S.

S JAIN SUBODH LAW COLLEGE

MANSAROVAR, JAIPUR

AFFILIATED TO
DR. BHIMRAO AMBEDKAR LAW UNIVERSITY

SESSION: 2023-24

SUBJECT: ECONOMICS

TOPIC: INTERNATIONAL TRADE AGREEMENTS AND INDIA

Submitted To: Submitted By:

Mrs. Khushbu Rathore Mukul Maheshwari

Assistant professor of Economics B.A.LL.B student

5th Semester (Section A)

 DECALARATION

I, Mukul Maheshwari do hereby declare that, this project titled “INTERNATIONAL TRADE
AGREEMENTS AND INDIA” is a guidance of Mrs. Khushbu Rathore (Asst. prof. of Economics) at S.S
Jain Subodh Law College in fulfillment for the award of the degree of B.A.LL.B. at the Bhimrao
Ambedkar Law University.
I also declare that, this work is original, except where assistance from other resources has been taken and
necessary acknowledgement for the same has been made at appropriate places. I further declare that, this
work has not been submitted either in whole or in part, for any degree or equivalent in any other
institution.

Date: 26 July 2023 Mukul Maheshwari

Place: Jaipur 5st Sem (SEC-A)

 CERTIFICATE

To whomsoever it may concern

This is to certify that the Project entitled “INTERNATIONAL TRADE AGREEMENTS AND INDIA "
submitted by MUKUL MAHESHWARI in fulfillment for the award of the degree of BA.LL. B in S.S Jain
Subodh Law College, Jaipur is the product of research carried out under my guidance and supervision.

Mrs. Khushbu Rathore

Asst. Prof. of Economics

S.S Jain Subodh Law college

 ACKNOWLEDGEMENT

I acknowledge with profundity, my obligation to Almighty god and my parents for giving me
the grace to accomplish my work, without which this project would not have been possible. I
express my heartfelt gratitude to my respected faculty, Mrs. Khushbu Rathore Asst. Prof. of
Economics for providing me with valuable suggestions to complete this dissertation. I am
especially to all my faculty members at S.S Jain Subodh Law college who have helped me
imbibe the basic research and writing skills. Lastly, I take upon myself the drawbacks and
limitations of this study, if any.

Date: 26 July 2023

Place: Jaipur
Mukul Maheshwari
 INDEX

1. INTRODUCTION
2. TYPES OF TRADE AGREEMENTS
3. FREE TRADE AGREEMENTS
4. ADVANTAGES AND DISADVANTAGES OF FREE TRADE
5. INDIA - AUSTRALIA (ECTA) AGREEMENT
6. THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS(ASEAN)
AGREEMENT
7. AGREEMENT ON SOUTH ASIA FREE TRADE AREA (SAFTA)
8. CONCLUSION
9. BIBLIOGRAPHY
 INTRODUCTION

 Trade agreement, any contractual arrangement between states concerning their trade
relationships. Trade agreements may be bilateral or multilateral—that is, between two
states or more than two states.
 For most countries international trade is regulated by unilateral barriers of several
types, including tariffs, nontariff barriers, and outright prohibitions. Trade agreements
are one way to reduce these barriers, thereby opening all parties to the benefits of
increased trade.
 In most modern economies the possible coalitions of interested groups are numerous,
and the variety of possible unilateral barriers is great. Further, some trade barriers are
created for other, noneconomic reasons, such as national security or the desire to
preserve or insulate local culture from foreign influences. Thus, it is not surprising
that successful trade agreements are very complicated. Some common features of
trade agreements are (1) reciprocity, (2) a most-favoured-nation (mfn) clause, and (3)
national treatment of nontariff barriers.
 reciprocity is a necessary feature of any agreement. If each required party does not
gain by the agreement as a whole, there is no incentive to agree to it. If agreement
takes place, it may be assumed that each party to the agreement expects to gain at
least as much as it loses. Thus, for example, country a, in exchange for reducing
barriers to country b’s products, which thereby benefit a’s consumers and b’s
producers, will insist that country b reduce barriers to country a’s products, thereby
benefiting country a’s producers and perhaps b’s consumers.
 The most-favoured-nation clause prevents one of the parties to the current agreement
from further lowering barriers to another country. For example, country a might agree
to reduce tariffs on some goods from country b in exchange
for reciprocal concessions. Without a most-favoured-nation clause, country a could
then further reduce tariffs for the same goods from country c in exchange for other
concessions. As a result, country a’s consumers would be able to purchase the goods
in question more cheaply from country c because of the tariff difference, while
country b would get nothing for its concessions. Most-favoured-nation status means
that a is required to extend the lowest existing tariff on specified goods to all its
trading partners having such status. Thus, if a agrees to a lower tariff later with c, b
automatically gets the same lower tariff.
 A “national treatment of nontariff restrictions” clause is necessary because most of the
properties of tariffs can be easily duplicated with an appropriately designed set of
nontariff restrictions. These can include discriminatory regulations, selective excise or
sales taxes, special “health” requirements, quotas, “voluntary” restraints on importing,
special licensing requirements, etc., not to mention outright prohibitions. Instead of
trying to list and disallow all of the possible types of nontariff restrictions, signatories
to an agreement demand treatment similar to that given to domestically produced
goods of the same type (for example, steel).

TYPES OF TRADE AGREEMENTS

1. FREE TRADE AGREEMENT

A free trade agreement is an agreement in which two or more countries agree to provide
preferential trade terms, tariff concession etc. to the partner country. Here a negative list of
products and services is maintained by the negotiating countries on which the terms of FTA
are not applicable hence it is more comprehensive than preferential trade agreement. India
has negotiated FTA with many countries e.g. Sri Lanka and various trading blocs as well e.g.
ASEAN.
2. PREFERENTIAL TRADE AGREEMENT
In this type of agreement, two or more partners give preferential right of entry to certain
products. This is done by reducing duties on an agreed number of tariff lines. Here a positive
list is maintained i.e. the list of the products on which the two partners have agreed to provide
preferential access. Tariff may even be reduced to zero for some products even in a PTA.
India signed a PTA with Afghanistan.
3. COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT
Partnership agreement or cooperation agreement are more comprehensive than an FTA.
CECA/CEPA also looks into the regulatory aspect of trade and encompasses and agreement
covering the regulatory issues. CECA has the widest coverage. CEPA covers negotiation on
the trade in services and investment, and other areas of economic partnership. It may even
consider negotiation on areas such as trade facilitation and customs cooperation, competition,
and IPR.
India has signed CEPAs with South Korea and Japan.
4. COMPREHENSIVE ECONOMIC COOPERATION AGREEMENT
CECA generally covers negotiation on trade tariff and TQR rates only. It is not as
comprehensive as CEPA. India has signed CECA with Malaysia.
5. FRAMEWORK AGREEMENT
Framework agreement primarily defines the scope and provisions of orientation of the
potential agreement between the trading partners. It provides for some new area of
discussions and set the period for future liberalisation. India has previously signed framework
agreements with the ASEAN, Japan etc.
6. EARLY HARVEST SCHEME
An Early Harvest Scheme (EHS) is a precursor to an FTA/CECA/CEPA between two trading
partners. For example early harvest scheme of RCEP has been rolled out. At this stage, the
negotiating countries identify certain products for tariff liberalization pending the conclusion
of actual FTA negotiations. An Early Harvest Scheme is thus a step towards enhanced
engagement and confidence building.

FREE TRADE AGREEMENTS

 A free trade agreement is a pact between two or more nations to reduce barriers to
imports and exports among them. Under a free trade policy, goods and services can be
bought and sold across international borders with little or no government tariffs,
quotas, subsidies, or prohibitions to inhibit their exchange. In the modern world, free
trade policy is often implemented by means of a formal and mutual agreement of the
nations involved. However, a free-trade policy may simply be the absence of any
trade restrictions.
 A government doesn't need to take specific action to promote free trade. This hands-
off stance is referred to as “laissez-faire trade” or trade liberalization.
 Governments with free-trade policies or agreements in place do not necessarily
abandon all control of imports and exports or eliminate all protectionist policies. In
modern international trade, few free trade agreements (FTAs) result in completely
free trade.
 ADVANTAGES AND DISADVANTAGES OF FREE TRADE

1. RAPID DEVELOPMENT
Free trade has allowed many countries to attain rapid economic growth. By focusing on
exports and resources where they have a strong comparative advantage, many countries have
been able to attract foreign investment capital and provide relatively high-paying jobs for
local workers.

2. LOWER GLOBAL PRICES

For consumers, free trade creates a competitive environment where countries strive to
provide the lowest possible prices for their resources. This in turn allows manufacturers to
provide lower prices for finished goods, ultimately increasing the buying power for all
consumers.

3. UNEMPLOYMENT AND BUSINESS LOSSES

However, there are economic losers when a country opens its borders to free trade. Domestic
industries may be unable to compete with foreign competitors, causing local unemployment.
Large-scale industries may move to countries with lax environmental and labor laws,
resulting in child labor or pollution.

4. INCREASED DEPENDENCY ON THE GLOBAL MARKET

Free trade can also make countries more dependent on the global market. For example, while
the prices for some goods may be cheaper on the world market, there are strategic benefits for
a country that produces those goods domestically. In the event of a war or crisis, the country
may be forced to rebuild these industries from scratch.

 INDIA - AUSTRALIA (ECTA)

 India and Australia have signed a historic interim Economic Cooperation And Trade
Agreement (INDAUS ECTA), which will give a fillip to India’s exports in the textiles,
leather, gems, and jewellery sector Down Under.
 For India, the ECTA with Australia is the first agreement with a large developed
economy of the world after more than a decade. Australia is also the third OECD after
Japan and South Korea country with which India has signed a Free Trade Agreement
(FTA).
 The two sides will be negotiating for a full-fledged Comprehensive Economic
Cooperation Agreement (CECA).
 It covers almost all the tariff lines dealt in by India and Australia respectively.
 India will benefit from preferential market access provided by Australia on 100% of its
tariff lines.
 India will be offering preferential access to Australia on over 70% of its tariff lines.
 Under the agreement, Indian graduates from STEM (Science, Technology,
Engineering and Mathematics) will be granted extended post-study work visas.
 It will provide zero-duty access to 96% of India’s exports to Australia and will give
about 85% of Australia’s exports zero-duty access to the Indian market
 It will boost bilateral trade in goods and services to USD 45-50 billion over five years,
up from around USD 27 billion, and generate over one million jobs in India,
 according to a government estimate.

SIGNIFICANCE OF (ECTA)

 Enhanced Exports: Currently, Indian exports face a tariff disadvantage of 4-5% in

many labour-intensive sectors vis-à-vis competitors in the Australian market such as
China, Thailand, Vietnam, South Korea, Japan, Indonesia and Malaysia.
 Removing these barriers under the ECTA can enhance India’s merchandise exports
significantly.
 Cheaper Raw Materials: Australian exports to India are more concentrated in raw
materials and intermediate products. Due to zero-duty access to 85% of Australian
products, many industries in India will get cheaper raw materials and thus become
more competitive, particularly in sectors like steel, aluminium, power, engineering
and so on.
 Change in Perceptions for India: The recent trade agreement will also assist in
changing perceptions in the developed world which has always typecast India as
‘protectionist’ and address scepticism around India’s openness to do business with the
world.
 Stronger Indo-Pacific: Strong Australia India economic ties will also pave the way for
a stronger Indo-Pacific economic architecture, that’s not just based on flows of
physical goods, money and people, but on the basis of building capacity led
connections, complementarities, sustainable commitments and mutual dependence
across countries and sub-regions.

 THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS(ASEAN)

 The Association of Southeast Asian Nations (ASEAN) is a regional grouping that

aims to promote economic and security cooperation among its ten members: Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,
Thailand, and Vietnam. ASEAN countries have a total population of 662 million
people and a combined gross domestic product (GDP) of $3.2 trillion. The group has
played a central role in Asian economic integration, joining negotiations to form the
world’s largest free trade agreement and signing six free trade deals with other
regional economies.
 Yet experts say ASEAN’s impact is limited by a lack of strategic vision, diverging
priorities among member states, and weak leadership. The bloc’s biggest challenges,
they say, are developing a unified approach to China, particularly in response to
territorial disputes in the South China Sea, and responding to Myanmar’s civil war.
 ASEAN is headed by a chair—a position that rotates annually among member states
—and is assisted by a secretariat based in Jakarta, Indonesia. Important decisions are
usually reached through consultation and consensus guided by the principles of
noninterference in internal affairs and peaceful resolution of conflicts. Many experts
see this approach to decision-making as a drawback of the organization. “These
norms of consensus and noninterference have increasingly become outdated, and they
have hindered ASEAN’s influence on issues such as dealing with China and crises in
particular ASEAN states.
 Supporters of ASEAN, such as Kishore Mahbubani, who served as Singapore’s
 permanent representative to the United Nations, say the grouping has improved
previously hostile regional relations. “[ASEAN’s] culture of consultations and
consensus generated geopolitical miracles, some so stealthy that few outside the
region have noticed them,”

ASEAN PURPOSE

 Accelerating economic growth, cultural development, and social progress in the

region by joint initiatives in the spirit of partnership and equality to cement the
foundation for a peaceful and strong community of SE Asian countries.
 Promoting peace and stability in the region by incorporating respect for justice and
the rule of law in the relationships between nations and adherence to the United
Nations principles.
 Promoting active collaboration and mutual assistance in subjects of common interest
in social, economic, cultural, administrative, scientific, and technical domains.
 Assisting member countries via training and research facilities in the educational,
administrative, technical, and professional domains.
 Cooperating for better usage of agriculture and industries, trade expansion (including
studying the problem of international commodity trade), improving communication
and transportation facilities, and improving living standards among the people.
 Promoting SE Asian studies.
 Exploring more avenues for further cooperation among themselves, and maintaining
close and advantageous cooperation with other international groupings of similar
objectives.

ASEAN FUNDAMENTAL PRINCIPLES

 Mutual respect for the independence, sovereignty, equality, territorial integrity, and
national identity of all nations;
 The right of every State to lead its national existence free from external interference,
subversion or coercion;
 Non-interference in the internal affairs of one another;
 Settlement of differences or disputes by peaceful manner;
 Renunciation of the threat or use of force; and
 Effective cooperation among themselves.

ASEAN HEADQUARTERS

 The body is headquartered in Jakarta, Indonesia.

 Secretary-General: Dato Lim Jock Hoi
 Official Languages: Burmese, Filipino, Indonesian, Khmer, Lao, Malay, Mandarin,
Tamil, Thai and Vietnamese
  Working Language: English

ASEAN-LED FORUMS

1. ASEAN REGIONAL FORUM (ARF): It was launched in 1993. It is a twenty-

seven-member multilateral grouping that was developed to facilitate cooperation on
political and security issues to contribute to regional confidence-building and
preventive diplomacy.

2. ASEAN PLUS THREE: The consultative group initiated in 1997 brings together
ASEAN’s ten members, China, Japan, and South Korea.

3. EAST ASIA SUMMIT (EAS): First held in 2005, the summit seeks to promote
security and prosperity in the region and is usually attended by the heads of state from
ASEAN, Australia, China, India, Japan, New Zealand, Russia, South Korea, and the
United States. ASEAN plays a central role as the agenda-setter.

AGREEMENT ON SOUTH ASIA FREE TRADE AREA (SAFTA)

 The Governments of the SAARC (South Asian Association for Regional Cooperation)
Member States comprising the People’s Republic of Bangladesh, the Kingdom of
Bhutan, the Republic of India, the Republic of Maldives, the Kingdom of Nepal, the
Islamic Republic of Pakistan and the Democratic Socialist Republic of Sri Lanka
hereinafter referred to as “Contracting States”

OBJECTIVES AND PRINCIPLES

1. The Objectives of this Agreement are to promote and enhance mutual trade and economic
cooperation among Contracting States by, inter-alia:
A) eliminating barriers to trade in, and facilitating the crossborder movement of goods
between the territories of the Contracting States;
B) promoting conditions of fair competition in the free trade area, and ensuring equitable
benefits to all Contracting States, taking into account their respective levels and pattern of
economic development;
C) creating effective mechanism for the implementation and application of this Agreement,
for its joint administration and for the resolution of disputes; and
D) establishing a framework for further regional cooperation to expand and enhance the
mutual benefits of this Agreement.
2. SAFTA shall be governed in accordance with the following principles:
A) SAFTA will be governed by the provisions of this Agreement and also by the rules,
regulations, decisions, understandings and protocols to be agreed upon within its framework
by the Contracting States;
B) The Contracting States affirm their existing rights and obligations with respect to each
other under Marrakesh Agreement Establishing the World Trade Organization and other
Treaties/Agreements to which such Contracting States are signatories;
C) SAFTA shall be based and applied on the principles of overall reciprocity and mutuality of
advantages in such a way as to benefit equitably all Contracting States, taking into account
 their respective levels of economic and industrial development, the pattern of their external
trade and tariff policies and systems;
d) SAFTA shall involve the free movement of goods, between countries through, inter alia, the
elimination of tariffs, para tariffs and non-tariff restrictions on the movement of goods, and any other
equivalent measures; e) SAFTA shall entail adoption of trade facilitation and other measures, and the
progressive harmonization of legislations by the Contracting States in the relevant areas; and f) The
special needs of the Least Developed Contracting States shall be clearly recognized by adopting
concrete preferential measures in their favour on a non-reciprocal basis.

CONCLUSION

A large and increasing number of free trade agreements (FTAs) has become a defining
feature of global trade in the early twenty-first century. Even countries such as those in East
Asia, which were reluctant to engage in FTA negotiations a mere ten years ago, are now avid
participants. Although the tangible benefits of FTAs are ambiguous,1 and they may be
undermining multilateral trade negotiations under the World Trade Organization (WTO), the
FTA frenzy has continued and accelerated. Thus, we began by asking the following
questions. What is driving these FTAs? What explains the intense interest of so many
countries in FTAs despite their ambiguous benefits? In order to address these questions, this
volume started with the assumption that most FTAs are interconnected. That is, although the
dynamics between FTA partners are important, a government’s decision to negotiate an FTA
with another country also impacts third countries. Those third countries, in turn, may feel
pressured to participate in the FTA process not only because of their fundamental interest in
liberalizing trade with certain partners, but also because partners (or rivals) already have FTA
relationships with other countries. This interdependence of government decisions points to a
process of FTA diffusion in the world. Such FTA diffusion, we hypothesized in the
framework chapter (Chapter 1), is caused by emulative or competitive mechanisms, among
which competitive pressures are dominant. Moreover, we argued that competitive pressures
are multifaceted and should be disaggregated into different types of competition ranging from
economic to political to legal. Beyond trying to explain FTA diffusion, we also asked another
important question regarding the impact of FTA proliferation on regional integration. If our
claim is correct—that competitive motivations are behind the spread of most FTAs—the
conclusion is contrary to the oft-heard assumption that FTAs will gradually lead to wider
regional integration (Baldwin, 2006). Indeed, it looks increasingly likely that the FTA
proliferation will challenge, rather than facilitate, region-wide FTA networks.
 BIBLIOGRAPHY

1. https://commerce.gov.in/international-trade/trade-agreements/indias-current-
engagements-in-rtas/association-of-south-east-asian-nations-asean-and-india-free-
trade-agreement-fta-negotiationss/
2. https://www.investopedia.com/terms/f/free-trade.asp
3. https://prepp.in/news/e-492-types-of-trade-agreements-indian-economy-notes#Trade
%20Agreements
4. https://commerce.gov.in/wp-content/uploads/2020/05/safta.pdf