From Thailand to EU deal: India’s evolving FTA journey

New Delhi: India has come a long way from the early days of its journey towards FTAs, which really began with an “early harvest scheme” with Thailand that had limited coverage of under 100 products. The duty concessions to the South East Asian country meant that companies such as Honda and Sony began importing gear boxes and TV sets, instead of producing them locally, putting govt on the defensive.

What followed was a “careful calibration” with the govt refusing to cut duties on “sensitive sectors” such as wine and spirits and automobiles. The fear was that domestic manufacturing would be hurt and grape farmers would be adversely impacted. In any case, anything to do with farmers was a no-go zone.



Things began to change with an interim deal with Australia in 2022, which followed India’s decision to walk out of RCEP, the regional grouping led by China. For the first time, govt showed boldness in lowering tariffs for wine above a specified value but sought to win over local producers by assuring technical support from their competitors. It also tested the quota system, offering concessions on some farm products, but for limited quantities.

With every trade deal, the list got longer. So, in came chocolates and watches in the pact with European Free Trade Association, comprising Switzerland, Norway, Iceland and Liechtenstein. Similarly, trade-offs started going beyond goods and services — something that the govt failed to do in Asean FTA — to include investment promises as EFTA committed a fresh FDI of $100 billion.

By the time govt finalised its agreement with EU, eighth in four years. barring cereals, pulses, dairy and genetically modified food, the red channel list became much shorter with the Indian negotiators learning to make trade-offs.

So, if duty was slashed on French or Spanish wine, it was done in return for allowing limited quantities of grapes to European markets. Similarly, pears and apples were allowed, but in limited quantities and with features such as a minimum import price, ensuring that the landed cost of apples does not fall below Rs 96 a kg.

The benefits are also in line with the opportunity that a market offers. Govt decided against offering any concessions to British electric vehicles when it finalised the FTA last May. But eight months later, it offered a limited number of EVs as part of the EU deal.

“Every FTA stands on its own foot,” commerce minister Piyush Goyal said on Tuesday.

The change in approach is also visible in the so-called “new issues”, earlier called non-trade issues by Indian negotiators, being part of the trade engagement. So, the “modern FTAs” include intellectual property rights, SMEs, digital trade, labour and environment, but the commitments have not extended beyond what India has committed at international forums, addressing concerns around patent laws being diluted.

“It is how you negotiate these issues. We are firm on certain aspects and we will stick to them in our other engagements as well,” a senior official said.