FTA push: Commerce Dept assesses infrastructure requirements to help exporters benefit more from pacts
Here's an important but underreported economic policy story. India has signed free trade agreements with several major partners including the UK, Australia, UAE, and Oman, and is finalising one with the EU. But Indian exporters aren't actually using these agreements to their full potential. The Department of Commerce is now assessing infrastructure gaps in industrial clusters, specifically testing facilities and certification processes, to help exporters comply with partner-country standards. For CLAT, FTAs are a key part of India's trade policy. India negotiates these under the Foreign Trade Policy framework. Bottom line for the exam: know the countries India has signed FTAs with, the concept of Rules of Origin, and why utilisation rates matter for FTAs to actually deliver benefits.
Union Minister of Commerce and Industry Piyush Goyal
In a bid to expand the capacity of Indian industry to benefit from the various free trade agreements (FTAs) recently signed or finalised with partners such as Australia, the UK, the UAE, Oman and the EU, the government has initiated a comprehensive assessment of infrastructure requirements in various industrial clusters, including testing facilities and international certification processes.
The Department of Commerce aims to bridge the gap between India’s expanding network of FTAs and the currently low utilisation of the pacts that have already been implemented, is by providing adequate infrastructure to exporters to meet standards and time-lines, a person tracking the development said.
Despite successfully finalising or signing landmark deals with major partners, including Australia, the UAE, Mauritius, the UK, New Zealand, Oman, and the EU, a big concern on their future utilisation remains as Indian exporters have struggled to fully capitalise on preferential market access gained in past FTAs.
FTAs signed in the past such as ones with the ASEAN, Japan and South Korea, or more recent ones such as the UAE, have been sub-optimally used by Indian exporters. Internal government estimates suggest that not just utilisation but utilisation rate of many of these FTAs, too, remains persistently low.
“In a direct outreach to industry clusters, the Ministry is now seeking data on specific infrastructure bottlenecks that prevent goods from moving seamlessly from Indian factory floors to international markets,” the source said.
Through communications sent to various export promotion councils, the Department of Commerce has requested members to identify critical needs in areas such as specialised testing laboratories, international certification centers, logistics hubs, and Meetings, Incentives, Conferences, and Exhibitions (MICE) facilities.
The initiative acknowledges that while tariff barriers are falling due to FTAs, non-tariff barriers, such as Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT), remain a significant hurdle.
“Industry members have been asked to provide not only a list of required facilities but also the estimated expenditure involved in creating such infrastructure. This data will enable the government to consolidate a national requirements list, potentially leading to targeted fiscal support or the establishment of common facility centers under a public-private partnership model,” the source noted.