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India-Japan FTA: Rules of origin, product specific rules to be reviewed

The Hindu BusinessLine | 24 November 2023

India-Japan FTA: Rules of origin, product specific rules to be reviewed


India’s long-pursued demand for a review of the India-Japan Free Trade Agreement (FTA) – which has so far resulted in disproportionate gains for Tokyo – may be met, at least partially, with the two sides preparing to take a relook at the rules of origin (ROO) and product specific rules for greater market access for goods, sources have said.

“The Commerce Ministry is taking inputs from various export promotion organisations on the changes in the ROO text and existing product specific rules (that they would want in the India-Japan CEPA for items of export interest to them,” a source tracking the matter told businessline.

Balanced review

While India wanted a broader review of its FTA with Japan, officially called the Comprehensive Economic Partnership Agreement (CEPA), to make it more balanced, it will try to see the extent to which it can get the ROO and PSRs changed to benefit the Indian industry before pressing on other aspects of the review such as non-tariff measures, the source added.

India and Japan entered into a CEPA in 2011 extending duty free/low duty market access for most items, with both sides hoping to gain substantially from it. But the pact benefitted Japan much more than India. Japan’s exports to India almost doubled to $16.49 billion in 2022-23 from $8.62 billion in 2010-11, while India’s exports to Japan remained static at $5.46 billion in 2022-23 from $5.09 billion in 2010-11.

“India has been pressing for a review of its CEPA with Japan as it believes that some of the non tariff measures (NTMs) in Japan, especially those related to technical standards, are tough for its MSMEs to meet. At the moment, however, Japan wants the focus of the review to be on ROOs and benefits could flow to Indian exporters from this exercise as well,” the source said.

Key for FTA

ROOs are crucial in any free trade pact as they prescribe the minimum processing which needs to happen in an FTA partner country for a product to qualify for duty benefits. PSRs determine the circumstances in which goods imported from a partner country, that have components or inputs from a non-partner, are still eligible for preferential tariff treatment.

“The government is hopeful that the Indian industry will help it identify how ROOs and PSRs could be modified to result in greater market access in Japan,” the source added.

 source: The Hindu BusinessLine