion driven largely by oil, the balance favours UAE at $12.7 billion. The FTA aims to step up bilateral trade to $115 billion within five years, of which $15 billion is in services exports. India hopes to step up textile exports as the UAE is the third-largest re-export market. Plain and studded gems and jewellery exports could also rise substantially.
India has identified 1,000 products like leather, spices, engineering goods, chemicals and poultry for duty concessions from the UAE. In a first of its kind, there is a digital trade element to enhance cooperation in paperless trading, digital payments and online consumer protection. Another first is that Indian drugs approved by regulators in advanced countries can be sold within 90 days of application.
Bilateral trade volumes would increase manifold when two-way investment flows pick up. Cumulative bilateral investments are pegged at $57 billion between 2003 and 2021, of which 54% is India’s FDI according to a KPMG-IBPC report. UAE’s investments in India are also set to rise on the energy front. The CEPA proposes an investment zone in India for UAE firms and a dedicated India Mart in the Jebel Ali Free Zone. Both sides have pledged to create opportunities for Indian investors in advanced industrial technology zones in Abu Dhabi.
To boost cooperation on climate change actions, both agreed to set up a joint hydrogen task force to scale up technologies. Trade is a win-win situation for both parties as gains include substantial employment generation of as much as 1 million jobs in India and 100,000 in the UAE.
The CEPA’s significance is that it serves as a template for an FTA with the Gulf Cooperation Council whose members include Saudi Arabia, Kuwait, Oman, Qatar and Bahrain. India thus will have larger access to West Asia and Africa as UAE has no customs barriers with GCC members. While this is the good news, the fact is that it represents only a first step forward. While India should be mindful of past experience, there is a warrant for a higher level of ambition to ensure that early harvest agreements with prospective trading partners like Australia and UK graduate into full-fledged FTAs.
https://www.financialexpress.com/opinion/india-uae-cepa-bridging-the-gulf-after-10-years/2439543/
