Bring benefits of FTAs to SMEs

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Bikky Khosla | 11 Mar, 2014
In the last few years, India has signed a number of free trade agreements with several countries and trading blocks, including Japan (2011), Malaysia (2011), ASEAN (2009), South Korea (2009) and Singapore (2005). In addition, preferential trade pacts with MERCOSUR and Chile were implemented in 2009 and 2007 respectively. Negotiations on similar agreements with many others -- most notable among them are the European Union, Canada, Australia, Indonesia, New Zealand, Israel, Gulf Cooperation Council, BIMSTEC and South African Custom Union -- are at different stages of development.

This list is long, but are we benefiting from these agreements? The principal point of FTAs is to secure trade liberalisation. Under such negotiations, each party makes some concessions in opening up its markets; one side gains in the areas where it gets more access while loses out where the other side gains more access. The balance is the key to create a win-win situation. In contrast, if FTAs are not set up carefully, it may result in a win-loss situation, enhancing economic welfare for one party while diminishing it for the other.

For quite some time now there has been a growing concern that the multiple free trade agreements signed by India in the recent years are not benefiting us as desired. The group of skeptics who view this way include -- according to some media reports -- our finance minister who has raised concern over our rising imports from the FTA partners. The trade ministry, on the other hand, claims that proper internal studies were conducted before signing these agreements. Be that as it may be, I think there is no harm in setting up a better institutional mechanism to undertake thorough studies and evaluate the impact of FTAs on a continuous basis.

But there is an area where we are clearly lacking -- in bringing the benefits of FTAs to our industry, particularly to the small and medium exporting community. The trade agreements we sign may bring down trade and non trade barriers but as far as making our exporters aware about these developments is concerned, there is no effort at all from the government's side. Majority of our exporters are small and medium enterprises and that is why there is an enhanced need to properly guide this sector. Awareness creation and SME participation are critical elements that must be addressed to make the most of the FTAs we sign.

The media has recently reported India and ASEAN are likely to ink the much-delayed FTA on trade in services and investment soon. We are traditionally strong in services exports and the 10-nation ASEAN grouping is a net importer of services -- considering this I think the deal would benefit our economy and allow more access to our professionals in ASEAN nations like Malaysia, Singapore and Indonesia where opportunities abound in areas such as IT, medicine, architecture, etc. But again, we have to wait to see how far the deal would go to our advantage.

I invite your opinions.