Digging a Trade Line for Bond Beyond Oil

India has embarked on a new journey with a new vigor and vigor – a new Free Trade Agreement (FTA) journey. India’s approach to FTAs ​​is now more focused on achieving meaningful market access and facilitating the integration of Indian industry into global value chains. As the Union Minister of Commerce and Industry Piyush Goyal has repeatedly emphasized, India will no longer sign trade agreements just to join a grouping, but the new approach of FTA negotiations to international trade and the new emerging dynamics in the Indian economy. will respond to the requirement. ,

focus country

Under the revised FTA strategy, the Indian government has given priority to at least six countries or regions to deal with, with the United Arab Emirates (UAE) topping the list for early harvest deals; The others are the United Kingdom, the European Union, Australia, Canada, Israel and a group of countries in the Gulf Cooperation Council (GCC). The premature harvest deal is to be expanded into a comprehensive FTA. This is a very welcome move, where the Indian government can be seen actively reviewing pending FTAs, entering into fresh negotiations and open to interim and small-trade deals.

Simultaneously, the United Arab Emirates also announced, in September 2021, its intention to pursue bilateral economic agreements with eight countries – India, Britain, Turkey, South Korea, Ethiopia, Indonesia, Israel and Kenya. contract within one year

major economic center

UAE has emerged as an important economic hub not only in the context of Middle East/West Asia but also globally. The UAE has emerged as an important economic center in the world due to its strategic location. In recent years, the UAE, through its ‘Vision 2021’, has sought to diversify its economy and reduce its dependence on oil. According to a WTO document, since 2012, growth has been led by non-hydrocarbon sectors, reflecting successful diversification of the economy. Although the UAE has diversified its economy, the hydrocarbon sector is very important, followed by services and manufacturing. Within services, financial services, wholesale and retail trading, and real estate and business services are the main contributors.

India and the United Arab Emirates established diplomatic relations in 1972. The greater blow to bilateral ties came when Prime Minister Narendra Modi’s visit to the United Arab Emirates in August 2015 marked the beginning of a new strategic partnership between the two countries. Furthermore, during the visit of Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi to India as the chief guest at India’s Republic Day celebrations in January 2017, it was agreed that bilateral ties were to be upgraded into a Comprehensive Strategic Partnership . This gave impetus to the start of negotiations for the India-UAE Comprehensive Economic Partnership Agreement, which was eventually launched in September 2021.

business and investment data

As India and the UAE strive to further deepen trade and investment ties, the soon-to-be-announced Early Harvest Agreement comes at the most opportune time. The India-UAE total trade trade has been valued at US$52.76 billion for the first nine months of the financial year 2021-22, making the UAE India’s third largest trading partner. It aims to take bilateral trade trade to over US$ 100 billion and services trade to US$ 15 billion in five years.

With India’s newfound strength in exports, as the country is on the verge of creating history by reaching the merchandise export figure of US$ 400 billion, a trade pact with an important country like UAE will help sustain the growth momentum. As we witness a major shift in manufacturing, UAE will be an attractive export market for Indian electronics, automobiles and other engineering products.

A trade agreement is also a enabler for two-way investment flows. UAE’s investment in India is estimated to be around US$11.67 billion, making it the ninth largest investor in India. On the other hand, many Indian companies have set up manufacturing units either as joint ventures or in special economic zones for cement, building materials, textiles, engineering products, consumer electronics, etc. Many Indian companies have also invested in tourism, hospitality. catering, health, retail and education sectors. Since both UAE and India are aggressively pursuing FTAs ​​with many important countries, not only companies from these two countries but also MNCs from other geographies will find UAE and India as an attractive market for investment .

As an export springboard

India aims to achieve merchandise exports of US$ 1 trillion and service exports of US$ 1 trillion by 2030. A trade agreement with the UAE could be a springboard for realizing these ambitious export goals. The UAE is a party to several regional and bilateral FTAs, including those from the GCC.

As part of the GCC, the UAE has strong economic ties with Saudi Arabia, Kuwait, Bahrain and Oman, which means that the UAE shares a common market and a customs union with these countries. Under the Greater Arab Free Trade Area (GAFTA) agreement, the UAE has free trade access to Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, Jordan, Egypt, Iraq, Lebanon, Morocco, Tunisia, Palestine, Syria, Libya and Yemen. . ,

This FTA with UAE will pave the way for India to enter UAE’s strategic location, and get relatively easier access to the Africa market and its various business partners which will help India especially in handlooms, handicrafts and handicrafts. Being part of the supply chain can help. Textiles and Pharma.

on compliance requirements

The UAE tariff structure is tied with that of the GCC, and the applicable average tariff rate is 5%. Therefore, the scope of addressing non-tariff barriers (NTBs) becomes very important. The reflection of the NTB can be seen through non-tariff measures (NTMs), which are mostly covered by sanitary and phytosanitary (SPS) and technical barriers to trade (TBT). There are 451 SPS notifications in the UAE. SPS information is mainly related to live poultry, meat and processed food. In addition, there are 534 TBT information in the UAE, mainly related to fish, food additives, meat, rubber, electrical machinery, etc. Most of the information pertains to consumer information, labeling, licensing or permit requirements, and import monitoring and monitoring requirements. These compliances pose a challenge for Indian exporters. The FTA agreement should strive to bring greater transparency and predictability in the use of NTBs so that their compliance becomes less cumbersome.

The Director General of Confederation of Indian Industry (CII) is Chandrajit Banerjee. Views expressed are personal