Is India recalibrating its approach towards FTA negotiations?
The Economic Times, November 09, 2021

By Pradeep S. Mehta and Advaiyot Sharma

India has recently reaffirmed its commitment to trade multilateralism with the World Trade Organisation (WTO) at its centre. Parallelly, India has renewed its Preferential Trade Agreement (PTA) negotiations with many countries with vigour. While it has maintained certain long-held positions at the WTO, there are early signs that India may be recalibrating its approach towards PTA negotiations.

At the WTO, India is simultaneously contesting certain developments while taking initiatives and demonstrating leadership in other areas. India is opposing the inclusion of new rules through non-consensus based instruments such as the Joint Statement Initiatives. It is also challenging the proponents who seek erosion of Special and Differential Treatment (SDT) and reform of the principle of self-declaration of development status.

At the same time, India has taken the lead in seeking a Trade-Related Aspects of Intellectual Property Rights (TRIPs) waiver for Covid-19 related vaccines and medical equipment. It is at the forefront of efforts towards finding a permanent solution on public stockholding for food security purposes at the WTO Committee on Agriculture in Special Session. In the fisheries subsidies negotiations, India is pressing for effective SDT.
On the bilateral front, India has recently begun/resumed PTA negotiations with various countries. A combination of reasons seems to have driven this.
First, a focus on export-oriented economic growth, with the government setting ambitious targets for goods and services exports. This indicates signs of a more offensive strategy focusing on Indian export potential, rather than a defensive approach prioritising protection of domestic industry from import competition.

Second, the missed chance to get preferential access for Indian exports subsequent to India’s unwise decision to stay out of the Regional Comprehensive Economic Partnership (RCEP).

Third, WTO multilateral negotiations are stalled and plurilateral negotiations (which India so far contests) are more focused on regulatory issues rather than core trade concerns. All these reasons have led to India making a renewed push for pursuing trade liberalisation on preferential basis through the PTA route.

How does India’s engagement at WTO negotiations square with its recent trade engagements bilaterally? The example of trade and environment talks may be pertinent here. At the WTO, there are Trade and Environmental Sustainability Structured Discussions (TESSD) taking place, as a means to complement the work of the Committee on Trade and Environment. The focus of these discussions is on trade and environmental sustainability.

India was not a participant in the 2020 Communication on Trade and Environmental Sustainability where the TESSD were launched. On the other hand, recent news reports have indicated that India may be agreeable to incorporating chapters on trade and sustainable development (TSD) in its proposed PTAs with the UK and EU. The TSD chapters of existing EU FTAs contain obligations on environmental and social concerns, including on climate policy.

Although it remains to be seen how far India will be willing to go on such trade and non-trade linkages in PTA negotiations, it does mark a shift in its approach. India has traditionally been wary of linking non-trade issues with trade, both bilaterally and multilaterally at the WTO. This is currently being witnessed in India’s opposition to attempts by some WTO members to link the negotiations on fisheries subsidies with forced labour concerns.

What then does this shift indicate? It perhaps reveals a greater degree of pragmatism on the part of Indian trade negotiators. There seems to be an acceptance that going forward, there will inevitably be a greater role of certain issues in trade negotiations. These include environmental and sustainability concerns, which are transitioning from “non-trade” to “trade-related” issues. There is an ever-increasing linkage of trade with such areas, given the nature of problems of global commons the world is confronting today. Avoiding engagement on these issues at the WTO does not mean that they will not show up elsewhere in bilateral and regional settings. In this context, a degree of pragmatism may help align negotiation outcomes with Indian trade policy goals.

At the same time, India should carefully assess the implications of its stance on such “trade-related” issues in bilateral settings for the positions it will take multilaterally. Additionally, India must remain cautious of not over-committing to onerous and sweeping new rules on WTO-plus matters in its zeal for early finalisation of PTAs. India’s positions on issues like trade and sustainable development in upcoming PTA negotiations will be valuable pointers to its approach on trade policy going forward.

Overall, India is simultaneously pursuing export-led economic growth and greater self-reliance, committing to multilateralism and renewing its focus on bilateralism. While there are apparent contradictions here, there is also space for convergence.

Notably, India is not unique in this attempt to straddle multiple trade policy paths. The United States has emphasised the role of the WTO as a force for good, but is simultaneously focusing on a worker-centric trade policy at home. The EU’s new mantra is “open strategic autonomy”, including a trade policy which enhances the EU’s trade enforcement powers and integrates EU values such as sustainable development.

There are early signs that India may be recalibrating its approach towards PTA negotiations. The direction in which its trade policy tilts will determine the success of India’s plans for export-led economic growth. It will also influence India’s positions on emerging global trade issues.

The authors work for CUTS International, a global public policy research and advocacy group.

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