Failure of Free Trade Agreements : Analysis – UPSC GS3

Challenges in Free Trade Agreement:
  • Rising trade deficits:
    • ASEAN (Association of Southeast Asian Nations) FTA’s deficit rose from $5 billion to $22 billion.
    • Japan FTA saw the deficit increase from $4 billion to $8 billion.
    • South Korea FTA deficit grew from $8 billion to $12 billion.
  • Unsatisfactory exports:
    • According to NITI Aayog, India’s exports to FTA countries have not outperformed overall export growth or exports to the rest of the world.
    • Only 22% of exports are to FTA partners, while nearly 30-35% of all imports are from FTA partners.
  • Presence of Preferential Duties:
    • It significantly hamper the domestic industry.
    • The average margin of preference (the difference between tariff applied across countries and preferential rate applied for partner free-trade countries) in the Asia-Pacific Trade Agreement (APTA) is 33.45%.
    • While the trade deficit with China is in excess of $55 billion; it still has preferential access to many product lines.
  • Stagnated manufacturing:
    • At around 16% of GDP (having fallen from 19%).
    • World Economic Forum’s (WEF) Global Competitive Index (GCI) for 2019-20: India figures 68th out of 141 countries, 12th out of the 15 members RCEP.
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