The three pacts resulted in rising imports and a progressive slowdown of
exports
India’s three free trade agreements with the ASEAN, Japan and South Korea
have not turned out to be favourable for the country as these resulted in
growing deficits in merchandise trade, according to a study published by
think-tank Third World Network.
“When the analysis of the three existing Comprehensive Economic
Partnership Agreements (CEPA) show that the balance sheet is heavily
loaded against India, there is no reason to hope that the Regional
Comprehensive Economic Partnership (RCEP), which includes 16 countries,
will be any different for the country,” said Biswajit Dhar, author of the report
titled ‘India’s CEPAs with ASEAN, Japan and Korea’, at a discussion on
Tuesday.
The study is important as the government is at present focussed on how to
make India’s free trade agreements deliver more for all stakeholders and has
also employed three think-tanks to analyse the on-going RCEP negotiations.
India is especially anxious about RCEP as China, which is one of the bloc
partners, holds the threat of flooding the domestic market with cheap
Chinese goods.
Rising trade imbalance
Over the past decade, India’s trade imbalance vis-à-vis its existing CEPA
partners has steadily increased, the study observed. After the initial spurt in
the middle of the previous decade, trade imbalances saw a sizeable increase
immediately after the three CEPAs with the ASEAN, Japan and Korea came
into effect.
Trade deficit with the three countries, which stood at $4.5 billion in 2004
and $16.4 billion in 2010, shot up to $29.7 billion in 2015 before cooling
down a bit to $26.6 billion in 2016.
“What is of additional concern is the fact that India’s exports have lagged
behind at a time when its CEPA partners have been providing additional
market access,” Dhar said.
The three CEPAs not only resulted in rising imports but also a progressive
slowdown of exports.
“These trends provide a clear indication that while India’s FTA/CEPA
partners were well positioned to taken advantage of an open Indian
economy, Indian entities have been unable to exploit the market access
opportunities offered by the partner countries,” the study said.
Available trends in both exports and imports point to a hollowing out of the
manufacturing base, which has prompted the present government to initiate
measures for the revival of the manufacturing sector, the report added.
The Society of Indian Automobile Manufacturers (SIAM), in its white paper
on India’s FTAs, has stated that the negative fallout of the pacts will seriously
compromise investments, manufacturing value add and employment at no
obvious gain in trade or economic expansion.
While the study could not throw much light on services trade in the absence
of comparable bilateral data, it observed that none of the pacts resulted in
significant liberalisation in the movement of skilled professionals.
Source: The Hindu Business Line, India Wednesday, 12 December 2018