Business Standard, India

The information hurdle in free trade agreements

By TNC Rajagopalan

28 September 2015

In its Foreign Trade Policy statement, issued in March, the commerce ministry talked of a relative lack of awareness about the potential benefits from free trade agreements (FTAs). Also, that industry is not adequately oriented to using such FTAs to find new markets and products, except when these adversely affect their business.

So, an FTA outreach programme has been launched for all tier I and tier II cities, to be conducted till a satisfactory level of awareness is achieved, it said.

While such programmes will help, it can assist exporters who want to compete in the markets of countries with which we have FTAs, by making it easier to access essential information on tariffs. For example, if an exporter is talking to a prospective buyer in Malaysia, he would need to know the normal tariff for his product in Malaysia and the concessional one for imports there. This will enable him to work out the landed costs from various countries.

Armed with this, he can adjust his quotes and be competitive.

This information is not readily available. A web portal on FTAs has been developed and can be accessed at http://indiantradeportal.in. This provides both the normal tariff (rate under the most favoured nation (MFN) treatment, given to all countries) and the trade agreement applicable, rules of origin, sanitary and phytosanitary standards, and technical barriers to trade under various FTAs signed by India. The data is provided at the eight-digit level of the harmonised system of classification.

However, the information on preferences in that portal relate only to India. The exact rates under the FTA with India are not given. In many cases, the MFN rate is given as zero and so, it is difficult to understand how the FTA helps. Besides, the data is so presented as to require some interpretation and enhanced levels of understanding by the exporter. Not all can easily reach that expertise.

What is needed is a presentation of relevant information in a chart showing the comparative tariffs for each product in the destination country for imports from various countries. In other words, the exporter should, at a glance, know the tariff rates in the importing country for his product, for imports from various countries. That will enable him to understand the extent of preferences his competitors get, and quote accordingly.

For example, if an exporter knows imports from India attract five per cent duty in a destination country, whereas imports from his competitor in another country attract nil duty, he can adjust his prices. Facilitation by way of better presentation of available information can help Indian exporters leverage the benefits of FTAs.