Recently, India and the United Arab Emirates (UAE) have officially initiated negotiations on the India-UAE Comprehensive Economic Partnership Agreement (CEPA). With this development in news, their objective is to further capitalise on the progress made under the Comprehensive Strategic Partnership 2017, with hopes of reaching a beneficial economic agreement.
Understanding Comprehensive Economic Partnership Agreement (CEPA)
A Comprehensive Economic Partnership Agreement or CEPA is essentially a type of free trade agreement that focuses not only on trade in goods, but also includes services, investment, and other domains of economic partnership. It can also extend its scope to aspects like trade facilitation, customs cooperation, competition, and Intellectual Property Rights. This kind of agreements tend to be more comprehensive than the traditional Free Trade Agreements as they also consider the regulatory dimensions of trade. India has previously signed such agreements with South Korea and Japan.
India-UAE Economic Relations Overview
Currently, the UAE is India’s third-largest trade partner with a 2019/2020 trade value amounting to USD 59 billion. The UAE is also India’s second-largest export market after the US, with exports valued around USD 29 billion in 2019-2020. Among foreign investors in India, the UAE ranks eighth, investing approximately USD 11 billion between April 2000 and March 2021. On the other hand, Indian corporations have an estimated USD 85 billion worth of investment in the UAE. Key commodities in the trade between both nations include petroleum products, precious metals, stones, gems, jewellery, and minerals.
Significance of the India-UAE CEPA
The India-UAE CEPA is expected to boost bilateral trade in goods to USD 100 billion within five years of signing the agreement, and raise trade in services to USD 15 billion. This would subsequently lead to the creation of broader social and economic opportunities in both nations.
Other Forms of Trade Agreements
Aside from CEPA, various other types of trade agreements exist. They include Free Trade Agreement (FTA), Preferential Trade Agreement (PTA), Comprehensive Economic Cooperation Agreement (CECA), Bilateral Investment Treaty (BIT), and Trade and Investment Framework Agreement (TIFA). Each has its distinct specifications and scope. For example, FTA involves two or more countries agreeing to provide preferential trade terms and tariff concessions to the partner country. India has signed FTAs with several countries like Sri Lanka and trading blocs such as ASEAN. Similarly, in a PTA, the participating partners give a preferential right of entry to specific products by reducing duties on an agreed number of tariff lines. India has established a PTA with Afghanistan.
CECA, compared to CEPA, typically covers negotiations on trade tariffs and Tariff Rate Quotas rates only, making it less comprehensive. India has one such agreement with Malaysia. In contrast, BIT entails a bilateral agreement that sets conditions for private investments by citizens and firms of the two concerned countries. Lastly, TIFA is a trade pact establishing a framework to expand trade and resolve any existing disputes between participating countries.