Free Trade Agreements (FTA): Bilateral, Multilateral and Future Outlook

In the modern world, free trade policy states the absence of any trade restrictions between two or more nations implemented by a formal and mutual agreement. It’s completely the opposite of trade protectionism or economic isolationism. Let’s dive deeper. 

What is a Free Trade Agreement (FTA)?

Free trade agreements function as international legal pacts between two or more countries to minimise any barriers that impede international imports and exports. The free trade policy allows merchants to make transactions across international borders by removing government-imposed barriers which include tariffs and quotas and subsidies. The concept of trade freedom exists under two alternative terms: “laissez-faire trade” alongside “trade liberalisation.”

However, governments with free-trade policies or agreements in place do not necessarily abandon all their powers over imports and exports. They can exercise some protectionist policies, as per the requirement. 

For example, a nation with an FTA in place with another nation might restrict the import of regulator-unapproved drugs, non-vaccinated animals, or processed foods that do not meet its standards.

A nation with an FTA might also run policies to exempt specific products from tariff-free status to support local producers from foreign competition.

In this regard, India has made free trade with many nations across the globe to boost its local business.

List of Free Trade Agreements by India

So far, India has signed 13 FTAs with different countries, as mentioned below.

1. India-Sri Lanka Free Trade Agreement (FTA)
2. Agreement on South Asian Free Trade Area (SAFTA)
3. India-Nepal Treaty of Trade
4. India-Bhutan Agreement on Trade, Commerce and Transit
5. India-Thailand FTA - Early Harvest Scheme (EHS)
6. India-Singapore Comprehensive Economic Cooperation Agreement (CECA)
7. India-ASEAN CECA - Trade in Goods, Services and Investment Agreement
8. India-South Korea Comprehensive Economic Partnership Agreement (CEPA)
9. India-Japan CEPA
10. India-Malaysia CECA
11. India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA)
12. India-UAE CEPA (*)
13. India-Australia Economic Cooperation and Trade Agreement (ECTA) (*)

 (*) Signed, but yet to be implemented.

Bilateral Trade Agreements of India

The bilateral trade agreement is signed between the two nations, unlike multilateral trade agreements that involve more than two countries. 

Here is the list of bilateral trade agreements of India for your reference: 

1. India-Afghanistan Preferential Trade Agreement
2. Australia–India Comprehensive Economic Cooperation Agreement (AI-CECA)
3. India-Chile Preferential Trade Agreement
4. Japan-India Comprehensive Economic Partnership Agreement (JICEPA)
5. India-Malaysia Comprehensive Economic Cooperation Agreement (IMCECA)
6. India Mauritius Comprehensive Economic Cooperation and Partnership Agreement
7. India-Thailand Free Trade Agreement
8. India Singapore Comprehensive Economic Cooperation Agreement
9. India-Korea Comprehensive Economic Partnership Agreement (IKCEPA)
10. India Sri Lanka Free Trade Agreement (ISFTA)
11. India UAE Comprehensive Economic Partnership Agreement

Multilateral Trade Agreements of India

India has also signed multilateral agreements in groups with more than two nations as follows: 

Benefits of FTAs for India

Free trade agreements support small to medium companies who want to trade in the international market with the following benefits: 

Lower tariffs, more exports: due to low tariffs, businesses find it cheaper to export items like readymade garments, leather goods, and processed foods in huge numbers than before 

Support for Small Business (SMEs & MSMEs): SMEs and MSMEs get the chance to do business in the internal market for maximum ROI

Government incentive for exporters: businesses receive additional support through various schemes such as: 

• Interest Equalisation Scheme: for discounted loan interest 
• Merchandise Exports from India Scheme (MEIS): incentive for international exports
• Services Exports from India Scheme (SEIS): supports service-based exports 
• Expert House Recognition: special recognition from the Indian government for making a significant contribution to the country’s foreign trade 

Better infrastructure & logistics for trade: The Department of Commerce facilitates smooth logistics to export goods outside India at low costs and as fast as possible 

Impact of Free Trade Agreements

Here is a quick summary of the impact of FTA on different business sectors of India. 

Future Outlook for India’s FTAs

At present, India is in talks with the UK, Canada, and the EU to sign FTAs to boost local services, digital trades, and sustainable development. Surprisingly, the proposed FTA with the UK alone is expected to boost bilateral trade by $15 billion by 2030. It is most likely that India’s future FTAs are likely to focus on digital trade so that the digital economy could add USD 1 trillion to India's GDP by 2025.