Updates on India’s FTAs with UK, UAE, Australia, and Other Trade Engagements in 2022
India is pushing for more FTAs with multiple countries and regional blocs in 2022 as it chases an ambitious export target of US$450-500 billion by next fiscal. It is also aggressively seeking trade concessions with major economies like the US.
India has been talking free trade agreements with several partners – both bilateral and regional – over the past two years in a bid to boost export-oriented domestic manufacturing. New Delhi is looking at an ambitious export shipment target of US$450-$500 billion by FY22, against US$291 billion in FY21 – which is why early harvest deals and full free trade agreements (FTAs) have assumed newfound importance to an otherwise trade conservative regime. Indian exports touched US$197.89 billion in the period from April to September 2021, up 57 percent from the same period in the previous year.
New Delhi hopes to conclude trade agreements with the UAE, UK, and Australia by as early as 2022 and is reportedly close to signing early harvest agreements with them. A growing list of countries and regional blocs negotiating trade deals with India now includes Russia, Oman, Canada, the GCC, and the Southern African Customs Union.
In multiple public addresses, the Indian commerce and industry minister, Piyush Goyal, asserted that India fully supported free trade within a rules-based multilateral trading environment. However, if India faced unfair treatment, it would reciprocate.
Goyal has called upon the ASEAN bloc to do away with its non-tariff barriers, saying that equitable trade between the two regions would see trade flows worth US$200 billion. India wants the ASEAN countries to lower market restrictions in the agriculture and automotive sectors as well as reciprocate its own FTA concessions. These concerns are also why India walked away from the Regional Comprehensive Economic Partnership (RCEP) in November 2019.
In the following sections, we spotlight developments in India’s economic and commercial engagement with the regions with whom it is currently negotiating free trade arrangements or seeking trade concessions.
India to export mangoes to the US, import US pork and other agriculture products: Trade Policy Forum outcomes
US Trade Representative Katherine Tai on her two-day visit in November last year asked India for greater agri market access while Indian officials brought up the difficulty of securing intellectual property rights in the US – among other issues. Following the visit, the revived Trade Policy Forum (after being dormant since October 2017) has provided a direct channel for the two sides to make progress on bilateral trade concerns.
In January 2022, it was announced by both governments that the US had approved the import of mangoes and pomegranates from India. Meanwhile, India agreed to import cherries, alfalfa hay, and pork and pork products from the US.
The US market preference for Indian mangoes is well known. Indian mango exports to the US amounted to 800 metric tons (MTs) in 2017-18, worth US$2.75 million. The next year, 2018-19, saw India export 951 MT of mangoes, worth US$3.63 million. In 2019-20, Indian mango exports to the US were 1,095 MT, worth US$4.35 million. In 2020, exports came to a halt as USDA officials could not visit India to inspect irradiation facilities due to COVID-19 travel restrictions.
The US Department of Agriculture’s (USDA) approval now will boost exports from Indian mango production strongholds like Maharashtra, Uttar Pradesh, Andhra Pradesh, and Telangana. It will also open up opportunities for the export of other mango varieties from the north and east India, such as Langra, Chausa, Dasehri, and Fazli. Currently, the state of Maharashtra accounts for 80 percent of India’s mango exports; reportedly 205 varieties of mangoes can be found in the Western Ghats in the state.
Various pending bilateral trade issues between India and the US include penal tariffs on Indian steel, market access for medical equipment and US dairy, and non-tariff barriers in both countries.
Meanwhile, on November 24, 2021, India and the US agreed on India’s implementation of the equalization levy or digital services tax till the OECD Pillar One came into force or by March 31, 2024 – whichever is earlier.
Indian goods exports to the US in FY 2020-21 were US$51.6 billion while imports were US$28.8 billion. According to USTR, trade in services with India (exports and imports) totaled an estimated US$54.1 billion in 2019. Services exports were US$24.3 billion and services imports were US$29.7 billion.
India-UK FTA negotiations formally launched
India-UK FTA negotiations formally launched on January 13, 2022 during the UK International Trade Secretary Anne-Marie Trevelyan’s two-day visit to India for the 15th UK-India Joint Economic and Trade Committee (JETCO).
The first round of negotiations involving trade experts from both countries will begin on January 17, and future rounds of negotiations will take place approximately every five weeks (see joint media statement here).
Upon completion, the India-UK trade pact could boost total trade by £28 billion by 2035 and nationwide wage growth by up to £3 billion, according to a statement released by the UK government. This will be achieved on account of unlocking a huge new market for British producers and manufacturers across numerous industries from food and drink to services, renewable tech, and automotive.
The UK is particularly keen on India reducing its import duties on Scotch Whiskey and cars, which is currently around 150 percent and 125 percent, respectively.
In May 2021, an Enhanced Trade Partnership (ETP) was established between the two countries – reflecting unusually rapid progress in bilateral trade talks. The 15th UK-India JETCO in January 2022 reviewed the progress made within the UK-India ETP.
Two-way trade between India and the UK was at £23 billion in 2019. International investment from Indian companies already supports 95,000 jobs across the UK; overall, the two countries reportedly support nearly 500,000 jobs in each other’s economies.
India-UK trade negotiations were previously slated to begin November 2021. An early harvest deal was to be reached by March 2022 as per this timeline, to be followed by a comprehensive agreement.
India-Russia trade and investment relationship following Putin’s 2021 visit
India and Russia held their first 2+2 dialogue (defense and foreign ministers) and the meeting of the Inter-Governmental Commission on Military & Military-Technical Cooperation on December 6, 2021, during President Vladimir Putin’s official visit to India.
Several government-to-government agreements between India and Russia were reached during the visit as well as MoUs between commercial and other organizations of both countries. The MoUs covered nearly 30 sectors, including trade, energy, steel, fertilizers, science & technology, intellectual property, outer space, geological exploration, cultural exchange, and education.
Prominent outcomes include a deal signed between the two countries worth INR 51 billion (US$689.90 million) for the joint production of more than 500,000 AK-203 assault rifles at a facility in the Amethi district of Uttar Pradesh state. Russia also agreed to provide reliable long-term supplies of coal to India for steel production through an MoU. Discussions also took place on Russian participation in India’s Production-Linked Incentives (PLI) program for specialty steel.
Besides these, Putin and Modi discussed India’s linkages with the Eurasian region through the International North South Transport Corridor (INSTC) and the proposed Chennai – Vladivostok Eastern Maritime Corridor. The INSTC offers a cheaper and faster alternative multimodal transit corridor for India-Russian trade as the route connects India with Nordic Europe, Central Asia, and Russia; it is expected to eventually touch the Baltic and Arctic regions.
The two leaders also looked forward to greater inter-regional cooperation between various regions of Russia, in particular the Russian Far-East, with the States of India. Areas of trade and investment cooperation between India and the Russian Far-East include energy, maritime connectivity, healthcare, and tourism.
Putin has extended an invitation to Prime Minister Modi to visit Russia for the 22nd India-Russia Annual Summit in 2022.
As per Indian embassy figures, Indo-Russian bilateral trade during April 2020-March 2021 amounted to US$8.1 billion. Indian exports were valued at US$2.6 billion while imports from Russia were worth US$5.48 billion. As per Russian figures, bilateral trade in the same period amounted to US$9.31 billion, with Indian exports worth US$3.48 billion and Russian imports amounting to US$5.83 billion.
India and Russia want to reach a trade target of US$30 billion by 2025. Negotiations for a India-Eurasian Economic Union (EAEU) free trade zone have been ongoing.
Russian Prime Minister’s visit to India planned for January
The Russian Prime Minister Mikhail Mishustin has reportedly planned his maiden trip to India in the second week of January, following Putin’s December 6 annual summit. The Russian PM will lead a delegation of 15 Russian governors, including 11 from the Russian Far-East, to attend the Vibrant Gujarat Global Summit (VGGS). The 10th edition of the VGGS is scheduled to be held during January 10-12, 2022, themed ‘From Atmanirbhar Gujarat to Atmanirbhar Bharat’ (From a Self-Reliant Gujarat to a Self-Reliant India).
India-UAE set to take bilateral ties to the next level with CEPA
Latest updates on UAE-India CEPA
“As of now only goods from both sides are to be covered in an India-UAE early harvest agreement”, as per a source quoted by the media. A partial FTA was to be signed on Modi’s planned visit to the UAE on January 6, 2022, but this was postponed due to a surge in Omicron / COVID-19 outbreaks. The source also told media that UAE and Indian trade representatives are currently working on finalizing the larger CEPA agreement that will include investment protection measures and special facilities for Indian labor and expatriates; the goal is to complete this by March 2022.
Formal negotiations for their bilateral FTA, called the India-UAE Comprehensive Economic Partnership Agreement (CEPA), began September 2021. The two countries wanted to conclude talks by December 2021 and close the deal by March 2022.
The UAE is India’s third-largest export destination and India is seeking duty free market access on a whole range of products, such as gems and jewelry, textiles and garments, engineering goods, etc. New Delhi is sensitive of Dubai emerging as a transshipment hub for the entry of Chinese goods into India and so strict rules of origin are expected to be negotiated into the CEPA, such as 35 percent value addition in UAE for products to qualify for trade concessions from India.
Currently, 87 percent of UAE imports are subject to five percent tariffs and 11 percent attract zero duty. Other items are subject to higher duties or are in prohibited or restrictive lists of goods. Textiles, garments, and jewelry are all taxed at five percent while 10 percent duty is levied on some steel products – cumulatively, they accounted for 34 percent of India’s US$16.7 billion exports to the UAE in FY 2020-21 and 43 percent in FY 2019-20. The UAE applies a much lower average tariff at 4.6 percent (2020 figure) as compared to India’s 15 percent. High duty items in the UAE are alcohol (50 percent) and tobacco (100 percent). This means that CEPA negotiations will necessitate much higher concessions from the Indian side.
Major Indian exports to the UAE are refined petroleum products, minerals, cereals, sugar, fruits, vegetables, tea, meat, seafood, textiles, engineering, machinery products, and chemicals. Major Indian imports from the UAE are petroleum and petroleum products, precious metals, stones, gems and jewelry, minerals, chemicals, and wood and wood products.
In FY 2019-20, the UAE was India’s second largest goods export market (US$29 billion in exports), after the US. In FY21, China replaced India due to the pandemic disruptions. The UAE has, however, long standing goodwill with India. It is the eighth largest foreign investor in India, accounting for US$11.3 billion in equity investments from April 2000 and March 2021. Investment by Indian entities in the UAE amounted to about US$85 billion (mostly in real estate) during the same period.
Meanwhile, the UAE hosts nearly three million Indian expats who remit home nearly US$3 billion annually. Dubai is the top most visited tourist destination for Indians.
India to keep sensitive dairy and agriculture products out of FTA with Australia
India and Australia are soon expected to complete negotiations for an interim FTA that will officially be called the India-Australia Comprehensive Economic Cooperation Agreement (CECA). The Indian government has confirmed that sensitive dairy and agriculture items will be kept out of the trade deal and will focus on items not produced in the country. “India is not offering concessions for items that are essential for the livelihood of lakhs of dairy and agriculture farmers such as milk, butter, milk powder or wheat. This has been clearly communicated to Australia and there is no cause for apprehension for farmers,” as per a source speaking to the media. Examples of such products include blue cheese and Australian tree nuts like macadamias.
The interim FTA between India and Australia will lower import duties and expand market access for a limited number of items and sectors. Australian producers have also focused on encouraging market access for products not made in India or commodities where India experiences a shortfall in supply, such as pulses, grains, and oilseeds. Indian interests lie in securing market access for its textiles, leather, and gems and jewelry.
The full CECA – covering most trade in goods and areas such as services, investments, government procurement, and intellectual property – will likely be completed around the end of 2022, according to optimistic statements put out by the Indian government.
Formal negotiations for the CECA took place during the 17th India-Australia Joint Ministerial Commission on September 30, 2021. Both sides agreed to conclude an interim agreement or early harvest trade deal by December 2021.
India and Australia had previously launched CECA negotiations in May 2011, which were stalled and then eventually suspended in September 2015 after nine rounds of talks. The current geopolitical context has drastically changed since then and will accelerate closer economic and commercial relations.
India’s export basket to Australia majorly comprises of goods like petroleum products, medicines, polished diamonds, gold jewelry, apparels etc., while key Australian exports to India include coal, LNG, aluminum, and non-monetary gold. In the services sector, major Indian exports to Australia are related to travel, telecom and computer, government, and financial services, while Australian services exported to India are primarily related to education and personal services. Sectors like food and agribusiness, healthcare, infrastructure, as well as mining and resources have been gaining importance in recent years.
Indian exports to Australia in 2020-21 were worth US$4 billion and imports from the country were US$8.5 billion. In 2020, India was the seventh largest trade partner for Australia and its sixth largest export market. Education remains Australia’s largest service export to India, valued at US$4.46 billion and accounting for around 88 percent of the total in 2020. At the end of 2020, Indian students in Australia numbered 115,137. The total value of two-way foreign direct investment between both countries was valued at US$1.04 billion in 2020. For more information, see our article “Trade and Investment Between India and Australia: Trends and Prospects”.
During the previous year, 2019, Indian exports to Australia were worth US$3.19 billion, and included refined petroleum (US$287 million), packaged medicaments (US$277 million), and railway passenger cars (US$166 million). In 2019, Australia’s exports to India amounted to US$15.3 billion, and included coal briquettes (US$12.1 billion), gold (US$604 million), and petroleum gas (US$419 million).
India-Canada trade talks sputter in the background
India is said to be in trade talks with Canada. The last update in this regard from the Indian government was that India-Canada trade discussions would begin around March-April 2022.
As per the government of Canada, two-way merchandise trade between itself and India was $10.1 billion in 2019, and decreased to $8.7 billion in 2020 on account of the COVID pandemic.
Indian sectors of interest for Canadian companies include education, transportation infrastructure, life science, clean energy technology (integration of renewable energy/smart grid; carbon capture, use, and storage; and energy efficiency) and renewable energy, infrastructure development, natural resources, defense and security, value-added food products, mining, and oil and gas, etc.
Canada is working to advance negotiations on a Foreign Investment Promotion Protection Agreement (FIPA) and a CEPA. India-Canada CEPA negotiations began in 2010 with the last full negotiation round held in August 2017, covering cross-border trade in goods and services, e-commerce, telecommunications, sanitary and phytosanitary measures, and technical barriers to trade. In June 2021, Indian and Canadian trade officials had another stocktaking meeting.
India-Israel trade talks ongoing, 2022 target for deal
The two countries are reportedly engaged in FTA talks and want to sign a deal by mid-2022 as the year marks 30 years of India-Israel formal diplomatic ties. India-Israel bilateral engagement has flourished under the Narendra Modi government, with closer military and technology partnerships. Cooperation is reported to be improved in water and agriculture sectors and both countries have established mutual recognition of vaccination certificates. Total merchandise trade between India and Israel amounted to US$4.67 billion in FY 2020-21.
India-European Union FTA negotiations referenced in Danish PM visit to India
India and the EU restarted their FTA negotiations in goods and services in early 2021 after a gap of eight years. The two regions aim to work out pacts in investments and geographic indications parallel to FTA engagement. In his official trip to India in 2021, the Danish Prime Minister Mette Frederikson supported New Delhi’s inclination for an early conclusion of the India-EU FTA negotiations.
India and Denmark themselves have agreed to expand collaboration across multiple areas like agritech, food safety, cold chain, food processing, fertilizers, and aquaculture. Newer areas of cooperation include smart water resource management and efficiencies in supply chain management. For more information on India-EU FTA engagement, see our article “Can We Expect an India-EU FTA Soon? What Has Changed in the Bilateral Relationship”.
India-South African Customs Union preferential trade agreement talks revived
In July 2020, India revived talks with the SACU bloc for a preferential trade agreement (PTA). In a virtual meeting between the two sides, India emphasized its close engagement with the Southern African region. In 2019-20, India’s trade with Africa stood at US$66.7 billion, out of which India-SACU trade amounted to US$10.9 billion. Currently, the trade balance favors SACU showing its beneficial access to India’s market. However, there remains significant scope for greater trade.
India is seeking closer manufacturing and industrial investment ties with Namibia, and its sectors of interest cover agriculture, irrigation, renewables, ICT, pharmaceuticals, and medical supplies. India-Namibia trade in 2018-19 amounted to US$135.92 million with Indian exports worth US$82.37 million and imports valued at US$53.55 million. Namibia holds rich deposits of uranium, diamonds, copper, phosphates, and other minerals while India’s advantage lies in its capabilities in IT, engineering, pharma, railways, as well as its large SME (small and medium enterprise) sector.
India-South Africa bilateral trade was worth US$10.584 billion in 2018-19. Indian exports to South Africa include auto and auto components, transport equipment, drugs and pharmaceuticals, engineering goods, footwear, dyes and intermediates, chemicals, textiles, rice, gems and jewelry, etc. South African exports to India include goal, steam coal, copper ores and concentrates, phosphoric acid, manganese ore, aluminum ingots, and other minerals.
India-Oman trade and investment seek further boost
On October 9, 2021, India stated that it was looking to sign an FTA with Oman. Bilateral trade between Oman and India stood at US$5.931 billion in FY 2019-20, while bilateral trade in 2020-21 (April 2020 to February 2021) amounted to US$4.63 billion. Omani-India trade benefits from the fact that Oman’s ports are five days shipping time from India’s western coast.
There are reportedly over 4,000 India-Oman joint ventures (JVs) in Oman with an estimated investment of over US$7.5 billion. There are close to half a million Indian expats based in Oman, whose total population is around 4.6 million.
Oman has four sea ports facing the Indian Ocean. Its industrial zones at Duqm offer “30 years corporate tax exemption, 0% customs duty, 100% foreign ownership, usufruct agreements, 50 years renewable, no restrictions on repatriation of profits, no income tax, currency exchange freedom, and a stable currency rate,” as per Oman’s Ambassador to India Sheikh Hamad bin Saif Al Rawahi.
Oman’s sea ports are supported by airports and warehousing facilities. The Port of Duqm SEZ has been earmarked for an Indo-Oman JV, Sebacic Oman, which will be an US$1.2 billion acid plant. A ‘Little India’ integrated tourism complex project worth US$748 million has also been agreed to between the two countries, also located in Duqm. Indian entities are also among the largest foreign investors in the Port of Sohar, with an estimated investment of about US$2 billion. Other India-Oman JVs include the US$969 million Oman India Fertilizer Company (IFFCO, KRIBHCO of India, and Oman Oil Company) at the port city of Sur, which produces urea for Indian farmers. Indian investments at the Port of Salalah are in manufacturing automotive parts, textiles, cables, guar gum, etc.
This article was originally published November 6, 2021. It was last updated January 13, 2022.
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