The Comprehensive Economic Partnership Agreement between India and the UAE

February 22, 2022

Syllabus: General Studies Paper 2

Context

After a fast tracked three month negotiation between India and UAE, both countries on February 18 signed an FTA pact, during a virtual summit.
India and the United Arab Emirates (UAE) inked a trade pact, Comprehensive Economic Partnership Agreement (CEPA) during a virtual summit led by Prime Minister Narendra Modi and Crown Prince of Abu Dhabi Sheikh Mohamed bin Zayed Al Nahyan.
India has been part of global trade organisations like the WTO but this latest trade pact is unique and has broader implications.

Details of pact

The Comprehensive Economic Partnership Agreement is a bilateral trade pact that will cover over a period of time 90% of India’s exports.
- This will include leather, processed agriculture and dairy products, handicrafts, gems and jewellery, furniture, pharmaceuticals, food and beverages, engineering products and nearly the entire spectrum of items produced by the Indian economy.
- Apart from the goods sector, it will also include the services sector. Indian officials said that they expect the services sector to boom by $15 billion in the coming five years.
The deal has strong anti-dumping measures integrated into it which will prevent any country from dumping its products into the Indian market by using the route of the UAE.
The document has very strong rules of origin clauses that will disallow any country to export goods to India taking advantage of relaxed tariff on the Indian side.
- India wants 40% value addition into a product from a third country before it could be exported to India through UAE.

Likely Impact

India-UAE economic ties are marked by the flow of remittances from the oil rich Gulf country to India. The country hosts at least 3 million Indians who work in diverse sectors of the economy of the Emirates and provides it with vital manpower support at all levels.
According to a study, 82% of India’s total remittances originated from seven countries that included Gulf countries like the UAE, Saudi Arabia, Oman and Kuwait.
In 2019, India received $83 billion from the Gulf region.
The India-UAE economic relation at present is shaped by the remittances that remain much greater than the $60 billion bilateral trade. The remittances are expected to rise with full economic recovery of the UAE’s post-pandemic economy.
The FTA will also increase remittances as Indian investments in UAE will bring Indian employees into the Gulf country.

Reference to western Quad

The western Quad consisting of Israel, India, UAE and the United States has been a regional factor ever since it was convened last October which was followed by a ministerial meeting of the four countries.
USA and the UAE are among the biggest trading partners of India, and Israel is among the top technology support providers for India. All four are connected by currents of security and trade.

Immediate outputs of the FTA

The FTA will allow goods from UAE, especially the famed dates of UAE to enter India.
Most of the Indian exports similarly will benefit from the “zero tariff” that UAE is expected to grant.
This move will allow increased visibility of Indian products in the UAE.
The reduction in tariff for Indian jewellery and gems will allow it to enter the UAE in greater volume.

Difference between UAE and India CEPA and other trade agreements India is negotiating with countries like Australia

Most of the other agreements are expected to be “early harvest agreements” or interim agreements till both sides conclude the final agreement in a comprehensive manner.
The India-UAE FTA however is comprehensive in nature, with vast scope of items that will come under it.
Early harvest agreements are expected to include goods and products. But the CEPA will have a greater spread of both goods as well as services.

When will the agreement come into effect?

The agreement is not likely to come into force immediately as the United Arab Emirates has not yet completed the necessary official procedures on its end.
This process will take 60 days at least and India has expressed hope that CEPA will be in the phase of implementation after May 1.
India, on the other hand, has completed the entire official requirement.

The Hindu link

https://www.thehindu.com/news/national/the-comprehensive-economic-partnership-agreement-between-india-and-the-uae/article65068502.ece?homepage=true

Question- How the recently signed Comprehensive Economic Partnership Agreement between India and the UAE will boost bilateral trade ties? Elucidate.