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Global Trade Dynamics

Trade Agreements & Economic Integration

Understanding the hierarchy of economic cooperation from PTAs to Economic Unions, and India's global trade footprint.

13+India's RTAs
~2.5%Global Trade Share
$1 Trillion+Total Merchandise Trade

Levels of Economic Integration

From Preferential Trade to full Economic Union

1

Preferential Trade Agreement (PTA)

PTA

The initial stage of economic integration. Two or more countries agree to reduce (not necessarily eliminate) tariffs on a select list of goods.

Positive List (specific goods only) Reduced Tariffs (Margin of Preference) Simplest form of integration
Example: India-Afghanistan PTA, India-MERCOSUR PTA
2

Free Trade Agreement (FTA)

FTA

Partner countries agree to eliminate tariffs on substantially all trade. However, each country maintains its own external tariff regime for non-members.

Negative List (all goods covered except exclusions) Zero Tariffs on most goods Rules of Origin apply
Example: India-Sri Lanka FTA, ASEAN-India FTA
3

CECA / CEPA

CECA/CEPA

Comprehensive agreements that go beyond goods to include Services, Investment, IPR, and Regulatory aspects.

CECAIntegrated package on Goods, Services & Investment (e.g., India-Singapore).
CEPABroader scope including Trade Facilitation & Regulatory aspects (e.g., India-UAE, India-Japan).
Goods + Services + Investment Mutual Recognition Agreements (MRAs) Deeper economic integration
Example: India-UAE CEPA, India-Korea CEPA
4

Customs Union

CU

An FTA where member countries also agree to adopt a common external tariff (CET) for imports from non-member countries.

Free trade among members Common External Tariff (CET) Unified trade policy
Example: Southern African Customs Union (SACU), GCC (Gulf Cooperation Council)
5

Common Market

CM

A Customs Union that also allows free movement of factors of production (Labor and Capital) among member countries.

Free movement of Goods & Services Free movement of Labor & Capital Harmonized technical standards
Example: European Single Market (pre-Maastricht)
6

Economic Union

EU

A Common Market with harmonized fiscal and monetary policies. Often leads to a common currency.

Common Currency (Monetary Union) Unified Fiscal Policy norms Political institution integration
Example: European Union (EU)

India's Major Trade Agreements

Key bilateral and multilateral deals shaping India's trade.

Active

India-UAE CEPA

Type
CEPA

Historic deal finalized in 88 days. Zero duty on 90% of India's exports. Expected to boost trade to $100bn.

Year: 2022
Active

India-Australia ECTA

Type
ECTA (Early Harvest FTA)

Economic Cooperation and Trade Agreement. Zero duty on 96% of Indian exports including textiles and leather.

Year: 2022
Active

ASEAN-India FTA (AIFTA)

Type
FTA (Goods + Services)

Trade in Goods Agreement. Services and Investment agreements signed later. Currently under review to address trade deficit.

Year: 2010
Active

India-Japan CEPA

Type
CEPA

Covers Goods, Services, Movement of Natural Persons (Nurses, Caregivers), and IPR.

Year: 2011
Active

India-Korea CEPA

Type
CEPA

Comprehensive deal but India has faced widening trade deficit. Under review for upgradation.

Year: 2010
Active

SAFTA (South Asia)

Type
FTA

South Asian Free Trade Area. Agreement reached at 12th SAARC summit. Limited success due to geopolitical tensions.

Year: 2006
Negotiating

India-UK FTA

Type
FTA

Negotiations in advanced stages. Focus on tariff reduction in whiskey/autos vs visa access for professionals.

Year: Ongoing
Negotiating

India-EU BTIA

Type
FTA

Broad-based Trade and Investment Agreement. Stalled for years, negotiations re-launched recently.

Year: Ongoing