Early Harvest agreements: Explained: Why India is trying to seal a free trade agreement with UK

News: India and UK have formally launched Free Trade Agreement (FTA) negotiations, with the aim of concluding an early harvest trade agreement over the next few months.

Read here: India’s FTA ambitions in perspective
What will be the benefit of FTA with the UK?

According to India’s commerce minister, this interim agreement aims to achieve up to 65% of coverage for goods and up to 40% coverage for services. Till the agreement has been finalized, it is expected that the coverage for goods goes up to 90 plus percentage.

Read here: Things to watch for as India, UK launch FTA talks

India is also negotiating a similar early harvest agreement with Australia.

What are Early Harvest agreements?

Early harvest agreements initiate bilateral trade by focusing on a restricted list of goods and services. They act as a precursor for a comprehensive FTA.

What are the challenges associated with the Early Harvest agreements?

-They can result in delaying a comprehensive FTA. For instance, with Thailand, India has signed a restricted trade agreement in 2004 but has been unable to convert this into an FTA. Similar case with Sri Lanka, where India was not able to conclude an agreement on services and investments.

-Early harvest agreements can be challenged in WTO, as only comprehensive FTA’s are exempt from WTO rules. Article XXIV.8(b) of GATT exempts only those deals which cover substantially all the trade between two countries.

-Expert notes that early harvest deals reduce the incentive from one side towards a full FTA.

-But in the case of India, early harvest deals also serve the function of keeping trading partners interested, as India had become known for long-drawn negotiations for FTA’s.

Also read: India’s ‘early harvest’ trade deals could run into trouble
What are the other trade pacts that are under negotiation?

India currently has 10 FTAs and six PTAs (preferential trade agreements). It is negotiating 16 new and expanding seven existing agreements, including with trading partners such as Canada, the EU, the US, alongside Australia and the UK.

Read here: List of India’s FTAs

A majority” of FTAs under negotiations are “comprehensive” and cover goods, services, investment, IPR, Non-Tariff Measures, regulatory procedures and trade facilitation etc. India is also simultaneously carrying out a review of the existing FTAs with South Korea, Japan and ASEAN on the ground of India’s rising trade deficit with these trading partners.

Source: This post is based on the article “Explained: Why India is trying to seal a free trade agreement with UK” published in Indian Express on 17th January 2022.

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