Are FTAs More about Politics than Trade?
India has been pushing hard to sign bilateral and regional free trade agreements with many countries and regional blocks spanning almost all over the world. However, India’s record has been poor in terms of inking a final deal. While, a final breakthrough still eludes India in FTA with ASEAN, the free trade negotiations with EU is fast losing its pace and December 2008 deadline does not seem feasible any more.
If one look at the impact of India’s existing signed FTAs such as with Mercosur, Singapore, South Asian countries - they have not done any wonder in terms of increase in bilateral trade. The US and China continues to be India’s major trading partner though without any bilateral preferential trade agreement. Domestically there is a strong opposition from many quarters to launch any FTAs with USA and China in the near future. This defies economic logic.
Now the question arises – are FTAs necessarily to increase bilateral trade or they are mainly required for some political reasons? Looking at the global trend of proliferation of FTAs, we may refer that of late it has become an integral part of countries’ political diplomacy. Sometimes even political leader don’t realise whether an FTA is feasible under the given circumstances. For instance, once the present Brazilian President proposed to convert the IBSA (India-Brazil-South Africa) initiative into a free trade agreement without realiaing that both Brazil and South Africa are part of a customs union in their respective region.
Political diplomacy is a major reason for why FTAs are going to happen even if there is a successful conclusion of the Doha Round of multilateralo trade negotiations by the WTO Members. An oft-repeated argument is that the current proliferation of FTAs is because of poor progress of the Doha Round. Will countries stop negotiating/signing FTAs even if the Doha Round is successfully concluded?
Pranav Kumar, Policy Analyst, CUTS (June 13, 2008)
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