The Indian government recently signed the Free Trade Agreement(FTA) with the United Arab Emirates. This marks a major step for India in the direction of further liberalization and integration with the global markets. The official term for this FTA with the UAE is the Comprehensive Economic Partnership Agreement or CEPA.
CEPA is India’s first Free Trade Agreement with the Middle East and North Africa or MENA region. Read out this article to know more about FTA, CEPA, and the implications of this agreement.
What are FTA and CEPA?
A Free Trade Agreement is essentially a bilateral agreement between two parties that removes barriers to trade between them. It basically involves both countries agreeing to charge fewer taxes in the form of tariffs and customs duties. Such relaxations open larger markets to companies situated in both countries. This boosts trade between both countries.
FTAs have been largely criticized for being against the spirit of globalization and international cooperation. The reason for this is that an FTA is an agreement between just two countries.
When two countries grant tax concessions to each other, that necessarily creates a disadvantage for the companies of other countries trying to export their goods into these nations. This is because these companies from other nations still have to pay taxes and import duties that increase their rates.
What Does This FTA Entail For India?
As per the government, this FTA is expected to create as many as 10 lakh jobs in India. The CEPA covers as much as 80% of all Indian exports to the UAE. The rest 20% doesn’t affect India much as per the Government.
The agreement is also likely to provide much-needed relief to the jewelry sector by reducing important tariffs. The creation of an India Martin UAE and a special investment zone in India for companies of Emirates is also mentioned in the agreement.
This agreement also suggests that India is not going to take a protectionist stance and eschew FTAs with other countries. Agreements with Canada, the UK, and Australia are also being discussed.
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