Foreign trade policy

Syllabus– General Studies 3(economy)

Context

• After raising questions over the benefits flowing to India from the Free Trade Agreements (FTAs) it had signed, and choosing to opt out of the Regional Comprehensive Economic Partnership (RCEP) trade agreement, the Union commerce minister in his recent comments has suggested that the government is re-orienting its foreign trade policy.

Background

• The series of tariff hikes since 2014 marked an abrupt reversal of the decades-long policy of lowering tariff barriers.
• Coupled with the advocacy of Atma Nirbharta, it seemed to suggest that the country was turning its back on the enormous benefits flowing from free trade.

Furthermore

• Addressing the export promotion councils the Union Minister announced that the government was working towards “early harvest” agreements with Australia and the UK.
  • These are precursors to free trade agreements (FTA) in which tariff barriers are lowered on a limited set of goods.
• While a trade agreement with the US is unlikely to materialise in the near term, there is “positive momentum” for signing trade deals with the EU and the GCC (Gulf Cooperation Council) nations.

Way ahead

• Considering the current economic environment, a re-evaluation of the trade policy is much needed.
• With both private consumption and investment likely to remain subdued, and with the ability of the government to support the economy during this period being limited, exports can serve as an important driver of growth, more so when global growth is on the upswing.
• The country’s overall exports (merchandise and services) in the first four months of the current financial year stood at $204.97 billion, up 47.87 per cent over the same period last year, and 15.35 per cent over the year before that. It should move quickly to seize this opportunity.
• The government has recently announced the rates under its Remission of Duties and Taxes on Exported Products (RoDTEP) to reimburse exporters for duties paid across the supply chain, making exports zero-rated.
  • While some have expressed disappointment over both the rates, and the exclusion of some sectors, the larger policy thrust should be to integrate with global value chains, boost the competitiveness of exports.

The Indian Express link- https://indianexpress.com/article/opinion/editorials/freer-trade-agreements-rcep-piyush-goyal-7465982/

Question- In view of recent slowdown, exports may pave the way for economic recovery. Comment .