India has signed more than 40 free trade agreements (FTA) till date. What is politico-economic significance of these agreements? Critically analyse with reference to recent trends in FTAs.

Context:
A free trade agreement is a preferential arrangement in which members reduce tariffs on trade among themselves, while maintaining their own tariff rates for trade with non-members.Preferential Trade Agreements (PTAs) have been proliferating, especially since the establishment of the World Trade Organization (WTO) in 1994. India has made use of FTAs as a key component of its trade and foreign policy, especially from 2003-04 onwards.

Core:

Political framework:

• Previously most of the trade agreements focused on geographical proximity so india focused on Asia region as seen in India-ASEAN,SAFTA, Indo –japan , korea agreements.
• Secondly NAM , cold war, developed-developing divide, colonial experience created an inertia with respect to FTAs between developing and developed world.
• This is presently changing with coming up of mega regional world where politicalproximities matter more than geographical proximities as seen in indo- us agreement, NGG clearance, dilution of NAM, post-cold war multipolar world.
• Internationalization of yuan.

Economic aspect:

• India ASEAN FTA is positive,
• Indo Korea –Japan has negative impact
• Impact of FTA on trade balance and welfare is uncertain.
• Lager impact on metals on importing side and textile on the exporting side
• Internationalization of currency based on export demand from other countries.
• Sectorial base with in export regime(industry vs services).
• Trickle down of welfare benefits to lower sections of society (industry vs service)

Way ahead:
Continued utilization of FTA for enhancement of soft power with developed countries and market access with developing countries.

Report error