India’s exporters are a worried lot, with senior leaders of the government recently coming out with categorical statements almost ruling out free trade agreements (FTAs) and incentives for the exporting community. With the FTAs that the previous government had entered into not being of any help and the Regional Comprehensive Economic Partnership (RCEP) giving China a huge advantage, they feel that India should stitch new trade pacts with the US, the European Union and Japan.
Officially, exports have suffered a 20 per cent downfall between April and October this year, due to the corona virus pandemic. “But, if you see in real analysis, then we are down even more than that, because whatever exports have taken place, they are mostly commodities like rice, cereal and so on,” says Sharad Saraf, president, Federation of Indian Export Organisations. “The manufactured products are still suffering. For example, engineering goods, chemicals, then labour-oriented industries like handicraft, leather, carpet, these are all suffering huge downfall”.
As India’s commerce & industry minister, and one who has also been stop-gap finance and now consumer affairs minister, Piyush Goyal should be considered an authoritative voice on matters concerning trade. So, when, at the webinar series The Road To Atmanirbhar Bharat, organised by Swarajya, in association with Vedanta Resources, he recently declared that free trade agreements (FTAs) per se are good for the nation and India must look to leverage these pacts with countries having transparent trading mechanisms and business systems, one took his views as the government’s official stand.
Blame it on the UPA
Yet, Goyal’s remarks were nuanced. He later spoke of how in FTAs with countries including Japan, Korea and Asean, business communities of these regions benefited more by getting market access in India. A few days later, external affairs minister S. Jaishankar went a step ahead and debunked FTAs, which in reality were ‘trade deals with China by stealth’.
A day after the signing of RCEP (Regional Comprehensive Economic Partnership) to create the world’s largest trade bloc, Jaishankar said that, in the name of openness, India (during the UPA years) had allowed subsidised products and unfair production advantages from abroad to prevail in the country. Going ahead, whatever India decides now will determine whether the country will become a first-class industrial power or not in the future, he added.
The manufactured products are still suffering. For example, engineering goods, chemicals, then labour-oriented industries like handicraft, leather, carpet, these are all suffering huge downfall
The Modi government has for some time been blaming the UPA for inking a rash of trade agreements with Asean members, which has allowed China to route its products to India, using third countries. There has been talk of these pacts being renegotiated but not much progress has been achieved. The focus now has shifted on expanding domestic manufacturing capabilities (Atmanirbhar Bharat). The government also feels that India should focus its energy on FTAs initially with developed countries like the US or blocs like the EU, which are looking for market access in the large Indian market and which can open their doors for our domestic goods as well.
Yet, as Jaishankar conceded, the EU does not seem to be interested in an FTA with India at this point. The talks for the FTA have been stalled since May 2013 when both sides failed to bridge substantial gaps on crucial issues, including on data security status for the IT sector. “In the last one year, I have been to Brussels twice and brought up the subject with the commissioner mandated to deal with us,” he recently said. “And the answer I got was that ‘we need to think this through, we are not sure we want to do this at this time’.”
One of the primary reasons India could not join RCEP was that some of the members do not ‘really’ have democratic transparent trading systems, the minister said. “And when you are dealing with an unfair partner, a partner which does not really give a level playing field or reciprocal access or where there is a risk of predatory pricing, where there is a risk of circumvention of country of origin rules, one does have to be cautious,” he added.
On support measures for the exporting community, Goyal said the government may not be in a position to actually give export incentives per se to promote outbound shipments. “We really cannot give any specific incentives to exports given the WTO (World Trade Organisation) framework in which we are all doing business today,” he said. “At the end of the day, if we start doing that, there will be retaliatory action from other countries”.