Free Trade Agreement Current Affairs - 2020

GoI: 10 Sectors identified to cut imports

On June 3, 2020, the Department of Promotion for Industry and Internal Trade identified 10 sectors where in the imports are to be cut. This includes textiles, jewelry, mobile, gems, pharmaceuticals, garments, electronics, machinery, etc.

Highlights

The GoI has recently changed the set targets in order to become self-reliant in footwear, furniture and air conditioner. In parallel, the Government has also laid groundwork to become self-reliant in 10 other sectors.

Objectives

The Government has selected these 10 sectors in particular as India has natural advantage in these sectors. Hence, given a small push, these sectors have the potential of becoming the strength of the country.

The Government has made the decision of cutting imports to target the quality of domestically made products. Also, India will focus on increasing quality controls.

Imports in India

India imported 467.2 billion USD worth goods in the year 2019-20. Of this, leather and leather products amounted to 1.01 billion USD, machinery of 37.7 billion USD and machine tool imports of 4.2 billion USD.

The AC industry concern

The AC industry of India is largely dependent on imports, mainly imported compressors. These imports account to 60%-65% of AC production value.

What is the issue?

The Japanese split AC companies that are market leaders are taking advantage of India-ASEAN Free Trade Pact and importing from Vietnam and Thailand claiming to be registered in India. This is so common especially in new inverter category ACs.

Concerns of Atma Nirbhar Bharat Abhiyan

The steps of cutting imports and encouraging domestic manufacturing is being done under Atma Nirbhar Bharat Abhiyan. However, these steps may bring on certain issues. They are as follows

  • India might go back to Import Substitution Industrialization.
  • Trade Distortion. The prescribed limits of import duties of WTO may be crossed.
Import Substitution Industrialization

The ISI is criticized for the following

  • Only the consumer goods are boosted
  • The employment growth rate is slow
  • The productivity growth is minimal and the agriculture sector declined greatly
  • The internal migration increased.

Exports: GoI launches guidelines for Certificate of Origin

The Ministry of Commerce recently launched an online platform to issue Certificate of Origin to the exporters and other guidelines. The move is being taken to facilitate shipments during lock down.

Highlights

Currently, the online platform is used obtain certificate of exports under PTA signed with Chile, SAFTA signed with Nepal and SAPTA signed with SAARC countries and also India-Korea Comprehensive Economic Partnership Agreement. The guidelines has included many more such agreements to the list. IT has also framed time line and an online protocol to issue the certificate.

Certificate of Origin

The Certificate of Origin document is used worldwide. The certificate attests that the product originated in a particular country. The Guidelines for the issuance of certificate of origin is issued by International Chamber of Commerce. The certificate is important to determine tariffs. For instance, a preferential agreement might be supported by certificate of origin will reduce impose duty imposed on the product.

SAFTA and SAPTA

SAFTA is South Asian Free Trade Area that was signed in 2004 at the SAARC summit. The agreement created a free area of trade that accommodates more than 1.6 billion people. Under the agreement, the custom duties of traded goods were brought to be brought down to zero by 2016. SAPTA is SAARC Preferential Trading Agreement that envisages creating an area of preferential trading.