HOW D OES GLOBA L TRA D E AGREEMEN T S

IMPACT MY EXPOR T OPPOR TUNITI ES?

Why this difference in tii values?

Canada-USA TII = 44.3

India-USA TII = 26.9

NAFTA

India-Thailand TII = 19.5 Canada-Thailand TII = 2.3

• India- ASEAN FTA

• Indo-APTA
• BIMSTEC
• India-Thailand
 •BENIN
•BURKINA FASO
•CABO VERDE
•CÔTE D'IVOIRE
•The GAMBIA
•GHANA
•GUINEA
•GUINEA BISSAU
•LIBERIA
•MALI
•NIGER
•NIGERIA
•SENEGAL
•SIERRA LEONE
•TOGO

Economic Community
of West African
States(ECOWAS)

Central
American
neighbors
The Economic and
Costa Rica, El
Salvador, Monetary
Guatemala, Community of
Honduras, Central Africa
Nicaragua Gabon,
Cameroon, the
Central African
Republic (CAR),
The Latin
Chad, the
American
Republic of the
Integration
Congo and
Association
Equatorial
Guinea
Recent developments
▪The Regional Comprehensive Economic Partnership (RCEP) is a so-
called mega-regional economic agreement being negotiated since 2012
between the 10 ASEAN (Association of South-East Asian Nations)
governments and their six FTA partners: Australia, China, India, Japan,
New Zealand and South Korea.
▪The Trans-Pacific Partnership (TPP) is a trade and investment
agreement that was signed on 7 March 2018, after ten years of
negotiation, between 11 Pacific Rim countries. The TPP began as an
agreement between the four Pacific states of Brunei Darussalam, Chile,
New Zealand and Singapore. later, the governments of Australia, Peru
and Vietnam announced their intention to join as well. Malaysia,
Mexico, and Canada joined the negotiations in 2010, while Japan joined
in 2013. The US quickly assumed leadership of the whole negotiating
process.
Why this difference in tii values?

Canada-USA TII = 44.3

India-USA TII = 26.9

NAFTA

India-Thailand TII = 19.5 Canada-Thailand TII = 2.3

• India- ASEAN FTA

• Indo-APTA
• BIMSTEC
• India-Thailand
Hence we may loose in USA market against countries
having RTA with USA
Does it mean Indian exporters would have
equal opportunity in Thailand across all RTAs?

Canada-USA TII = 44.3

India-USA TII = 26.9

India-Thailand TII = 19.5 Canada-Thailand TII = 2.3

• India- ASEAN FTA

• Indo-APTA
• BIMSTEC
• India-Thailand
 An exporter’s anxiety?

Which are the existing trade agreements signed by India and the upcoming
ones which can impact my business?
As a business firm, how do I gain from RTAs signed by India?

Does all the trade agreements that India has signed, gives me equal business
advantage irrespective of the products I am dealing in?
Out of plethora of trade agreements signed by India, how do I choose the best
suited for my product??

Are all RTAs where India is not a part a threat to me as Indian exporter?
How do I inbuilt understanding of trade agreements in my company’s global
sourcing strategy?
 Three companies in India exporting three different products. Will all three
companies have equal opportunities when India signs any trade agreement.
Case example from Indo-ASEAN FTA

Mr. X exporting Mr. Y exporting Mr. Z exporting

Radar Transmitters Avionics
 Status of your product in RTA

You pay WTO MFN duty before

Open list RTA but pay Lesser duty after
RTA

RTA duty relaxation does not

Negative list apply here. You pay WTO
MFN duty before as well as
after RTA.

Initially in open list but shifted

Sensitive list to negative after certain quota
filled
 Mr. X
exporting
radar Mr. Y exporting Mr. Z exporting
transmitters avionics

If radar for If transmitters for If avionics for

example falls in example falls in example falls in
open category negative category then sensitive category
then it is a good it is a bad news for him then it is a tough
news for him since the MFN duty news for him since
since the MFN will NOT come down to the MFN duty will
duty will come 0%. But he can export NOT come down to
down to 0%. at MFN. 0% immediately.
 Time periods of the Concessions
Example of Indo-Korea CEPA: Schedule for Tariff Elimination

E-0 Tariff will be entirely eliminated on the date the

agreement enters into force (January 01, 2010)
(Your export opportunity begin immediately)

E-5 Tariff will be removed in 5 equal annual stages

beginning on the date the agreement enters into
force, effective January 1 of the year* four
(Your export opportunity will begin only in 2015)
E-8 Tariff will be removed in 8 equal annual stages
beginning on the date the agreement enters into
force, effective January 1 of the year* seven
(Your export opportunity will begin only in 2018)
 Parameters to analyze business
implications of RTA for your product

 Status of your product in RTA

 Open list
 Negative List
 Sensitive List
 Time periods of the Concessions
 Rules of Origin
 Type of RTA
 Level of RTA
 Status of the partner countries in an RTA
 Type of RTA

PTA (Preferential Trade Agreement) : SAARC, Chile, Peru, MERCOSUR, Afghanistan

FTA (Free Trade): SAARC, ASEAN, Srilanka
CEPA (Comprehensive Economic Partnership Agreement): Korea, Japan
CECA (Comprehensive Economic Co-operation Agreement): Singapore, Malaysia
TOT (Treaty of Trade): Nepal
Stages of Economic Integration around the World
 PTA/FTA: Tariff
CEPA: Services
reduction in
Liberalisation
goods
How are
these
different Treaty of Transit:
? CECA: Investment
allowing goods to pass
duty free if they are
not being imported for
Liberalisation consumption but only
to use the port for the
third country
 Level of RTA
Common currency
Monetary Union Macroeconomic
policy
coordination

Economic Union

Free
movement of Common Market
factors of CET
production
Custom Unions

Free Trade Areas

Preferential Trading Arrangement

South African Customs Union
(SACU)

Does Indian
companies hold any
opportunity in SACU
despite absence of
any trade agreement
either with SACU or
with any of these
countries
independently?
 WTO MFN
Rate: 42%

GSP Rate: 12%

• Import of components
• Assemble in Africa:
Made in Africa tag (ldc)
• Manufacture in Africa
and export to eu
 COMESA comes
to your rescue

The Common Market for Eastern

and Southern Africa, is an FTA with
twenty member states stretching
from Libya to Zimbabwe. COMESA
formed in December 1994,
replacing a Preferential Trade Area
which had existed since 1981.
Chinese conglomerates Jiangsu
Sunshine Group, which deals in
wool textiles and garments, has
decided to invest close to US$ 1
billion in Ethiopia. It is building a
major textile manufacturing hub in
Ethiopia. Many other Chinese
textile investors are choosing to
relocate their textile operations to
the East African country like
Ethiopia. Because they need raw
material base country and Ethiopia
is a cotton-producing country. This
is part of its value chain relocation,
in addition, companies are also
using Africa as a gateway to
emerging markets on the
continent and to the European
market.
 Rules of Origin
Rules of origin are used to determine the country of origin of a product for
purposes of international trade. The exact rules vary from country to country,
from agreement to agreement. There are two common types of rules of origin:
Non-preferential rules of origin are used to
Non-preferential determine the country of origin for certain
purposes. These purposes may be for quotas,
anti-dumping, anti-circumvention, statistics or
origin labelling.
Preferential Preferential ROO are part of RTA which
includes tariff concessions. These trade
arrangements might be unilateral, bilateral or
regional (also sometimes called multilateral)
trade arrangements. The rules of origin
determine what products can benefit from the
tariff concession or preference, in order to
avoid transhipment.
• Wholly obtained goods: in which the product should be entirely produced
(agro products)/manufactured (industrial product) within the national
boundaries of the FTA country (exporter) to qualify for FTA benefits in FTA
partner country (importer)
• Substantial transformation criteria: In this scenario, FTA country partners
are not too particular on the products being 100% manufactured within
themselves but allows certain flexibility to the countries to import certain
amount of raw material from non FTA country. Now what will be this certain
amount is negotiable within the trade agreements and differs across trade
agreements.
• Minimum operations criteria: this criteria makes very simple operations
ineligible for origin purposes. For example, mere mixing of two inputs or
cutting large items into smaller pieces or just repacking does not qualify your
product to enjoy tariff benefit in FTA country. For example; operations to
ensure preservation of products in good condition during transport, simple
operations like dust removal, sorting, washing, painting, cutting, packing etc
will not be considered for availing tariff concessions.
 Duty Concessions for Sri Lankan Exports to India
Tariff
Reductio Remarks
n

50% To be made duty free from 2004 The Rules of Origin (RoO) criteria have
alsoof tea
50% fixed tariff concession for imports beenfromdefined
Sri Lankaunder
(AnnualISLFTA. The of
maximum quota
50%-Tea 15 million Kilograms) preferential duties will be applicable
only if the domestic value-addition is at a
Garments covering Chaptersminimum 61 & 62 whileof 35 remaining
percent orin 25
thepercent
negative
list, will be given 50 percent when tariff
Indianconcessions on a10fixed
inputs comprise basis,
percent.
subject to an annual restriction of eight million pieces, of which six
million shall be extended the concession only if made of Indian fabric.
50%- On utilization of the unrestricted quota, an additional quota of 2 million
Garments pieces out of 8 million pieces is permitted. The quota level per
category is increased from 1.5 million to 2 million pieces per category
per year.

Concessions of Textile items restricted to 25 percent on Chapters 51-56, 58-60, & 63.
25%- Four Chapters under the Textile sector retained in the negative list (Chapters 50, 57,
Textiles 61, and 62)
 Ready reference for Indian Exporters

Afghanistan Tea, medicines refined sugar white cement

Chile
plastics rubber pharma dyes and resins leather textiles

Nepal Vanaspati(one lakh mt), copper products (10,000mt), acrylic(10,000mt), Zinc oxide(2,500mt)

organic chemicals, pharma, essential oils, plastics, rubber, electric machinery

South Americal
Ready reference for Indian Exporters

ROO :30%

Tea, medicines refined sugar white cement

ROO :10-100%

plastics rubber pharma dyes and resins leather textiles

Vanaspati(one lakh mt), copper products (10,000mt), acrylic(10,000mt), Zinc oxide(2,500mt)

ROO :10-20-
100%

organic chemicals, pharma, essential oils, plastics, rubber, electric machinery