India faces a year of tough trade talks

Syllabus subtopic: Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests

Prelims and Mains focus: about the challenges India will be facing in negotiating trade deals this year; about RCEP, CECA, BTIA, GSP: their significance

News: After walking out of negotiations on the 16­nation Regional Comprehensive Economic Partnership (RCEP) free trade agreement, the government said it would renegotiate its existing free trade agreements (FTA) and redouble its efforts to conclude other trade negotiations. The task is likely to swamp negotiators of both the Commerce and Industries and External Affairs Ministries in 2020.

RCEP walkout

• To begin with, the RCEP walkout is not cast in stone yet, as the other 15 countries, including 10 ASEAN members and their FTA partners China, Japan, Australia, New Zealand and South Korea, will complete legal reviews by June and are only expected to sign the deal in November 2020.

• In the interim, many countries, most notably Japan, Australia and even China, have said they would be keen to work with India to convince the government to rejoin the RCEP.

India-Australia CECA

While the RCEP is being wrapped up, India’s long-pending negotiations with Australia for a Comprehensive Economic Cooperation Agreement (CECA), as well as Commerce Minister Piyush Goyal’s plans to reopen the existing FTAs with ASEAN, Japan and South Korea will have to take a back seat.

Bilateral Trade and Investment Agreement (BTIA)

The next big trade focus for the government will be during the EU­India summit expected in March, when PM Modi is expected to travel to Brussels, to meet the new European Commission President Ursula Von Der Leyen, and discuss restarting EU­India Bilateral Trade and Investment Agreement (BTIA) talks. However, this is easier said than done, given that the talks that began in 2007 and stalled in 2013 over tariff issues, have not been resumed despite several efforts.

Bridging gap with U.S.

Finally, the two Ministries will focus on closing talks with U.S. Trade Representatives. In 2019, President Trump rescinded India’s GSP special status for exporters, which has led to more bitterness over the issue. Mr. Modi and Mr. Trump discussed the trade issues on two occasions when they met in 2019, but negotiators have been unable to forge any kind of deal, despite visits by Mr. Goyal to the U.S.

In the New Year, both sides hope a package of smaller agreements can be announced, but a free trade agreement could be several years away, as it hasn’t even been discussed officially yet.

Way ahead

Given all the challenges, the government is actively considering a sharper and leaner trade negotiating team that merges the best strengths of Commerce Ministry officials and External Affairs diplomats, on the lines of countries with a consolidated Department of Foreign Affairs and Trade (DFAT).

With the world being carved up into regional trading blocs and India’s only regional Bloc, for SAARC nations (SAFTA) stalled, the odds of concluding more bilateral trading agreements will be that much harder in 2020.