Free Trade Agreement Current Affairs

India-ETFA to hold FTA talks

India and European Free Trade Association (EFTA) will meet shortly in an attempt to conclude their long pending negotiations on Free Trade Agreement (FTA).

So far, 16 rounds of negotiations have taken place which had started in 2008. Both sides had resumed talks on the agreement in January 2017 after a gap of three years

Key Facts

The proposed FTA between India and EFTA covers trade in goods and services, investments, IRPR protection, trade facilitation, customs cooperation and public procurement. The early conclusion of the proposed FTA between India and EFTA as well as an investment protection framework will boost economic ties between the two sides. The India-EFTA bilateral trade was worth $19 billion in 2016-17 from $21.5 billion in 2015-16. The trade balance was in favour of EFTA members.

European Free Trade Association (EFTA)

EFTA is regional trade organisation and free trade area consisting of four European states, Iceland, Norway, Switzerland and Liechtenstein. It operates in parallel with European Union (EU), and all four member states participate in the European single market.

It was established in May 1960 thorough Stockholm Convention to serve as an alternative trade bloc for those European states that were unable or unwilling to join then European Economic Community (EEC) (which subsequently became European Union).

EFTA is not a customs union and member states have full rights to enter into bilateral trade arrangements with third-country. Moreover, it does not envisage for political integration nor issue legislation. Its secretariat is headquartered in Geneva, Switzerland.

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Government bans import of gold, silver items from South Korea

The Directorate General of Foreign Trade (DGFT) in the Union Commerce Ministry has banned duty free imports of gold, silver items from South Korea.

These restrictions were imposed against the backdrop of sudden surge in imports of precious metals from South Korea, with which India has a free trade agreement (FTA) since January 2010. Now, importers will now have to obtain a license from the DGFT for importing gold and silver from South Korea.

Sudden surge

Under the India-South Korea FTA, India has allowed duty free import of gold and silver items. However, 12.5% countervailing duty was imposed to offset equal level of excise duty on gold and silver jewellery items produced domestically.

After goods and services tax (GST) regime was implemented from 1 July 2017, countervailing duty was abolished as it subsumed excise duty and only 3% GST was imposed on gold. This created a situation where importing gold via South Korea became profitable due to its duty free status with India even as government continued to impose 10% basic customs duty on gold imports from other countries. Between 1 July and 3 August 2017, gold imports from South Korea surged to $339 million against import of only $70.5 million in 2016-17.

Background

India is the world’s second largest gold consumer after China, with consumption of 674 tonnes in 2016. According to the World Gold Council (WGC), India’s gold demand is projected to rise to between 850 tonnes and 950 tonnes by 2020 from an estimated 650-750 tonnes in 2017.

Directorate General of Foreign Trade (DGFT)

The DGFT is the nodal agency responsible for execution of the import and export Policies of India. It is entrusted with responsibilities for formulating and implementing the foreign trade policy with the main objective of promoting India’s exports.

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