Quest for transparency in FTA negotiations – Reforming the FTA Mechanism in India | 17th November 2022 | UPSC Daily Editorial Analysis

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What's the article about?

  • It talks about reforming the free trade agreement (FTA) mechanism in India, to bring greater transparency and accountability, along the lines of the UK’s FTA mechanism.


  • GS3: Indian Economy; Effects of Liberalization on the Economy;
  • GS2: Effect of Policies and Politics of Developed and Developing Countries on India’s interests.

What's the crux of the article?

  • India is investing heavily on free trade agreements (such as the European Union, Canada, the U.K., and Israel) to achieve its export target of $2 trillion by 2030. (FTAs).
  • These FTAs cover a wide array of topics and have a far-reaching impact on the economy and society.
  • However, India's FTA framework is not as transparent and accountable as it needs to be.
  • India does not have a single, comprehensive FTA legislation.
  • India must therefore revamp its FTA framework.
  • The UK's FTA Mechanism offers several suggestions in this area.

What Is a Free Trade Agreement (FTA)?

  • A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

Takeaways from the UK’s FTA mechanism:

  • First, the Department of International Trade (DFIT), U.K., publishes a policy paper laying down the strategic objectives behind negotiating an FTA and why it is important for the U.K. to have an FTA with a particular country.
    • Conversely, the Commerce Ministry in India, the nodal body responsible for FTAs, only offers the most basic information about FTA negotiations on its website.
  • Second, the policy paper that the DFIT publishes also contains the inputs and responses received by various stakeholders such as businesses, non-governmental organisations, and others.
    • Seemingly, the Commerce Ministry also undertakes stakeholder consultations and inter-ministerial meetings but there is no public record of these discussions and the government’s response to the concerns of stakeholders.
  • Third, in the U.K., the strategic objectives identified by the government for signing an FTA are scrutinised by the U.K. Parliament.
    • In India, there is no mechanism for such parliamentary scrutiny of the executive’s actions during the FTA negotiations.
  • Fourth, in the U.K, under the Constitutional Reform and Governance Act, 2010, the executive has to lay down a treaty before the British Parliament for 21 sitting days with an explanatory memorandum before ratifying it.
    • Despite having the same power, the Indian Parliament hasn't used it in the previous 70 years.

Way Forward: India should frame a comprehensive law to cover the all aspects of the FTA, it should include:

  • First, the executive should make a clear economic case outlining its strategic objectives publicly for entering into negotiations for a treaty such as an FTA.
  • Second, the executive should be under an obligation to consult all stakeholders, respond to their concerns and make this information publicly available.
  • Third, the Indian Parliament should constitute a committee on the lines of the U.K.’s IAC that will scrutinise the strategic objectives behind entering into an FTA.
  • Fourth, the executive should place the FTA on the floor of Parliament for a certain duration, allowing Parliament to debate it, before ratifying it.

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