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EXPORT-IMPORT BANK OF INDIA

OCCASIONAL PAPER NO. 120

REGIONAL TRADE AGREEMENTS:

GATEWAY TO GLOBAL TRADE

EXIM Bank’s Occasional Paper Series is an attempt to disseminate the findings of

research studies carried out in the Bank. The results of research studies can interest
exporters, policy makers, industrialists, export promotion agencies as well as researchers.
However, views expressed do not necessarily reflect those of the Bank. While
reasonable care has been taken to ensure authenticity of information and data, EXIM
Bank accepts no responsibility for authenticity, accuracy or completeness of such items.

© Export-Import Bank of India

Published by Quest Publications
October 2007

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CONTENTS

Page No.
List of Tables 5
List of Charts 7
List of Boxes 9
Executive Summary 11
1. Evolution of Regional Trade Agreements 22
2. Global Performance of RTAs 36
3. Trade Performance of Select Major Countries 62
4. India’s Engagements in Regional Trade Agreements 82
5. Emerging Trends in RTAs 125
6. The Way Forward: Major Observations and 141
Strategy Recommendations
Annexure
Table A1 FTAs Notified to the WTO Since 2000 161
Table A2 Merchandise Exports by Blocs (as % of global exports) 163
in Latin America & the Caribbean
Table A3 Merchandise Exports by Blocs (as % of global exports) 164
in Africa
Table A4 Merchandise Exports by Blocs (as % of global exports) 164
in Asia
Table A5 Merchandise Exports by Blocs (% of global exports) 164
in West Asia
Table A6 Merchandise Exports by Blocs (as % of global exports) 165
in Europe
Table A7 Trade pattern between US and AGOA countries 165
Table A8 Trade pattern between US and ATPDEA countries 165

Project Team:
Mr. Arijit Saraswati
Mr. Viswanath Jandhyala

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List of Tables
Table No. Title Pg. No.

1.1 Number of RTAs Notified to WTO, 2000 to 2007 32

2.1 Trend in Trade Performance of American Trade Blocs 40
2.2 Trend in Trade Performance of African Trade Blocs 43
2.3 Trend in Trade Performance of Asian Trade Blocs 45
2.4 Trend in Trade Performance of West Asian Trade Blocs 47
2.5 Trend in Trade Performance of European Trade Blocs 49
2.6 Trend in Trade Performance of CIS Trade Bloc 50
3.1 Countries Involved in Most Number of RTAs 62
3.2 Mexico’s Trade Performance with RTA Partners 64
3.3 Singapore’s Trade Performance with RTA Partners 70
3.4 Chile’s Trade Performance with RTA Partners 73
3.5 United States’ Trade Performance with RTA Partners 76
3.6 Turkey’s Trade Performance with RTA Partners 80
4.1 India’s Trade with RTA Partners 96
4.2 Trends in India-ASEAN Trade 98
4.3 Trend in Top 10 Export Items from India to ASEAN 100
4.4 Trend in Top 10 Import Items from ASEAN to India 101
4.5 Trends in India-Singapore Trade 103
4.6 Trend in Top 10 Export Items from India to Singapore 105
4.7 Trend in Top 10 Import Items from Singapore to India 106
4.8 Trends in India-Sri Lanka Trade 107
4.9 Trend in Top 10 Export Items from India to Sri Lanka 108
4.10 Trend in Top 10 Import Items from Sri Lanka to India 109
4.11 Trends in India-Thailand Trade 110
4.12 Trend in Top 10 Export Items from India to Thailand 111
4.13 Trend in Top 10 Import Items from Thailand to India 112
4.14 Trends in India-BIMSTEC Trade 114
4.15 Trend in Top 10 Export Items from India to BIMSTEC 116
4.16 Trend in Top 10 Import Items from BIMSTEC to India 116
4.17 Trends in India-Chile Trade 117
4.18 Trend in Top 10 Export Items from India to Chile 118
4.19 Trend in Top 10 Import Items from Chile to India 119
4.20 Trends in India-GCC Trade 119
4.21 Trend in Top 10 Export Items from India to GCC 121
4.22 Trend in Top 10 Import Items from GCC to India 121
4.23 Trends in India-Mauritius Trade 122
4.24 Trends in India-SACU Trade 123
5.1 Trend in Engagement in RTAs Based on the Nature of Agreement 125

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List of Charts
Chart No. Title Pg. No.
A Distribution of Agreements in Force 13
(based upon the Nature of Agreement)
1.1 Number of RTAs Notified to WTO and in Force 25
1.2 Distribution of RTAs Notified to WTO (% of total) 26
1.3 Number of RTAs Notified to WTO, Entering into 32
Force since 2000
2.1 RTAs in Force, by Year of Entry into Force 36
2.2 Trend in Number of FTAs Entered into Force Since 2000 37
3.1 Trend in Mexico’s Total Trade 63
3.2 Trend in Singapore’s Total Trade 68
3.3 Singapore’s Total Trade to GDP Ratio 69
3.4 Trend in Chile’s Total Trade 72
3.5 Trend in United States’ Total Trade 75
3.6 Trend in Turkey’s Total Trade 78
3.7 Turkey’s Total Trade to GDP Ratio 79
4.1 Trends in India-ASEAN Trade 99
4.2 Trends in India-Singapore Trade 104
4.3 Trends in India-Sri Lanka Trade 107
4.4 Trends in India-Thailand Trade 110
4.5 Trends in India-BIMSTEC Trade 114
4.6 Trends in India-Chile Trade 118
4.7 Trends in India-GCC Trade 120
4.8 Trends in India-Mauritius Trade 123
4.9 Trends in India-SACU Trade 124
5.1 % Share of Agreements Entering into Force 126
(based upon the Nature of Agreement)
5.2 Year wise Distribution of Agreements 127
(based upon the Nature of Agreement)

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List of Boxes
Box No. Title Pg. No.
1 Select Trading Blocs in America 38
2 Select Trading Blocs in Africa 41
3 Select Trading Blocs in Asia 44
4 Select Trading Blocs in West Asia 46
5 Select Trading Blocs in Europe 48
6 Pattern of Engagement in FTAs in America 51
7 Pattern of Engagement in FTAs in Africa 53
8 Pattern of Engagement in FTAs in Asia 54
9 Pattern of Engagement in FTAs in West Asia 56
10 Pattern of Engagement in FTAs in Europe 58
11 Pattern of Engagement in FTAs in CIS 60

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EXECUTIVE SUMMARY
INTRODUCTION
There is a growing realisation
among countries that bilateral and
multilateral agreements could be
complementary and mutually
reinforcing approaches to trade
reforms. Such regional integration
agreements could lead to enhanced
regional trade, which in turn could
provide a boost to multilateral trade.
Moreover, the Doha Declaration
drawn up by the WTO ministers in
late 2001 also recognises that RTAs
can play an important role in
promoting the liberalisation and
expansion of trade and also in
increasing investment and
productivity gains and fostering
development especially in
developing economies.
The need for such agreements has
arisen from a number of socio-
economic, political and security
considerations. RTAs have proved to
encourage investment, facilitate
preferential access to larger
competitive markets and accelerate
economic growth. It is important to
ensure that regional trade agreements
become building blocks to world
trade and not stumbling blocks to
achieving the universal goal of global
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amalgamation. RTAs are increasingly
being viewed as a link between
developing and developed countries
towards the common goal of
economic development and a
gateway to global trade.
Slow progress on the recent WTO
based multilateral trade talks and the
gradual erosion of faith in
multilateralism has also given a new
thrust to the concept of regionalism
as a highly effective tool for
expanding international trade,
economic cooperation and global
integration. As regionalism becomes
a more widely accepted and an
indispensable aspect of international
trade, a sustained commitment to
multilateralism can help to arrest the
possible divisiveness of regionalism
and tap its potential for attaining
greater global economic integration
and rapid trade reforms.
The present study provides an
overview of regional trade
agreements, the concept and
rationale, types and nature of trade
agreements, factors that led to their
proliferation and discusses the
compatibility of RTAs with the WTO
framework. A region wise analysis is
attempted in the present study to
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delineate the recent developments,
trends and patterns in the proliferation
of RTAs across the globe during the
last decade and highlight the
emergence and trade performance of
various trade blocs in America, Africa,
Asia, West Asia, Europe, and CIS
region. An analysis of the impact of
RTAs on the trade performance of
countries most involved in
agreements is also carried out. The
study also lays special emphasis on
the emerging regionalism in Asia with
special focus on India’s initiatives in
regional trade agreements and
suggests broad strategy
recommendations for policy makers
in India to further enhance and
strengthen regional economic
integration initiatives to enhance
regional and subsequently global
trade.
PROLIFERATION OF
REGIONAL TRADE
AGREEMENTS
Due to the slow progress on the
multilateral trade talks in the Doha
round, there has been a significant
increase in regional trade
agreements in recent years, as a
result of which at present more than
one third of the world’s trade takes
place within the framework of such
agreements. Of the 205 RTAs
notified to WTO and which are in
force, as on July 18, 2007, 124 are
FTAs, accounting for 60 per cent of
the total, 46 are Economic
Integration Agreements (EIA), 12 are
Customs Unions (CU), 12 are Partial
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Scope (PS) Agreements, while 11 are
Accession Agreements. In an FTA,
member countries eliminate or
reduce internal tariff and non-tariff
trade barriers among members,
while each member is free to
maintain different most-favoured-
nation (MFN) barriers on non-
members. A Customs Union moves
beyond an FTA by establishing a
common external tariff (CET) on
imports from non-member countries.
Partial Scope Agreements, on the
other hand, are agreements
especially among developing
countries that are designed to have
limited product coverage. Similarly,
Accession Agreements are
agreements that countries wanting
to join the WTO have to negotiate
bilaterally with major economic
powers, as a part of their entry
procedure, which includes specific
commitments, concessions and
schedules to liberalise trade in
goods and services. The
predominance of FTAs is probably
due to the fact that they are faster
to conclude and require a lower
degree of policy coordination
among the contracting parties as
compared to plurilateral or
multilateral negotiations. Moreover,
it is observed that the proliferation
of RTAs has gained momentum
especially since the dawn of the
new millennium, during which 124
agreements have entered into force,
reflecting the growing importance of
regionalism among countries. Of
these agreements entered into force

post 2000, nearly 63% are FTAs.
FACTORS BEHIND THE
PROLIFERATION OF RTAS
A number of socio- economic
political considerations have played
an important role in promoting
regionalism among countries in
different regions of the world.
Countries have embraced regional
trade agreements primarily due to
the following reasons:

to derive benefits of increased
preferential access to highly
competitive larger markets

the slow progress in trade
liberalisation under the WTO

the failure of multilateralism
based trade talks

a sharp increase in FTAs around
the world, which has prompted
other countries not involved in
regional trade agreements to
also consider engagement in
such agreements – termed as
‘demonstration effect’
Chart A:
DISTRIBUTION OF AGREEMENTS IN FORCE
(BASED UPON THE NATURE OF AGREEMENT)
SOURCE: WTO
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to promote liberalisation and
bring about policy reforms

to attract more foreign direct
investment into the country and

political and security
considerations
NATURE OF REGIONAL TRADE
AGREEMENTS
In comparison to more of
agreements between developing
countries in the initial years of
regional trade agreements, there has
been an increasing tendency among
developed countries as well to enter
into trade accords between
themselves as also with developing
countries, as depicted by the
increasing share of such agreements
from 1995-1999 to 2000-2007 (refer
Chart A). As observed, compared to
only 10 agreements between
developing and developed countries
during 1995-1999, the number has
surged significantly to 51 during the
last seven years, constituting 46% of
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the total number of agreements
during the period. Developing
countries too have evinced keen
interest in engagement in RTAs with
more developed nations to gain
access to the larger and more
potential markets and benefit from
the immense trade opportunities
inherent in these markets. This
phenomenon is reflected in the fact
that the share of south-south
agreements, which comprised 67%
of the total agreements during 1995-
99, decreased to 39% during 2000-
2007. It is also interesting to note
that all agreements of United States,
except those with Israel and Jordan,
have entered into force post 2004.
Likewise, all trade agreements of
Singapore have come into effect
only after 2001.
Moreover, the study also finds
that this subtle and gradual shift in
the interest among developing
countries to engage in agreements
with developed countries has been
particularly noticed since 2004, prior
to which developing countries were
more interested in engaging in
agreements with similar developing
countries. This could be attributed to
the interest among developed
countries to engage in bilateral
agreements with developing countries
subsequent to the erosion of their
confidence in multilateralism. South-
south agreements which numbered 12
in 2004 have sharply declined to 2
each in 2005 and 2006, whereas north-
south agreements increased from 7
in 2004 to 13 in 2005, the maximum
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number of agreements of any type
since 2000, and 11 in 2006.
EMERGENCE OF TRADE BLOCS
& RTAs
There has also been a fast rise in
the number of regional trade blocs
around the globe as a result of the
willingness on part of countries to
enhance and foster trade
relationship with neighbouring
nations. Countries are also
transcending physical geographical
borders to rapidly enter into trade
relations with distant countries as
well. Southern Cone Common
Market (MERCOSUR) and NAFTA
have emerged as major blocs in
America. With the emergence of
significant trade blocs like
Association of South East Asian
Nations (ASEAN), Asia too is rapidly
embracing regionalism. Common
Market for Eastern and Southern
Africa (COMESA) and Southern
African Development Community
(SADC) in Africa; Greater Arab Free
Trade Agreement (GAFTA) and Gulf
Cooperation Council (GCC) in West
Asia; European Union (EU) and
European Free Trade Agreement
(EFTA) in Europe and the
Commonwealth of Independent
States (CIS) trade bloc could be
identified as crucial developments in
regional economic integration, which
have also significantly enhanced
intra-bloc trade. The intra bloc
merchandise exports as a percentage
share of bloc’s total exports for
European Union has been as high

as 66% in 2005; in case of NAFTA
it has been 56% and around 50%
for East Asia Economic Caucus
(EAEC). The corresponding share
has shown a decent increase from
13.6% to 19% for Central American
Common Market (CACM) indicating
the high degree of integration
among these blocs. It is also
interesting to note instances of
establishment of agreements
between countries within a bloc.
This distinctive feature is particularly
noticed in the CIS trade bloc, where
all CIS countries, with the exception
of Moldova, have entered into
agreements only with other CIS
countries, the main countries
engaging in RTAs in CIS being
Armenia, Georgia and Kyrgyz
Republic. Another trend is also
depicted by Japan, exploring
possibility of a trade agreement with
ASEAN, in spite of it having
established bilateral agreements with
Singapore and Malaysia both being
members of ASEAN. While India’s
engagement in an FTA with Sri
Lanka and SAARC countries
resembles the trend among CIS
countries, similarly India’s RTA with
Singapore and Thailand as also with
ASEAN shows similarity to Japan’s
initiatives. Countries in almost all
regions of the world are showing
an increasing interest in expanding
their trade opportunities with
countries bilaterally outside the
region or a bloc. In Asia, Singapore
has been the most aggressive in its
pursuits of regional trade
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agreements with number of
countries like New Zealand,
Australia, United States, Jordan,
Panama, outside Asia. It is also
observed that countries are engaging
in agreements with trading blocs as
a whole to access the larger and
more potent markets of the region.
A typical example in this regard
could be the advantage of entering
into an agreement with blocs such
as EU, which provides access to all
member countries of the Union.
Besides, engagement with a
Customs Union or a Common
Market is advantageous as it is
easier for the country to negotiate
issues with a bloc as a whole rather
than with individual countries with
diverse opinions and interests. With
regard to member countries, a
customs union or common market,
however, restricts the choice and
freedom to enter into bilateral
agreements with non-member
countries. This is particularly true for
larger and relatively more advanced
member countries in the bloc.
The countries, except for India,
that are involved in the most number
of RTAs are Mexico, engaged in 19
agreements, Singapore, in 18
agreements, Chile, in 17 agreements,
United States, in 15 agreements and
Turkey involved in 10 agreements. An
investigation of the trade pattern of
these countries over the past decade
clearly attests to the positive impact
of RTAs on the trade performance of
a country. The value of trade of all
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these countries with their RTA partner
countries over the past five years has
also increased sharply. Moreover,
trade with RTA partner countries
constitutes a major portion of the total
trade of these countries. For example,
in case of Mexico, trade with RTA
partner countries constitutes around
85% of Mexico’s global trade.
Similarly, for Chile and Singapore
trade with RTA partners constitutes
as high as 80% and 63% respectively,
of their total trade.
The study also highlights some
of the key factors that promoted
regional trade agreements in these
countries. In case of Mexico, the shift
from an inward looking trade policy
to a more liberal, and outward
oriented trade policy, the presence of
Maquiladoras, offshore assembly
units, along the US-Mexico border and
a number of export incentives
provided by Mexico have played an
important role in fostering its trade
relations with other countries both
intra regionally and extra regionally.
With regard to Singapore, its pro-
export, liberal trade policies and
elimination of most restrictions on
imports boosted its trade
engagements. Similarly, in case of
Chile, prioritisation of ensuring access
to larger markets in its
multidimensional trade policy,
imposition of low and uniform
applied tariffs and a stable economy
were instrumental in the proliferation
of Chile’s engagement in RTAs. United
States’ Trade Capacity Building (TCB)
efforts have played an important role
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in strengthening its trade relations
with especially developing countries.
An open and competitive internal
market and leadership in the
multilateral trading systems have
boosted regionalism in the country.
Over the years, Turkey too has moved
from a protected and state-directed
system to a free market system –
resulting from trade reform initiatives,
liberalisation and tariff reduction.
INDIA’S ENGAGEMENT IN
REGIONAL TRADE
AGREEMENTS
India’s endeavour to foster its
international trade has also been
well complemented by its efforts to
promote regional trade. Target
countries in India’s regional trade
initiatives cover various regions of
the world. In Asia, India made a
foray in RTAs with an FTA with Sri
Lanka in 1998. This was followed
by a Comprehensive Economic
Cooperation Agreement (CECA) with
Singapore, an FTA with South Asian
Association for Regional Cooperation
(SAARC) members (SAFTA) and with
the members of Bay of Bengal
Initiative for Multi-Sectoral Technical
and Economic Cooperation
(BIMSTEC), a framework agreement
for FTA with Thailand and a
framework agreement for CECA with
ASEAN. With the establishment of
Joint Study Groups (JSGs), India has
also initiated negotiations with a
number of countries like Korea,
China, Japan, Russia, Malaysia and
Indonesia. These initiatives form an

integral part of India’s ‘Look-East
Policy’, which has gained substantial
momentum in recent years and has
started yielding desirable results on
the economic, political and strategic
fronts. India is also seriously
pursuing negotiations to establish
RTAs with other developing
countries located elsewhere. India
has in place a preferential trade
agreement (PTA) with MERCOSUR
and with Chile; a framework
agreement for FTA with the Gulf
Cooperation Council (GCC); and a
PTA with South African Customs
Union (SACU). It has also
established JSGs with Mauritius and
Israel to explore possibility of FTAs.
Engagement in regional trade
agreements has had a significant
effect over the past decade on
India’s trade performance with its
partner countries. India’s exports to
and imports from its RTA partner
countries have significantly increased
from 2001-02 to 2006-07. India’s
trade with its RTA partner countries
as a percentage of its total trade
has shown a decent rise from 20%
to 30% from 2001-02 to 2006-07.
EMERGING REGIONALISM IN
ASIA
Recognising the potential for greater
regional cooperation for
development, major Asian
economies too have rapidly
embraced regionalism in the course
of the past decade, which has led
to the proliferation of several
regional trading agreements
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involving most of the Asian
economies. Asia too is making its
presence felt on the global scene
with the emergence of significant
trade blocs like ASEAN, which
contributed to around 27.4% of
Asia’s global trade in 2005, and
rapidly growing economies like
China, Korea and India.
A classic example of growing
regionalism in Asia is the expansion
of ASEAN to ‘ASEAN plus three’,
where initially the five countries
namely Indonesia, Malaysia,
Philippines, Singapore and Thailand
constituted ASEAN, which later
expanded to include Brunei,
Cambodia, Myanmar, Laos and
Vietnam. The ASEAN FTA (AFTA) was
subsequently expanded and was
termed as ‘ASEAN plus three’ with
AFTA’s engagement with Japan, China
and Korea. ASEAN has also entered
into an agreement with China in 2003
to form the ASEAN-China FTA
(ACFTA). Bilateral efforts are also
taking place to establish the ASEAN-
Japan Closer Economic Partnership
(CEP) Agreement, ASEAN- Korea FTA
(AKFTA), and ASEAN-India FTA
(AIFTA).
ASEAN’s engagements with
China, Japan, Korea and India and
the ‘ASEAN plus three’ initiative are
proving to be very important
developments in regional integration,
significantly boosting trade relations
and development in the region. Value
of total trade of ASEAN plus three
countries reached US$ 4.3 trillion in
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2005 which was 20% of global
exports. Development of India’s
engagement with ASEAN into a Free
Trade Agreement could provide a
major boost to the ongoing efforts to
promote regionalism in Asia and
would help in the creation of a Pan
Asia Free Trade Area.
STRATEGY
RECOMMENDATIONS
The study also attempts to provide
broad strategies that India could
adopt in tune with global trends and
patterns in engagement in trade
agreements across the world.
Before entering into any trade
accord India needs to carefully assess
the long-term implications arising out
of such engagements and adopt an
approach, which does not act against
the long-term interest and potential
of the economy. India needs to pursue
its endeavour towards eventual
multilateralism, in continuance of its
bilateral and plurilateral trade
initiatives and effective regionalism
beyond free trade agreements.
Engagement in regional trade
agreements could therefore, be a
complementary approach to India’s
multilateral trade endeavours.
In tune with global trends, India
needs to maintain its current focus
on bilateral and plurilateral trade
agreements as non-participation in
RTAs could greatly impact India’s
competitiveness in the global
economy. India needs to follow an
integrated approach while identifying
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countries/blocs with which India
could negotiate the possibilities of a
RTA. An important aspect that India
needs to consider is consistency in
its negative lists with regard to
agreements with different countries
as difference in negative lists could
be self-defeating and ineffective in
protecting domestic industries. While
engagement in regional trade
agreements, especially with
developed countries like the US or
the European Union, the issue of non
tariff barriers must also be carefully
addressed as they could act as serious
impediments to trade, particularly for
developing countries like India.
Having noted the positive impact
of regional trade agreements on a
country’s trade performance India
could explore trade accords with all
major trading blocs in different
regions of the world viz. MERCOSUR
in Latin America, NAFTA in North
America, EU in Europe, ASEAN in
Asia, GCC or GAFTA in West Asia,
SADC & SACU in Africa and the CIS
countries. Such agreements could
substantially increase access to larger
markets of blocs and also widen the
choice of competitive imports. In this
regard, India has already signed trade
agreements with MERCOSUR, GCC,
ASEAN and SACU, which have
strengthened India’s trade linkages in
Latin America, West Asia and Africa.
India is also currently negotiating an
agreement with EU. It is also
important for India to engage in a free
trade agreement with at least one of
the major members of a trade bloc in

case of inability to strike an accord
with a bloc as a whole as this could
act as a potential gateway to other
markets of the bloc. In this regard,
India’s ongoing efforts to enter into a
RTA with Russia could prove to be
beneficial in opening up the larger
markets of the CIS trade bloc, of
which Russia is a major member.
Similarly, India could also explore
Mexico as a potential trade partner
as Mexico could act as a gateway to
NAFTA as well as to Central America.
Entering into an agreement with
Mexico could be mutually beneficial
as Mexico is also a leading trading
partner of India in the Latin American
& Caribbean region and has shown
increasing interest in regional trade
agreements to achieve global
integration.
It is also recommended that, in
tune with the global trend and pattern
of gradual shift from south-south trade
agreements to preferential agreements
between developing and developed
countries, India too could explore
opportunities to engage in trade
agreements with more developed
countries like US, Japan, EU as against
its current approach to engage
bilaterally mainly with developing
countries. Trade agreements with
larger and more important blocs like
EU in Europe and NAFTA in America
could prove to be highly beneficial
in enhancing India’s trade
opportunities and gaining access to
larger, potent and more significant
markets of the world. India has
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initiated efforts to negotiate an India-
Japan (Comprehensive) Economic
Partnership Agreement, the first round
of negotiations for which have
commenced in 2007. It is also
negotiating with EU to establish a
broad-based trade and investment
agreement. United States being one
of the world’s largest economies,
India could also explore opportunities
to enter into a preferential trade
agreement with the US, given the vast
market potential of the country. Such
a linkage could enable lower import
duties on manufactured exports from
India, greater employment
opportunities for highly skilled Indian
technical personnel in the US, and
boost inflows of US investments in
key sectors like telecommunications,
IT, financial services and
infrastructure. The evident
complementarities between India and
US in terms of low cost advantage of
India and high intensity of capital and
technology of the US also strengthen
the possibility of such an agreement.
It is also proposed that India
could continue to look beyond free
trade agreements in goods to expand
the scope of agreements to
incorporate service agreements,
investment agreements and enhance
regional monetary cooperation and
cooperation in trade logistics. In this
context, India has moved beyond free
trade in goods by signing a number
of comprehensive economic
cooperation/partnership agreements
with countries/blocs like Singapore
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and ASEAN. Similarly, the India-Sri
Lanka Free Trade Agreement is being
transformed into a Comprehensive
Economic Partnership Agreement
(CEPA) and India is negotiating such
an agreement with Mauritius. India
could sustain this trend as it provides
an opportunity for achieving greater
levels of global economic integration,
in goods, services as well as in
investment.
India could also capitalise on its
dynamic comparative advantage in
the services sector, which has been
consistently contributing over 50% of
India’s GDP since 2000-01, compared
to many leading economies of the
world and could pursue FTAs on
services with developed countries and
leading emerging economies where
services sector is a major component
of economic activity, which could
largely prove to be in India’s favour.
Having well established itself as a
growing services sector driven
economy, India could pioneer in
setting a trend in FTAs exclusively on
services. It could adopt a new
approach in moving from services to
goods and thereby, set a new trend
in global economic integration.
India could also explore
opportunities to enter into investment
agreements with other countries
based upon the strength of robust
economic fundamentals and growing
investment attractiveness of India in
the global arena in view of increasing
foreign investment inflows and
infrastructure investment
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opportunities. Bilateral investment
agreements could play a crucial role
in facilitating the prospective growth
of FDI in India as also contribute
towards higher levels of outward
investments from India. India is
presently engaged in more than 50
Bilateral Investment Promotion
Agreements (BIPA) that encourage
capital flows into India and provide
secured business environment to
Indian overseas investors. India could
also enforce agreements which have
been signed but which have not
entered into force yet and fill the
existing gap. India could also consider
entering into BIPA with potential FTA
partners such as Mexico and Chile.
Further, with a view to stimulate
investments, India could consider
expanding the scope of BIPAs to
include specific investment incentives
in sectors such as infrastructure.
India could also consider
enhancing its regional monetary
cooperation with a view to support
and facilitate its regional trade
integration. The model of the
Mercosur Structural Convergence
Fund (FOCEM), which is an
instrument for transferring funds from
the relatively advanced countries of
MERCOSUR (Brazil and Argentina) to
the relatively less developed countries
in the bloc (Uruguay and Paraguay),
could be replicated in the SAARC
region. Such an initiative in the SAARC
region could meaningfully contribute
towards economic development of
the region and truly capture the

essence of regional economic
integration.
It is also recommended that India
could take initiatives to enhance
cooperation in trade logistics and
could explore opportunities in trans-
shipment services given its strategic
location between the west and the
east. Such cooperation in trade
logistics could significantly reduce
transaction and shipment costs and
time.
To conclude, the general
approach among the countries
including India could be to move
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‘from regionalism to multilateralism’.
This could also be viewed as a
‘bottom up approach’ in contrast to
the notion of ‘top-down’ approach
exhibited by the concept of
multilateralism.
Such an approach could prove to
be highly effective as integration
among the countries is initiated at the
bilateral level to expand to plurilateral
and then to multilateral levels. Thus,
regionalism could pave the way for
eventual multilateralism. The ASEAN
plus three approach could serve as a
model in this regard.
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1. EVOLUTION OF REGIONAL
TRADE AGREEMENTS

INTRODUCTION or through preferential liberalisation

A regional trade agreement is an
economic trade agreement to reduce
tariffs and non-tariff barriers on trade
between two or more nations to
promote trade and investment 1.
Bilateral and multilateral trade
agreements could be mutually
beneficial to both the countries.
Regional trade agreements (RTAs)
could accelerate trade liberalisation
and set higher benchmarks for the
multilateral system.
The need for regional trade
agreements has arisen from a number
of socio-economic, political and
security considerations. Political origin
of RTAs is rooted in foreign policy,
commercial diplomacy, and
development policy interests. Issues
that fail to be resolved at the
multilateral level such as trade in
services, investment, competition,
environment and labour standards can
be effectively considered bilaterally
by entering into regional trade
agreements.
Following the suspension of the
Doha round of discussions of the
WTO, and consequent gradual loss
of confidence in WTO-bound
multilateralism, countries which are
keen on expanding their international
trade at a fast rate are increasingly
considering liberalisation at the
bilateral and regional levels as their
preferred means to a more flexible
trade and investment regime. Even
countries like the US and India, who
have been major proponents of the
multilateral system, are now opting
for regional dialogues.
Regional trade agreements
continue to proliferate as progress on
the multilateral trade talks such as
Doha round has slowed. There has
been a rapid growth in the number
of regional trade agreements (RTAs)
in recent years. More than 200 RTAs

1 Regionalism is described in the Dictionary of Trade Policy Terms, as “actions

by governments to liberalise or facilitate trade on a regional basis, sometimes
through free-trade areas or customs unions”. According to the WTO, “regional
trade agreements (RTAs) may be agreements concluded between countries
not necessarily belonging to the same geographical region”, but also has a
more specific meaning because of the WTO provisions which relate
specifically to conditions of preferential trade liberalisation with RTAs.

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are in force at present, and the
number is rapidly growing. The
collapse of the Cancun Ministerial
Conference of the WTO in 2003 and
the Hong Kong Ministerial Conference
in 2005 has underscored the
difficulties inherent in multilateral
agreements and has resulted in many
countries opting for RTAs as the
primary means of enhancing
international trade.
TYPES OF RTAs
Most RTAs are meant not merely to
slash tariffs but also to reduce
impediments in international trade
and to promote trade by reducing
either tariff or non-tariff measures.
They also essentially include rules
and regulations that improve the
overall investment climate. RTAs
range across different levels of
economic integration and differ
significantly in their scope and
coverage. The term regional trade
agreement encompasses both
reciprocal bilateral free trade or
customs areas as also multi-country
(pluri-lateral) agreements. RTAs are
commonly classified into the
following categories:
a) Preferential Trade
Agreements: Preferential trade
agreement is a trading agreement
giving preferential access to certain
products from certain countries. This
involves reducing tariffs but not their
elimination. This is the weakest
form of economic integration. The
South Asian Preferential Trade
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Arrangement (SAPTA) between
Bangladesh, Bhutan, India, Maldives,
Nepal, Pakistan and Sri Lanka was
one such agreement.
b) Free Trade Agreement
(FTA): A free trade agreement is the
most widespread form of RTAs. In
an FTA, member countries eliminate
or reduce internal tariff and non-
tariff trade barriers (to trade in
goods, and also increasingly in
services) among members, while
each member is free to maintain
different most-favoured-nation
(MFN) barriers on non-members.
Member countries are required to
develop rules-of-origin criteria to
prevent imports from third countries
to be trans-shipped through the
member country with the lowest
tariffs. The best known free trade
agreements are the European Free
Trade Association (EFTA), the North
American Free Trade Agreement
(NAFTA), and the Association of
Southeast Asian Nations (ASEAN)
Free Trade Area (AFTA).
c) Customs Union: The next
level of integration is a Customs
Union (CU). A CU moves beyond
an FTA by establishing a common
external tariff (CET) on imports from
non-member countries. Typically,
customs unions contain mechanisms
to redistribute tariff revenues among
member countries. Some examples
of Customs Unions include South
African Customs Union (SACU), East
African Community Customs Union
(EAC), Gulf Cooperation Council
23
 CMYK

(GCC), and Central American in the world, in the form of an

Customs Union (CACU). Economic and Monetary Union is
the European Union. Other
d) Common Market: Common
Economic and Monetary Unions
Markets are a form of ‘deep
include the West African Economic
integration’, where member
and Monetary Union (WAEMU),
countries attempt to harmonise
Economic and Monetary Community
institutional arrangements and laws
of Central Africa (CEMAC), Eurasian
and regulations among themselves.
Economic Community (EEC) and the
While all the features of a customs
Economic Cooperation Organization
union are present under a common
(ECO).
market system, the latter also
provides for free movement of In addition, there are also some
factors of production (labour and Partial Scope Agreements among
capital) among the member developing countries that are
countries, in addition to the free designed to have limited product
flow of products (output). The coverage.
Southern Cone Common Market
Countries wanting to join the
(MERCOSUR) and the Common
WTO have to negotiate bilateral
Market of Eastern and Southern
agreements known as accession
Africa (COMESA) are examples of
agreements with major economic
well known common markets. Other
powers, as a part of their entry
prevailing Common Markets include
procedure, which includes specific
Caribbean Community and Common
commitments, concessions and
Market (CARICOM), and the Central
schedules to liberalise trade in goods
American Common Market (CACM).
and services.
e) Economic and Monetary
According to latest updates from
Union: The most comprehensive
WTO, as on July 18, 2007 as many as
RTA is an Economic and Monetary
205 RTAs have been notified to WTO
Union, in which members remove
and are in force. These RTAs broadly
all internal trade barriers, permit the
include free trade agreements,
free movement of capital and
customs unions, preferential
labour, erect common external trade
arrangements, services agreements,
barriers, and unify their fiscal and
and accession agreements (refer Chart
monetary policies. Here, member
1.1).
countries share a common currency
and macroeconomic policies. The Of the 205 RTAs notified to WTO
best known and most successful and which are in force, 124 are FTAs,
form of a Regional Trade Agreement accounting for 60 per cent of the total;

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Chart 1.1:
NUMBER OF RTAS NOTIFIED TO WTO AND IN FORCE
(AS ON JULY 18, 2007)

SOURCE: WTO
Notation:
FTA: Free Trade Agreements
EIA: Economic Integration Agreements
CU: Customs Unions
PS: Partial Scope Agreements
AA: Accession Agreements

46 are Economic Integration As can be seen from charts 1.1

Agreements (EIA)2, 12 are Customs
Unions (CU), 12 are Partial Scope (PS)
Agreements, while 11 are Accession
Agreements (either to FTAs, customs
unions or economic integration
agreements (Charts 1.1 & 1.2). Of
these 205 RTAs, 136 RTAs were
notified under Article XXIV of the
GATT 1947 or GATT 1994; 21 under
the Enabling Clause; and 48 under
Article V of the GATS.
and 1.2, FTAs constitute the largest
proportions and they dominate all
other types of the RTAs notified and
in force. The predominance of FTAs
is probably due to the fact that they
are faster to conclude and require a
lower degree of policy coordination
among the contracting parties, as in
an FTA the member countries
maintain their own trade policy vis-
à-vis a third (non-member) country.

2 The term “economic integration agreement” has been used in the WTO
Agreement on Trade in Services (GATS) (Article V) in relation to agreements
that cover trade in services.

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Chart 1.2:
DISTRIBUTION OF RTAs NOTIFIED TO WTO (% OF TOTAL)
(AS ON JULY 18, 2007)
SOURCE: WTO
Further, FTAs are generally concerned
with strategic market access, and are
often not bound by any geographical
considerations. In contrast, in a
customs union, members have to
maintain a common external tariff
(CET), which requires coordination
and harmonisation of external trade
policies amongst the member
countries, and geographical
considerations often play an
important role in determining the
objectives of such an integration.
REGIONAL TRADE
AGREEMENTS AND WTO
According to WTO, by entering into
a regional integration agreement and
by granting more favourable
treatment to its trade with other
parties to the agreement vis-à-vis
26
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other WTO members, which are not
party to the said agreement, the
WTO member nation departs from
the WTO guiding principle of non-
discrimination. However, since the
underlying idea behind such
regional trade agreements is
believed to be enhancement of trade
among countries, WTO allows the
formation of such RTAs subject to
specific conditions.
When a country enters into a
regional trade agreement, it
strengthens the ties among the
member nations by elimination of
protectionist barriers such as tariffs,
quotas, and non-tariff barriers. This
undoubtedly promotes trade of goods
and services among the member
countries. Supporters of RTAs argue
that these agreements facilitate trade

creation and encourage nations to
gradually move towards global free
trade by allowing countries to increase
the level of competition slowly and
give domestic industries time to
adjust. RTAs are also believed to be a
vital ground for dealing with sensitive
trade issues such as agricultural
subsidies and trade in services.
Controversial issues that cause
deadlocks in multilateral negotiations
can also be resolved due to fewer and
like-minded participants.
But proponents of multilateralism
believe that such regional trade
agreements though undoubtedly
promote bilateral and regional trade,
also lead to overall trade diversion.
In the absence of a regional trade
agreement, a country exercises the
same tariff on all nations and thus, is
able to import from the most efficient
producer who provides the goods at
the lowest price. With the
establishment of a regional trade
agreement, trade gets diverted, as
importing from a non member
country becomes unattractive and
even unviable. If the agreement is
signed with a less-efficient nation, its
products may become cheaper in the
importing market than those from the
more-efficient nation. As a result, after
entering into a RTA the importing
country would acquire products from
a higher-cost producer, instead of the
low-cost producer from which it was
importing until then, thus shifting
trade from lowest cost sources of
imports to preferred trading partners.
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This leads to unproductive trade
diversion. Diverted trade may hurt the
non-member nation economically and
politically and create a strained
relationship between the two nations.
The decreased output of the good or
service traded from one nation having
a high comparative advantage to a
nation which is having a lower
comparative advantage works against
creating more efficiency.
Despite the above argument,
since the primary purpose of such
regional trade agreements – customs
union or a free trade area, is
considered to be trade facilitation
between the member countries and
not to raise barriers on other non-
member (non-contracting) members,
the WTO members are allowed to
enter into RTAs, subject to specific
conditions. This is based on the
underlying philosophy that bilateral
and multilateral agreements could be
complementary and mutually
reinforcing approaches to trade
reforms and that such regional
integration agreements could lead to
enhanced regional trade, which in
turn could provide a boost to
enhanced multilateral trade.
Moreover, the Doha Declaration
drawn up by the WTO in late 2001
also recognises that RTAs can play
an important role in promoting the
liberalisation and expansion of trade
and also in increasing investment and
productivity gains and fostering
development especially in developing
27

economies. As regionalism becomes
a more widely accepted and an
indispensable aspect of international
trade, a sustained commitment to
multilateralism can help to arrest the
possible divisiveness of regionalism
and tap its potential for attaining
greater global economic integration
and rapid trade reforms.
WTO Rules relating to RTAs
As per WTO rules, countries are
allowed to enter into regional
trading agreements under specific
conditions as per the three sets of
rules3:
a) Paragraphs 4 to 10 of Article
XXIV of GATT (as clarified in
the Understanding on the
Interpretation of Article XXIV of
the GATT 1994)

With respect to a customs
union, or a free trade area,
or an interim agreement
leading to the formation of
a customs union or free
trade area, the duties and
other regulations of
commerce imposed at the
time of institution of such
agreement in respect of
trade with other non-
member countries shall not
3 GATT Article XXIV; Enabling Clause & GATS Article V.
4 ‘Reasonable length of time” should exceed 10 years only in exceptional
cases, and member countries shall provide full explanation to the Council
of Trade in Goods for the need for a longer period.
28
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on the whole be higher or
more restrictive than that
prevailing prior to the
formation of the such
agreement.

Any interim agreement
should include a plan and
schedule for the formation
of such a customs union or
such free trade area within
a reasonable length of
time.4

Any contracting party
deciding to enter into any
such agreement should
promptly notify the other
contracting parties and
should make available to
them such information
regarding the proposed
customs union or free trade
area.

Notification is made to the
WTO Council.
b) Enabling Clause (i.e., the 1979
Decision on Differential and
More Favourable Treatment,
Reciprocity and Fuller
Participation of Developing
Countries)

Contracting parties may
accord differential and
more favourable treatment
to developing countries,

without according such
treatment to other
contracting parties.

Such differential and more
favourable treatment would
apply to: preferential tariff
treatment accorded by
developed contracting
parties to products
originating in developing
countries; differential and
more favourable treatment
with respect to non-tariff
measures; regional or
global arrangements
entered into amongst less-
developed contracting
parties for mutual reduction
of tariffs or non-tariff
measures, on products
imported from one another;
special treatment on the
least developed among the
developing countries.

Any differential and more
favourable treatment
provided under the clause
shall be designed to
facilitate and promote the
trade of developing
countries (and not to raise
barriers to or create undue
difficulties for the trade of
any other contracting
parties).
c) GATS Article V

General Agreement on
Trade in Services (GATS)
Article V lays down that
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countries can enter into an
agreement designed to
liberalise trade in services
between or among the
contracting parties,
provided that such an
agreement has substantial
coverage, and provides for
the absence or elimination
of substantially all
discrimination between or
among the parties, in the
sectors covered, through
elimination of existing
discriminatory measures,
and/or prohibition of new
or more discriminatory
measures.

Where developing
countries are parties to
such an agreement, GATS
Article V also lays down
that flexibility shall be
provided for in accordance
with the level of
development of the
countries concerned.

Further, any agreement on
services shall be designed
to facilitate trade between
the parties to the
agreement, and shall not in
respect of any non-
contracting party raise the
overall level of barriers to
trade in services within the
respective sectors or sub-
sectors compared to the
level applicable prior to
such an agreement.
29

WTO recognises that regional
trading arrangements and closer
economic integration can benefit
countries. It also recognises that under
some circumstances regional trading
arrangements could affect the trade
interests of other countries. In
particular, the arrangements should
help trade flow more freely among
the countries in the group without
barriers being raised on trade with the
outside world. In other words,
regional integration should
complement the multilateral trading
system and not threaten it.
Thus, article XXIV of GATT says
that if a free trade area or customs
union is created, duties and other
trade barriers should be reduced or
removed on substantially all sectors
of trade in the group. Non-members
should not find trade with the group
any more restrictive than before the
group was set up. Similarly, Article V
of the General Agreement on Trade
in Services (GATS) provides for
economic integration agreements in
services. Other provisions in the WTO
agreements (Enabling Clause) allow
developing countries to enter into
regional or global agreements that
include the reduction or elimination
of tariffs and non-tariff barriers on
trade among themselves.
WTO’s Committee on Regional
Trade Agreements
With a view to ensure that regional
integration agreements are consistent
with WTO rules, under GATT Article
30
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XXIV and GATS Article V, the WTO
set up the Committee on Regional
Trade Agreements (CRTA) in
February 1996, following the
Uruguay round of negotiations. The
committee ensures that such
regional agreements do not
undermine the importance of the
multilateral system. Its primary
functions are to:
(i) oversee, under a single
framework, all bilateral and
regional preferential trade
agreements;
(ii) develop procedures to facilitate
and improve the examination
process; and
(iii) consider the implications of
such agreements and regional
initiatives for the multilateral
trading system.
RTAs between developing
countries, when notified to the WTO
under the Enabling Clause, are, in
principle, not subject to review by the
Committee. WTO members are
required to notify regional trade
agreements to the CRTA to ensure that
WTO requirements are met. Such
notified agreements are then carefully
examined and scrutinised by other
WTO members for WTO compliance.
As has been highlighted by the
Declaration from the WTO Ministerial
Conference in Doha, regional trade
agreements can play an important role
in fostering liberalisation and
expansion of trade, and in fostering

development. As in the past, RTAs are
expected to proceed in response to a
range of economic, geo-political and
security interests.
MULTILATERALISM VIS-À-VIS
REGIONALISM
The effectiveness of RTAs, as a tool
for achieving liberalisation and
enhanced global integration, as
compared to the multilateral system
of negotiations, despite their
proliferation has remained a topic
of grave concern and continuous
debate and deliberation. Though, in
theory, regionalism does not offer
the best solution for trade
liberalisation, it is being considered
as a more viable alternate in the
light of the sluggish performance of
the multilateral system. Drawing
inference from the current trends,
one may say that RTAs might
continue to be a dominant strategy
for future liberalisation. In fact, RTAs
was the only issue on which a
consensus was reached during the
failed 23 July 2006 meeting of the
G-6 (France, Germany, United
States, Japan, United Kingdom and
Italy) at Geneva. A new WTO
transparency mechanism for RTAs
has been introduced, in recognition
of the inevitable proliferation of
RTAs, which provides for an early
announcement of any RTA and
notification to the WTO. The
primary idea behind this is to ensure
that regional agreements become
building blocks and not stumbling
blocks to world trade. This indicates
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the continuing confidence of
economies in regional agreements
in their commercial policies aimed
at creation of a freer trade regime.
GLOBAL SCENARIO-TRENDS IN
PROLIFERATION OF RTAs
In addition to the increasing
emergence of developing countries
as important drivers of global trade
and services, an important trend that
has also gained momentum in
recent years has been the
proliferation of RTAs.
An examination of the recent
trends would attest to the proliferation
of RTAs especially since 2000. Of the
205 RTAs notified to WTO and in
force, as on July 18, 2007, as many as
124 RTAs entered into force since
2000. FTAs dominated the trend in
the proliferation of regional trade
agreements, followed by EIAs (refer
Chart 1.3).
Further analysis of trends in RTAs
notified to WTO from January 01,
2000 to July 18, 2007, reveals that
during 2004, 2005 and 2006 maximum
number of RTAs were notified since
2000. In 2004, 24 RTAs entered into
force; the corresponding numbers
were 18 in 2005 and 19 in 2006 (refer
Table 1 .1). Further, as many as 40
FTAs and 23 EIAs entered into force
during the period 2004-2007.
While the dominance of FTAs
implies a growing tendency between
member countries to establish
bilateral preferential agreements,
31
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Chart 1.3:
NUMBER OF RTAs NOTIFIED TO WTO, ENTERING INTO FORCE SINCE
2000 (AS ON JULY 18, 2007)

SOURCE: WTO

Table 1.1:
NUMBER OF RTAs NOTIFIED TO WTO, 2000 TO 2007 (UPTO JULY 18)
Type of Agreement 2000 2001 2002 2003 2004 2005 2006 2007 Total
FTA 8 11 10 9 16 10 11 3 78
EIA 1 6 4 3 6 8 8 1 37
AA 1 1 2 1 5
CU 2 1 3
PS 1 1
Total No. of RTAs 11 17 15 15 24 18 19 5 124

SOURCE: WTO

similarly increasing number of EIAs trade partners. In the past, countries

do indicate that countries are
preferring to deepen bilateral
economic integration beyond trade in
goods.
FACTORS RESPONSIBLE FOR
RAPID INCREASE IN RTAs
Regionalism is a strategy to achieve
comprehensive reforms with key
have sought to implement deep
economic and institutional
integration by crafting agreements
that address more than tariff reform.
Many RTAs now deal with the
reform or harmonisation of
regulatory practices, investment
protection, labor issues, trade
dispute resolution, and the

32

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development of common positions
in other trade negotiation venues.
Increasingly, RTAs are also viewed
as a way to link developing and
developed countries in a common
project of economic development.
RTAs can also encourage
investment, facilitate productivity
gains in participating developing
countries and accelerate their
economic growth.
A classic example of deep
economic integration among nations
through an RTA is the European
Union. In the EU all internal trade
barriers have been eliminated and a
common external tariff is exercised
on all non-members. All EU members
also share a common currency and a
set of macroeconomic policies.
Free trade blocs formed by
agreements such as the EFTA, SAFTA,
ASEAN-FTA and NAFTA, and customs
unions such as the EU, SACU etc. have
allowed countries to lower trade
barriers among members and political
allies and to develop their own trade
policies.
Many developed countries offer
nonreciprocal preferences as another
way to foster exports by developing
countries. Nonreciprocal preferences
are arrangements between developed
and developing countries that reduce
tariffs or even allow duty-free access
for selected products from developing
countries. However, these
arrangements often exclude products
that are of the greatest importance to
developing countries.
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RTAs are primarily common
among, but not restricted to, small
groups of neighbouring countries
sharing similar concerns as
negotiations can be reached much
faster when compared to a multilateral
structure. The ASEAN-FTA, NAFTA,
South Asian Preferential Trade
Arrangement (SAPTA) between
Bangladesh, Bhutan, India, Maldives,
Nepal, Pakistan and Sri Lanka, are
such examples of RTAs among
neighbouring countries.
There are various factors that lead
to rapid expansion of FTAs around
the world which include

to derive benefits of increased
preferential access to highly
competitive larger markets

slow progress in trade
liberalisation under the WTO

a sharp increase in FTAs around
the world which has prompted
other countries not involved in
regional trade agreements to
also consider engagement in
such agreements.

to promote liberalisation and
bring about policy reforms, and

to attract more foreign direct
investment into the country
There are several factors that are
common to many countries, while
there are some specific factors that
may explain the motive of
engagement in FTAs in case of some
individual countries.
33

Rapid expansion of FTAs in other
parts of the world has prompted East
Asian economies to form FTAs, in
order to maintain and expand market
access for their exports. By the mid-
1990s the world’s leading economies
except those in East Asia had become
members of FTAs. The world’s two
largest economic regions, North
America and Western Europe too
formed separate FTAs. Faced with
these situations, many countries and
specifically East Asian economies
became concerned about their export
markets.
The formation of the North
American Free Trade Agreement
(NAFTA) had significant impact on
East Asian countries for several
reasons. One is the change in US
policy to regard FTA as an important
trade policy signalling the increasing
importance of regionalism. The
negative impacts of the NAFTA on
East Asian countries in the form of a
decline in exports to the US and a
decline in FDI from not only the US
but other countries highlighted the
importance of FTAs to deal with these
negative impacts.
The time consuming and slow
progress on multilateral trade
liberalisation under the WTO was also
one important factor that led to the
proliferation of FTAs in different parts
of the world. Many countries,
including those in East Asia realized
the benefits of trade liberalisation for
the promotion of economic growth.
Faced with the difficulty in pursuing
34
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trade liberalisation on the global scale,
many countries have opted to form
FTAs with like-minded countries to
pursue trade liberalisation.
The East Asian economies are
also trying to use FTAs as means to
promote deregulation and structural
reforms in the domestic market and
to promote socio-economic
cooperation in the region, as these
measures contributed to rapid
economic growth during the ’90s
when these economies faced a severe
financial crisis. Many East Asian
economies also see FTAs as an
effective means to promote economic
and other types of cooperation in East
Asia having understood the
importance of regional cooperation
after the financial crisis of 1990 and
to avoid its occurrence in future.
The need to attract foreign
investment (and stimulate domestic
investment) is increasingly being cited
as an impetus for RTAs by many
researchers. Participation in regional
agreements by developing countries
also demonstrates that the country is
committed to opening its markets.
Moreover, political factors too
have contributed to the increased
interest in FTAs in different regions
of the world. Political considerations
for such emergence of regional/
bilateral agreements inevitably
include consolidation of peace and
increasing regional security.
Furthermore, there are political-
economic reasons because of which
governments may find it easier to

liberalise when other countries are
doing the same.
Another way in which an FTA
could contribute to the welfare of its
members is by providing insurance
against possible future events to at
least one of the members. The desire
to increase bargaining power with
respect to third parties is also often
cited as a reason why countries may
wish to join a RTA.
CONCLUSION
Bilateral regional trade agreements
continue to proliferate, across the
globe, as progress on the WTO
based multilateral trade talks has
remained subdued and talks mostly
inconclusive in recent times. The
gradual erosion of faith in
multilateralism has given a new
thrust to the concept of regionalism
as a highly effective tool for
expanding international trade,
economic cooperation and global
integration.
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RTAs have been found to be very
useful in this context. The need for
such agreements has arisen from a
number of socio-economic, political
and security considerations. RTAs
have also proved to encourage
investment, facilitate preferential
access to larger competitive markets
and accelerate economic growth. It
is important to ensure that regional
trade agreements become building
blocks to world trade and not
stumbling blocks to achieving the
universal goal of global
amalgamation. RTAs are increasingly
being viewed as a link between
developing and developed countries
towards the common goal of
economic development.
The following chapters deal with
some of the major RTAs that came
into force in many countries and
regions of the world, how they have
proved to be a gateway to global
trade, and what India can learn from
the international experience.
35
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2. GLOBAL PERFORMANCE OF RTAs

A number of RTAs have countries where their prices had been

proliferated in various regions of the inflated by duties and other trade
world among many countries and barriers.
more than one third of the world’s
As can be seen from Chart 2.1,
trade takes place within the there has been an explosion in the
framework of such agreements5. A number of RTAs since the last decade.
well-crafted trade bloc can enhance The number of RTAs have almost
efficiency and economic welfare of tripled in the current decade,
its member countries by facilitating compared to the previous decade
consumer choice and increasing from 46 to 137 agreements. This is a
competition. Reducing tariff barriers clear evidence of the interest evinced
enlarges markets and facilitates entry by countries all over the globe in
of more efficient producers into regional economic integration.
Chart 2.1:
RTAs IN FORCE (BY YEAR OF ENTRY INTO FORCE)

SOURCE: WTO

5 World Development Indicators 2007, World Bank, Washington DC.

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PROLIFERATION IN GLOBAL
RTAs SINCE 2000
It is interesting to note that there
has been a sharp increase in the
number of RTAs notified to the
WTO especially since 2000. Of the
total 205 RTAs notified to the WTO,
124 RTAs have been notified since
2000.
Trends in FTAs Notified to the
WTO Since 2000
FTAs continue to dominate RTAs
around the world, with as many as
78 FTAs notified to the WTO
entering into force since 2000, of
the total 124 FTAs. Chart 2.2 below
highlights the recent trend in the
upsurge in number of FTAs notified
to the WTO entering into force since
2000. The list of these FTAs is
presented in Table A1 of the
Annexure.
Chart 2.2:
TREND IN NUMBER OF FTAs ENTERED INTO FORCE SINCE 2000
SOURCE: WTO
* as on July 18, 2007
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During recent years, the
maximum number of 16 FTAs notified
to the WTO, entering into force was
in 2004, followed by 11 agreements
in 2006. This trend could possibly be
attributed to the failure of the Fifth
WTO Ministerial Conference held in
Cancún, Mexico in 2003 and the Sixth
WTO Ministerial Conference held in
Hong Kong in 2005 that could have
eroded the confidence of the member
nations in the WTO based
multilateralism and encouraged them
to engage bilaterally in regional trade
agreements. During 2007, until July
18, 3 FTAs have entered into force,
which include the Turkey-Syria, the
EFTA-Lebanon and the EFTA- Egypt
agreements.
EMERGENCE OF TRADE BLOCS
The world has also seen a fast rise
in the number of regional trade
37
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blocs around the globe as a result Americas, the ASEAN and SAARC in
of the willingness on part of Asia, and COMESA and SADC in
countries to enhance and foster Africa could be identified as crucial
trade relationship with other nations. developments in regional economic
At one time, countries entered into integration in Asia and Africa. The
agreements with only neighbouring following section discusses the major
countries. However, geographical trade blocs across the globe and
constraints cease to be a hindrance their corresponding intra-regional
today and countries are rapidly trade performances.
entering into trade relations with
distant countries as well. Trade blocs Major Trading Blocs in
have emerged in all regions of the America
world including America, Asia, The main trading blocs in North
Africa, Europe, and West Asia. While America, Latin America and
the MERCOSUR and NAFTA have Caribbean region are presented in
emerged as major blocs in the Box 1 below.
Box 1:
SELECT TRADING BLOCS IN AMERICA
Trade Bloc Year of Formation Members
Central American 1961 Costa Rica, El Salvador,
Common Market (CACM) (revived in 1990) Guatemala, Honduras,
Nicaragua
Andean Community 1969 Bolivia, Colombia, Ecuador,
(CAN) (revived in 1990) Peru, Venezuela
Caribbean Community 1973 Antigua & Barbuda,
and Common Market Barbados, Belize,
(CARICOM) San Cristobal, Dominica,
Grenada, Guyana, Jamaica,
Montserret, St. Kitts & Nevis,
St. Lucia, St. Vincent &
the Grenadines,
Trinidad and Tobago
Latin American Integration 1980 Argentina, Bolivia, Brazil,
Association (LAIA) Chile, Colombia, Cuba,
Ecuador, Mexico, Paraguay,
Peru, Uruguay, Venezuela
Southern Cone Common 1991 Argentina, Brazil,
Market (MERCOSUR) Paraguay, Uruguay
North American Free 1994 Canada, Mexico,
Trade Agreement (NAFTA) United States
Free Trade Agreement 1994 Almost the entire of America,
of America (FTAA) excluding Cuba

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The underlying objective of most
trade blocs in the Americas was to
form a common market through
coordination and harmonisation of
fiscal, monetary and exchange rate
policies, and accelerating economic
development. MERCOSUR was
established in March 1991 with the
Treaty of Asuncion. Subsequently,
Bolivia and Chile have also become
associate members. Brazil is one of
the most important members in the
bloc. MERCOSUR became a customs
union on January 1, 1995. Latin
American Integration Association
(LAIA) or (Asociación
Latinoamericana de Integración)
(ALADI Group) formerly known as
the Latin American Free Trade
Association (LAFTA) is the largest
Latin-American group of integration.
The ALADI promotes the creation of
an area of economic preferences in
the region, aiming at a Latin-American
common market, through three
mechanisms: regional tariff
preference, regional scope
agreements and partial scope
agreements. With the establishment
of CARICOM, although a free-trade
area had been built, the agreement
did not provide for the free movement
of labour and capital, or the
coordination of agricultural, industrial
and foreign policies. The community
aimed to form a common market to
improve standards of living and work,
achieve full employment of labour
and other factors of production,
accelerate, coordinate and sustain
economic development, expansion of
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trade and economic relations with
third States and promote international
competitiveness and cooperation.
The North American Free Trade
Agreement (NAFTA) aimed at
establishing a free trade area in goods
and services, government
procurement and intellectual property
rights, as also liberalisation of
investment flows and professional
services amongst member countries.
It also focused on elimination of trade
barriers, promotion of fair competition
and boosting investment
opportunities. The parties endeavour
to fully implement these objectives
by 2008. All existing trade barriers are
slated to be removed over a period
of 15 years. The Free Trade Area of
the Americas (FTAA) endeavoured to
unite the economies of the Americas
into a single free trade area. The FTAA
negotiations were formally launched
in April 1998 at the Second Summit
of the Americas in Santiago, Chile. It
aimed at promoting prosperity
through increased economic
integration and free trade among the
member countries, maximizing
market openness and integration of
the smaller economies in the FTAA
process in order to promote their
development.
An inference on the importance
and significance of any trade bloc can
be made by observing the bloc’s
merchandise exports as a percentage
of global exports. An observation of
this trend reveals that two of the most
important blocs in the region are
NAFTA and FTAA with distinct shares
of 14% and 17% respectively, in global
39
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exports in 2005. This indicates the 824 billion. However, intra-bloc

magnitude of trade that these trade
blocs are engaged in. The
corresponding share of other trade
blocs like CACM, Andean Group,
CARICOM, LAIA and MECOSUR
though being relatively low 6 ,
nevertheless, remain very important
trading blocs. Intra-bloc trade
amounted a high of US$ 1.1 trillion
for FTAA in 2005, implying that over
60% of the bloc’s global exports are
confined within the bloc itself (refer
Table 2.1). Similarly, 56% of NAFTA’s
global exports in 2005 were within
the bloc itself amounting to over US$
exports have grown at almost a similar
pace at a CAGR of 6-7% both for
NAFTA and FTAA during 1999 to 2005.
LAIA, MERCOSUR and the
Andean Group too have shown
decent growth in intra-bloc exports
in recent period. The intra-bloc
merchandise exports as a ratio of total
bloc exports of the Andean group
have averaged around 9% during the
7-year period. On the contrary the
corresponding trade performance
ratio for MERCOSUR and CARICOM
have shown a sharp decline during

Table 2.1:
TREND IN TRADE PERFORMANCE OF AMERICAN TRADE BLOCS
1999 2000 2001 2002 2003 2004 2005
Merchandise Exports within Blocs (US$ bn)
CACM 2.2 2.6 2.7 2.8 3.2 3.6 4.1
Andean Group 3.9 5.3 5.6 5.1 5.2 7.3 9.5
CARICOM 1.1 1.1 1.4 1.2 1.4 1.7 2.1
LAIA (ALADI) 34.8 42.9 40.8 36.1 39.9 55.8 70.4
MERCOSUR 15.3 17.8 15.2 10.2 12.7 17.4 21.1
FTAA 734.9 855.7 810.4 787.2 826.3 967.7 1110.7
NAFTA 581.2 676.1 639.4 626.0 651.1 737.6 824.6
Merchandise Exports within Blocs (% of total bloc exports)
CACM 13.6 19.1 22.8 19.5 20.2 20.9 18.9
Andean Group 8.8 8.7 10.5 9.5 8.9 8.6 8.2
CARICOM 16.9 14.7 16.5 13.7 12.3 12.5 11.8
LAIA (ALADI) 12.7 12.8 12.8 11.2 11.4 12.6 13.2
MERCOSUR 20.6 20.0 17.1 11.5 11.9 12.7 12.9
FTAA 59.7 60.7 60.5 60.8 60.0 60.0 60.3
NAFTA 54.6 55.7 55.5 56.6 56.1 55.9 55.8
SOURCE: World Development Indicators 2007, World Bank, Washington DC.

6 Refer to Table A2 in Annexure for Merchandise Exports by Blocs (as % of

global exports) in Latin America & the Caribbean region.

40

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the period indicating a possible shift during the period. In general,

in interest among the member economic growth in the LAC region
countries of these blocs from trade has remained subdued in recent years,
with intra-bloc countries to bilateral which is reflected in depressed intra-
engagements with extra regional bloc trade in the region.
countries or blocs. CACM has shown
an increase in the intra-bloc exports Major Trading Blocs in Africa
as a percentage of total bloc exports As far as the African region is
from 13.6% in 1999 to around 19% in concerned, the main trading blocs
2005. A possible reason behind the are ECOWAS, SADC, COMESA,
depressed intra-bloc trade UEMOA etc. A brief description of
performance in MERCOSUR could be select RTAs of the region are
the economic crisis in Argentina presented in Box 2 below.
Box 2:
SELECT TRADING BLOCS IN AFRICA
Trade Bloc Year of Formation Members
Economic Community of 1975 Benin, Burkina Faso, Cape
West African States Verde, Côte d’Ivoire, Gambia,
(ECOWAS) Ghana, Guinea, Guinea-
Bissau, Liberia, Mali, Niger,
Nigeria, Senegal,
Sierra Leone, Togo
Southern African 1992 Angola, Botswana,
Development Democratic Republic of
Community (SADC) Congo, Lesotho, Malawi,
Mauritius, Mozambique,
Namibia, Seychelles,
South Africa, Swaziland,
Tanzania, Zambia, Zimbabwe
Common Market for 1994 Angola, Burundi, Comoros,
Eastern and Southern Democratic Republic of
Africa (COMESA) Congo, Djibouti, Egypt,
Eritrea, Ethiopia, Kenya,
Madagascar, Malawi,
Mauritius, Namibia, Rwanda,
Seychelles, Sudan, Swaziland,
Uganda, Tanzania, Zambia,
Zimbabwe
West African Economic 1994 Benin, Burkina Faso,
and Monetary Côte d’Ivoire, Guinea-Bissau,
Union (UEMOA) Mali, Niger, Senegal, Togo
East African 1996 Kenya, Tanzania, Uganda
Community (EAC)

41

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The member countries of
COMESA have identified priority areas
which include increasing industrial
and agricultural productivity and
efficiency, development of transport
and communications infrastructure,
trade expansion and trade facilitation
and development of comprehensive,
reliable and up to date information
data bases. COMESA primarily aimed
to deepen and broaden the integration
process among member States
through adoption of more
comprehensive trade liberation
measures such as complete
elimination of tariff and non-tariff
barriers to trade and elimination of
customs duties, free movement of
capital, labour, and goods,
standardisation and quality control
and adoption of a Common External
Tariff (CET). ECOWAS comprised of
16 nations until recently when
Mauritania withdrew membership
from ECOWAS. The principal
objective behind the formation of
ECOWAS was to achieve economic
integration and collective
development so as to form a unified
economic zone in West Africa.
Subsequently, the scope was
increased to include socio- political
interactions and mutual development
in related spheres.
SADC primarily aimed to promote
economic growth among its member
countries and focused on poverty
alleviation, improving standard of life
7 Refer to Table A3 in Annexure for Merchandise Exports by Blocs (as % of
global exports) in Africa
42
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of the people and optimum utilisation
of the natural resources of the region.
The West African Economic and
Monetary Union (UEMOA) was
created by a treaty signed at Dakar,
Senegal, in 1994. In 1997, Guinea-
Bissau became its eighth member
state. The Union focused on greater
economic competitiveness, through
open and liberal markets,
convergence and harmonisation of
macroeconomic and fiscal policies,
creation of a common market and
coordination of sectoral policies.
Though these blocs have played
an important role in integrating the
African countries in the region to a
good extent, these blocs have not
been able to make their presence felt
in the global arena, as indicated by
the low share of the merchandise
exports of these countries in global
exports7, the largest being that of
SADC with 0.8% share in world
exports, followed by ECOWAS with
0.6% share in 2005.
Though modest, nevertheless, the
intra-bloc merchandise exports
African trade blocs have shown a
steady increase in recent years.
Between 1999 and 2005, intra-bloc
exports have more than doubled for
COMESA and ECOWAS and have
grown substantially in case of SADC
(Table 2.2). However, declining
shares of intra-bloc exports as
percentage of global exports of these
blocs imply a growing tendency to
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Table 2.2:
TREND IN TRADE PERFORMANCE OF AFRICAN TRADE BLOCS
1999 2000 2001 2002 2003 2004 2005
Merchandise Exports within Blocs (US$ bn)
COMESA 1.4 1.7 1.8 2.0 2.4 2.9 3.3
EAC 0.4 0.6 0.7 0.7 0.7 0.8 0.9
ECOWAS 2.4 2.8 2.4 3.2 3.1 4.5 5.7
SADC 4.2 4.3 3.8 4.3 5.4 6.4 6.4
UEMOA 0.8 0.7 0.8 0.9 1.1 1.2 1.4
Merchandise Exports within Bloc (as % of total bloc exports)
COMESA 7.4 6.1 7.9 7.4 7.4 6.8 5.9
EAC 14.4 20.5 21.4 19.3 18.2 16.6 15.0
ECOWAS 10.4 7.9 8.5 10.9 8.6 9.4 9.5
SADC 11.9 9.3 8.6 9.5 9.8 9.5 7.7
UEMOA 13.1 13.1 12.7 12.2 13.3 12.9 13.4
SOURCE: World Development Indicators 2007, World Bank

trade beyond the region by member
countries. It may be interesting to note
that for EAC and UEMOA, although
in absolute terms intra-bloc exports
are extremely modest, but these two
blocs show the highest share of intra-
bloc exports as percentage of global
exports of these blocs.
Major Trading Blocs in Asia
(South, South-East and East
Asia)
In the Asian region, the main trade
blocs include ASEAN, Bangkok
Agreement, SAARC, and EAEC. The
member countries and year of
formation of these select blocs is
discussed in the following Box 3.
A key trading bloc in the Asian
region is ASEAN which was
established in 1967 in Bangkok by the
five original Member Countries,
namely, Indonesia, Malaysia,
Philippines, Singapore, and Thailand.
Brunei Darussalam joined in 1984,
Vietnam in 1995, Laos and Myanmar
in 1997, and Cambodia became a
member in 1999. The ASEAN region
has a combined gross domestic
product of almost US$ 700 billion, and
total trade of about US$ 850 billion.
The main focus of the association was
to accelerate equitable economic
growth, social progress and cultural
development in the region, to
promote regional peace and stability

43

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Box 3:
SELECT TRADING BLOCS IN ASIA
Trade Bloc Year of Formation Members
ASEAN 1967
(Association of
South East
Asian Nations)
Bangkok agreement 1975
SAARC (South Asia 1985
Association for Regional
Cooperation)
EAEC 1990
(East Asia Economic
Caucus)
in the region, facilitate free flow of
capital, and reduction of poverty and
socio-economic disparities. Singapore
and Thailand are the most important
member countries in ASEAN
accelerating trade and economic
performance of the bloc.
SAARC focuses on welfare of the
people of South Asia and aims to
accelerate economic growth, social
progress and cultural development in
the region, promote and strengthen
collective self-reliance among the
countries of South Asia and mutual
collaboration and assistance in various
fields. The Fourteenth SAARC Summit
was held in April 2007 in New Delhi.
India has been playing a crucial role
in SAARC to foster economic growth
in the region.
44
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Brunei, Cambodia,
Indonesia, Laos,
Malaysia, Myanmar,
Philippines, Singapore,
Thailand, Vietnam
Bangladesh, China, India,
Korea, Sri Lanka
Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan,
Sri Lanka
Brunei, China,
Hong Kong (China),
Indonesia, Japan, Korea,
Malaysia, Philippines,
Singapore, Taiwan (China),
Thailand
The East Asia Economic Caucus
is a regional free trade zone (FTA)
proposed in 1990 by Malaysia
encompassing six ASEAN member
states and China, South Korea and
Japan. The more recent ‘ASEAN plus
three’ initiative is likely to be a more
concrete and operational
manifestation of the East Asia
Economic Caucus.
Apart from these there is APEC,
which is the only inter governmental
grouping in the world operating on
the basis of non-binding commitments
and open dialogue. APEC has no
treaty obligations required of its
participants which include a host of
countries from Asia, Pacific and
Americas. Decisions made within
APEC are reached by consensus and
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commitments are undertaken on a Economic Group and ASEAN have

voluntary basis. performed well. The intra-bloc
merchandise exports of EAEC reached
To have an idea of the relative
US$ 1.3 trillion in 2005 (refer Table
importance of the trade blocs in the
2.3). The merchandise exports as a
world economy, it is pertinent to note
percentage of the bloc’s global
that the total merchandise exports of
exports has been consistently growing
EAEC have contributed to around 26%
and was around 50% in 2005. This
of total world exports in 2005. This
indicates that around 50% of EAEC’s
reflects the importance of the trading
global export transactions take place
bloc in the global scenario. The
within the bloc, indicating the high
contribution of ASEAN to global
level of confidence, cooperation and
exports has consistently been above
integration among the member
6% during the 7-year period8.
countries. The intra bloc merchandise
Among the Asian trading blocs, exports of ASEAN, in absolute terms,
the East Asia Economic Caucus have grown at CAGR of 10.6% to
formerly known as the East Asia reach US$ 143 billion in 2005. During

Table 2.3:
TREND IN TRADE PERFORMANCE OF ASIAN TRADE BLOCS
1999 2000 2001 2002 2003 2004 2005
Merchandise Exports within Blocs (US$ bn)
ASEAN 77.9 98.1 86.3 91.7 101.1 122.9 143.0
EAEC 612.4 772.4 698.6 779.4 941.0 1177.3 1335.0
Bangkok agreement 14.5 16.8 16.7 18.0 21.8 24.9 29.5
SAARC 2.2 2.6 2.8 3.4 4.9 5.7 7.1
APEC 1896.2 2261.8 2071.0 2168.7 2420.7 2905.3 3287.0

Merchandise Exports within Bloc (as % of total bloc exports)

ASEAN 21.7 23.0 22.4 22.7 22.1 22.3 22.7
Bangkok agreement 5.1 5.1 5.5 5.5 5.7 5.2 5.4
EAEC 43.8 46.6 46.6 48.1 49.4 49.8 49.2
SAARC 4.0 4.1 4.3 4.8 5.7 5.6 5.5

SOURCE: World Development Indicators 2007, World Bank, Washington DC.

8 Refer to Table A4 in Annexure for Merchandise Exports by Blocs (as % of

global exports) in Asia

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the same period from 1999 to 2005,
EAEC has grown at a compounded
rate of 13.8%. The share of intra-bloc
exports of ASEAN in total bloc exports
has remained steady at around 22%
during the period.
Though the intra-bloc
merchandise exports of SAARC have
more than tripled since 1999 to 2005,
the magnitude of exports still remains
relatively low being US$ 7 billion in
2005. The low level of economic
cooperation among the members of
SAARC is evident from the low share
of intra-bloc exports in total bloc
exports, being only 5.5% in 2005.
Major Trading Blocs in West
Asia
In the West Asian region, the main
trade blocs include the Arab
Common Market, GAFTA and GCC.
The member countries and year of
formation of these select blocs is
discussed in the following Box 4.
Box 4:
SELECT TRADING BLOCS IN WEST ASIA
Trade Bloc Year of Formation Members
Arab Common Market 1964
GCC 1981
(Gulf Cooperation
Council)
GAFTA (Greater Arab 1997
Free Trade Agreement)
9 Refer to Table A5 in Annexure for Merchandise Exports by Blocs (% of
global exports) in West Asia
46
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These agreements in the Arab
region were established primarily to
increase intra-regional trade, through
removal of trade barriers, enhance
mutual production efficiency by
exploiting comparative advantage and
scale economies, optimum utilisation
of natural resources of the region for
collective growth, enhance
competition within domestic markets,
improve terms of trade by decreasing
import prices and fostering economic
growth through the dynamic effects
of regional integration.
Though these trade blocs have,
to some extent, integrated the markets
of West Asia, the share of
merchandise exports of these trade
blocs in total world exports has been
low9, with the corresponding share
of GAFTA being the highest in the
region at 4.4%. .
In the West Asian region, as
shown in Table 2.4, the intra-bloc
merchandise exports of GAFTA have
Egypt, Iraq, Jordan, Libya,
Mauritania, Syria, Yemen
Bahrain, Kuwait, Oman,
Qatar, Saudi Arabia,
United Arab Emirates
Bahrain, Egypt, Iraq, Jordan,
Kuwait, Lebanon, Libya,
Morocco, Oman, Palestine,
Qatar, Saudi Arabia, Sudan,
Syria, Tunisia, United Arab
Emirates, Yemen.
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Table 2.4:
TREND IN TRADE PERFORMANCE OF WEST ASIAN TRADE BLOCS
1999 2000 2001 2002 2003 2004 2005
Merchandise Exports within Blocs (US$ bn)
Arab Common Market 1.0 1.3 1.7 2.0 1.8 6.3 7.1
GAFTA 13.8 16.2 17.5 19.2 21.5 35.6 44.8
GCC 7.3 8.0 8.1 8.9 9.6 12.5 16.5

Merchandise Exports within Bloc (as % of total bloc exports)

Arab Common Market 3.3 2.9 4.4 5.1 4.1 7.9 8.6
GAFTA 8.9 7.2 8.4 9.3 8.5 10.0 9.8
GCC 6.7 4.8 5.2 5.9 5.1 5.0 4.8

SOURCE: World Development Indicators 2007, World Bank

shown a continuous impressive interaction within the region, the

growth from US$ 13 billion in 1999
to more than US$ 44 billion in 2005
growing at a compounded annual rate
of 21.7% during the period. GCC and
the Arab Common Market too have
recorded a notable increase in exports
within the bloc during the period, the
exports of GCC growing from US$ 7
billion in 1999 to US$ 16 billion in
2005. However, the share of intra-bloc
exports in total exports of GCC has
seen a decline from 6.7% in 1999 to
4.8% in 2005, which possibly indicates
the willingness on part of its member
countries to explore trade
opportunities with other countries
outside the region.
With regard to the Arab Common
Market, though the intra-bloc
merchandise exports as a percentage
of total bloc exports has more than
doubled from 3.3% in 1999 to 8.6%
in 2005, reflecting greater trade
merchandise exports in absolute
terms remain relatively low.
Major Trading Blocs in
Europe
In the European region, the main
trade blocs include CEFTA,
European Union, EFTA and EMFTA.
The member countries and year of
formation of these select blocs is
discussed in the following Box 5.
The agreements primarily
focused on greater economic
integration among the European
economies through open markets and
convergence and harmonisation of
macroeconomic and fiscal policies
among the member countries,
expansion of trade, investment and
commercial activities, mutual
cooperation, raising the standards of
living, ensuring better employment
opportunities, increased productivity

47

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Box 5:
SELECT TRADING BLOCS IN EUROPE
Trade Bloc Year of Formation Members
European Union 1957 Austria, Belgium, Bulgaria,
(EU) Cyprus, Czech Republic,
Denmark, Estonia, Finland,
France, Germany, Greece,
Hungary, Ireland, Italy,
Latvia, Lithuania,
Luxembourg, Malta,
Netherlands, Poland,
Portugal, Romania, Slovakia,
Slovenia, Spain, Sweden,
United Kingdom
European Free 1960 Iceland, Liechtenstein,
Trade Area (EFTA) Norway, Switzerland
Central European 1992 Bulgaria, Czech republic,
Free Trade Area Hungary, Poland, Romania,
(CEFTA) Slovak Republic, Slovenia
Euro-Mediterranean 1995 European Union, Algeria,
Free Trade Area Cyprus, Egypt, Israel, Jordan,
(EMFTA) Lebanon, Malta, Morocco,
Syrian Arab Republic,
Tunisia, Turkey, West Bank
and Gaza

and financial stability. The agreements
also emphasised on fair trade between
members and, removal of trade
barriers to contribute to the balanced
development and expansion of world
trade.
EMFTA is one of the most
influential and significant regional
trade blocs in terms of its contribution
to total world exports. More than 40%
of the world exports, since 1990, are
accounted for by EMFTA. Another
very important and powerful trading
bloc is the European Union whose
share in total world exports has also
been close to 40% during the past
decade10. These reveal the magnitude
of trade that takes place in these blocs.
Table 2.5 shows that the intra-
bloc merchandise exports of EMFTA
and EU, which comprise of most of
the developed industrialised nations
of Europe, have been more than US$
2.8 trillion and US$ 2.6 trillion
respectively in 2005. Moreover, this
magnitude of exports, which accounts

10 Refer to Table A6 in Annexure for Merchandise Exports by Bloc (as % of

global exports) in Europe

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Table 2.5:
TREND IN TRADE PERFORMANCE OF EUROPEAN TRADE BLOCS
1999 2000 2001 2002 2003 2004 2005
Merchandise Exports within Blocs (US$ bn)
CEFTA 13.2 15.1 17.1 19.2 25.3 37.5 48.7
EMFTA 1700.9 1744.7 1737.3 1857.6 2253.5 2706.3 2883.5
EU 1579.1 1608.2 1612.6 1721.1 2087.3 2482.4 2642.6
Merchandise Exports within Bloc (as % of total bloc exports)
CEFTA 13.8 9.9 8.0 7.3 14.6 14.2 14.6
EMFTA 70.4 69.3 68.3 68.5 69.4 69.2 68.3
EU 67.8 66.8 66.2 66.3 67.2 66.8 66.0
SOURCE: World Development Indicators 2007, World Bank, Washington DC.

for about 66% of the global exports Belarus, Georgia, Kazakhstan,

of these blocs separately, takes place
within the bloc alone. However, there
has been a marginal decline in this
ratio for these two blocs since 2003.
Also, the merchandise exports of
EMFTA and EU have both grown at a
compounded annual rate of around
9% each. A high constant share of
intra-bloc exports in total bloc exports
together with increasing intra-bloc
merchandise exports, to the tune of
around US$ 2.6 trillion, shows the
growing cooperation and trade
linkage among the member countries
within the bloc and the immense trade
potential in the region.
Kyrgyzstan, Moldova, Russia,
Tajikistan, Turkmenistan, Uzbekistan
and Ukraine.
The intra bloc merchandise
exports of CIS have shown a steady
increase over the period (see Table
2.6). Though the intra bloc
merchandise exports of CIS as a
proportion of global exports of the
bloc have declined, it still remains a
very important bloc in the region
uniting the Commonwealth of
Independent States and promoting
economic development of the region
as a whole.

Commonwealth of PATTERN OF ENGAGEMENT IN

Independent States Trading
Bloc
The Commonwealth of Independent
Sates (CIS) was formed in 1991
among 12 nations in the region,
which include Azerbaijan, Armenia,
FREE TRADE AGREEMENTS
Countries have not only shown an
interest in engagement in trade
blocs through membership but are
also exploring opportunities to
bilaterally enter into agreements on

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Table 2.6:
TREND IN TRADE PERFORMANCE OF CIS TRADE BLOC
1999 2000 2001 2002 2003 2004 2005
Merchandise Exports within Bloc (US$ bn)
CIS 20.8 27.0 22.3 28.0 36.5 40.4 55.5
Merchandise Exports within Bloc (as % of total bloc exports)
CIS 20.7 19.2 18.2 18.8 19.6 16.6 17.1
SOURCE: World Development Indicators 2007, World Bank, Washington DC.

a one-to-one basis with individual following section11. Major countries

countries as also with a group of
countries or trade blocs.
Engagement in such kind of
agreements would enhance
competitiveness and optimise the
benefits derived from core
competencies of the trading
partners.
There exists an increasing interest
among countries to partner with
neighbouring countries and with
other countries within the region as
well as with distant countries and
trading blocs transcending physical
geographical borders to foster and
strengthen intra and extra regional
linkages, promote trade relations and
economic cooperation and integration
to help promote collective economic
development.
A global region-wise analysis of
the pattern of engagement of select
major countries of each region, in free
trade agreements is attempted in the
are selected in each region based
upon the number of agreements they
are engaged in and the size of the
economy.
Free Trade Agreements in
America
Almost all countries in Latin America
and Caribbean are already well
integrated among themselves, being
members of one or the other main
trading blocs like MERCOSUR,
Andean Group, LAIA, CACM and
CARICOM, the countries of North
America being well knit by NAFTA
and interestingly the two giant blocs
being bound by FTAA to a great
extent. In spite of this, the region
features a number of bilateral
agreements, which only portray the
interest and zeal among countries
like Chile, Mexico, Canada and USA
to vigorously enhance international
trade through the RTA avenue. The
bilateral initiatives of these identified

11 It is important to note here that there are a number of countries negotiating

trade agreements with India. However, agreements pertaining to India are
separately discussed in the following chapter and are not mentioned in this
section.

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Box 6:
PATTERN OF ENGAGEMENT IN FTAs IN AMERICA
Major Intra Regional Extra Regional
Participating Agreement with Agreement with Agreement with
Country Country Country Bloc
Chile
Canada (1997)
Korea (2004)
EU (2003)

Mexico (1999)
China (2006)
EFTA (2004)

Costa Rica (2002)

El Salvador (2002)

United States (2004)
Mexico
Costa Rica (1995)
Israel (2000)
EU (2000)

Nicaragua (1998)
Japan (2005)
EFTA (2001)

Chile (1999)

Honduras (2001)

Guatemala (2001)

El Salvador (2001)
USA
Chile (2004)
Israel (1985)

Dominican Republic-
Jordan (2001)
Central America
Singapore (2004)
(2006)
Australia (2005)

Bahrain (2006)

Morocco (2006)
Canada
Chile (1997)
Israel (1997)

Costa Rica (2002)

countries are discussed below in countries. Chile has been

Box 6.
A few interesting observations
can be drawn from the above pattern
of engagement of American countries
in Free Trade Agreements.

There exist a large number of
intra-regional and extra regional
trade agreements in the
Americas. As far as intra-
regional agreements are
concerned, it is however,
interesting to note that Chile has
shown more interest in entering
into bilateral RTAs with Central
and North American countries
rather than South American
involved in free trade
agreements with both Central
American countries like Costa
Rica and El Salvador and is also
well integrated with the highly
industrialised North American
countries like USA, Canada, and
Mexico. It is interesting to note
here that after the establishment
of FTA between Chile and
Canada in 1997, total exports
from Chile to Canada have shot
up from a mere US$ 0.18 billion
in 1999 to more than US$ 1 billion
in 2005. It has also endevoured
to enhance its trade relations with
the European Countries with

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engagement in agreements with
the European Union and EFTA
during the recent past. With the
involvement in trade agreements
with Korea and China more
recently, Chile too has shown
its increasing interest in the
East.

Mexico’s bilateral trade
engagements have been more
concentrated in Central
American countries. It also had
an agreement with Israel during
2000 to explore trade
opportunities in West Asia and
with the European Union and
EFTA during early 2000 to
establish better trade linkages
and cooperation with the highly
developed European countries.
The total exports from Mexico
to EU rose from US$ 5.7 billion
in 2000 to more than US$ 9
billion in 2005 which could be
attributed to the FTA between
Mexico and EU in 2000. More
recently Mexico has shown
keen interest in the East with
an agreement with Japan in
2005 to begin with.

The United States has shown an
increasing interest in FTAs
especially since 2004 with its
involvement in agreements with
Chile, Singapore, Australia,
Dominican Republic (Central
America), Bahrain and Morocco
during the last three years. The
United States has also
maintained good trade relations
52
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with West Asia with its
engagements with Jordan and
Israel and more recently with
its engagement with Bahrain in
2006 to capitalise on the huge
trade and investment potential
in the West Asian region.

The trend in extra regional
engagements of these countries,
generally, is more bilaterally
focused and on a one-to-one
basis with individual countries
rather than with any group of
countries or any trading bloc,
though some countries like
Chile and Mexico have also
engaged in agreements with
regional blocs like EU and
EFTA.
Free Trade Agreements in
Africa
As discussed in the previous section,
there are a number of regional trade
blocs in the African region like
SADC, ECOWAS, EAC, COMESA,
Cross Border Initiative, UEMOA etc.
Most African countries are members
of one or more such trading blocs
and thus, are intra-regionally well
knit. However, countries like
Tunisia, Morocco, Algeria, Egypt and
South Africa have looked beyond
the African region and have tried
to explore opportunities to enhance
and further their trade relations with
countries outside the region. The
pattern of trade engagement in FTAs
by these countries is presented in
Box 7.

Box 7:
PATTERN OF ENGAGEMENT IN FTAs IN AFRICA
Major Participating Extra Regional
Country Agreement with Country
Tunisia
Turkey (2005)
Morocco
United States (2006)

Turkey (2006)
South Africa
Egypt
Algeria

Most African countries either
being low income or lower
middle income countries, as
classified by the World Bank,
sought to explore trade
opportunities outside the African
region, as a result all bilateral
engagements of African
countries have been outward
oriented. Particularly EU has
been a preferred partner in all
such cases.

Tunisia, with its engagement
with Turkey and EFTA in 2005
has tried to strengthen its ties
with the European region. It has
also been engaged in an FTA
with EU since 1998.

Morocco too has been involved
in agreements with the
European region trade blocs
since 1999. While attempting to
strengthen these ties with the
European region by an FTA
with Turkey in 2006 it also
ventured to tap the significant
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Agreement with Bloc

EU (1998)

EFTA (2005)

EFTA (1999)

EU (2000)

EU (2000)

EU (2004)

EU (2005)
market potential of the North
American region by tying up
with United States in 2006.

Algeria, Egypt and South Africa
too have been associated with
the European Union to explore
trade and investment
opportunities in the region. It
is interesting to note that the
exports of Algeria to EU have
shot up form US$ 8.1 billion in
1999 to US$ 23.4 billion in 2005,
even before the establishment
of the FTA between Algeria and
EU. Algeria’s trade with EU is
expected to further increase
after the establishment of FTA.
Free Trade Agreements in
Asia
Asia is an extremely important
emerging region, which the world
is looking up to today, due to the
huge trade and investment potential
of the region. The Asian region is
integrated among itself with trading
53

blocs like ASEAN, EAEC, SAARC,
ECO etc. Moreover, economies like
China, Singapore, Korea, Thailand
and Japan are increasingly
participating in trade agreements
outside Asia to expand their trade
potential.
Some important observations can
be drawn from the pattern of
engagement of these countries in
trade agreements, and are highlighted
below (refer Box 8).

A very important observation
that can be drawn by analysing
the pattern of trade
engagements in the Asian
region is that the region has
been more receptive, open and
forward looking, especially since
the dawn of the new
millennium, with almost all
trade agreements by the Asian
Box 8:
PATTERN OF ENGAGEMENT IN FTAs IN ASIA
Major Intra Regional
Participating Agreement with
Country Country
China
Hong Kong (2004)

Macao (2004)
Singapore
Japan (2002)

India (2005)

Korea (2006)
Thailand
Australia (2005)
Japan
Singapore (2002)

Malaysia (2006)
Korea
Singapore (2006)
54
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countries entered into force
since only 2001.

All major Asian countries like
China, Thailand, Japan, Korea
and Singapore are exploring
opportunities to enter the
potential markets in the West,
through association in FTAs
with extra regional countries
like USA, Chile and Mexico.

China has struck an accord in
the Latin American region with
its FTA with Chile in 2006, to
tap the region’s trade potential.

Japan has attempted to further
strengthen its ties with East
Asian Countries, with its
agreement with Malaysia in
2006. It has also tried to focus
on the North American region
by entering into an accord with
Mexico in 2005.
Extra Regional
Agreement with Agreement with
Country Bloc

Chile (2006)

New Zealand (2001)
EFTA (2003)

Australia (2003)

United States (2004)

Jordan (2005)

Panama (2006)

New Zealand (2005)

Mexico (2005)

Chile (2004)
EFTA (2006)


Korea too expanded its trade
relations within the region by
engaging in an agreement with
Singapore in 2006. It has also
entered into an accord with
EFTA in the same year, to gain
access to the vast European
market. It has also maintained
trade relations in the Latin
American region with its FTA
with Chile in 2004.

Being well knit among the
Asian region with its
membership in important trade
blocs like ASEAN and EAEC,
Thailand has been outward
oriented in its approach to
explore new markets by
focusing its attention on the
Pacific region by FTAs with
Australia and New Zealand in
2005.

Singapore has been the most
aggressive among all Asian
countries in terms of its
engagement in trade agreements
both within and outside the
region. It is interesting to note
that Singapore has been
continuously engaged in new
agreements with countries since
2001. Intra-regionally it has
agreements with emerging
markets like Japan, India and
latest with Korea in 2006. As a
result of its engagement in FTA
with Japan in 2002, the total
volume of trade between
Singapore and Japan increased
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from US$ 23.5 billion in 2002
to US$ 31.7 billion in 2005.
Singapore has also entered into
an FTA with EFTA to tap the
potential of the European
market rather than by targeting
individual countries. Interestingly,
Singapore has diverse extra
regional trade pursuits, ranging
from the Pacific region with
agreements with New Zealand
and Australia; in the North
American region with agreement
with United States; and in West
Asia with Jordan. The exports
of Singapore to New Zealand
have shown an increase from
US$ 0.4 billion in 2001 to US$
1.1 billion in 2005 and exports
to Australia have shot up from
US$ 4.6 billion in 2003 to US$
8.4 billion in 2005. It has
recently ventured to tap the
market potential of Latin
America with its agreement with
Panama in 2006. This pattern of
Singapore’s aggressive
involvement in trade accords
has caught the attention of
many countries in the world
due the highly successful nature
of Singapore’s trade relations.
Free Trade Agreements in
West Asia
In the West Asian region, most
countries are integrated among
themselves bound by regional
trading blocs like GAFTA, GCC,
Arab Common Market and Arab
Maghreb Union. The largest among
55
 CMYK

them is GAFTA, which contributed
As discussed earlier, countries

around 4.4% of total world exports
in 2005. Being well knit intra-
regionally, the West Asian countries
are exploring opportunities for trade
association outside the region with

Israel has in place an FTA with
other countries and trade blocs.
Israel and Jordan are the only two
countries in West Asia which have
shown some interest in engagement
in trade agreements outside the
region, except for Lebanon’s
involvement with EU in 2003 and
more recently with EFTA in January
2007 and Syria’s involvement with
Turkey also in January 2007.
However, countries collectively,
represented by trading blocs like
GCC and GAFTA are exploring
opportunities to establish free trade
agreements with extra regional

Jordan has shown a rising
countries and blocs. For example,
opportunities to explore FTA
between GCC and Japan, GCC and
EU are being explored.
With reference to Box 9, some
observations on the trade pattern in
this region are presented below:
in this region are more oriented
towards trade agreements within
the region in the form of
creating trade blocs.
USA since 1985 and with a view
to further enhance trade with
the North American region, it
has entered into FTAs with
Canada and Mexico. Similarly its
agreement with the EU in 2000
indicates its urge to strengthen
its trade relations with the
European markets. As a result
of these endevours, Israel’s
exports to US and EU together
accounted for 65% of its total
exports in 2005.
interest in FTAs with its
involvement with USA in 2001
and the European region during
2002. Engagement in FTA with
USA has proved beneficial for
Jordan since as a result of this
FTA, the exports of Jordan to

Box 9:
PATTERN OF ENGAGEMENT IN FTAs IN WEST ASIA
Major Participating Extra Regional
Country Agreement with Country Agreement with Bloc
Israel
USA (1985)
EFTA (1993)

Canada (1997)
EU (2000)

Turkey (1997)

Mexico (2000)
Jordan
United States (2001)
EFTA (2002)

Singapore (2005)
EU (2002)

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US have increased from US$
0.23 billion in 2001 to US$ 1.1
billion in 2005. Total trade
between Jordan and EU too has
increased after Jordan’s
engagement with EU in an FTA
in 2002. Jordan appears to
explore new and more potential
markets in the East as indicated
by its Free trade agreement with
Singapore.
Free Trade Agreements in
Europe
The European region is of immense
importance owing to the diversity
of agreements that countries and
blocs like Albania, Croatia, Turkey,
EFTA and EU are engaged in, both
within and outside the region. In
the region, European Union, EMFTA
and EFTA are the most important
trading blocs owing to the
magnitude of trade that takes place
within and outside these blocs.
Some important observations can
be drawn observing the pattern of
engagement of these countries in
trade agreements, which are discussed
below (refer Box 10).

While Albania, Croatia and
Turkey have entered into
bilateral agreements with
countries/ blocs both outside
and inside the region, however,
Western European countries
have limited their RTA initiative
only to the extent of forming
the European Union.
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Albania’s willingness to engage
in free trade agreements has
been quite evident only
recently, with all its
engagements entering into force
post 2002. It appears from the
trend in Albania’s engagement
in trade agreements, that it has
been more interested in
bettering its trade relations
within the European region with
countries like FYROM, Kosovo,
Croatia, Bosnia and Herzegovina
and Serbia Montenegro, rather
than ambitiously exploring extra
regional opportunities. It has
also strengthened its integration
within the European region with
its engagement with the EU in
2006 and the CIS country of
Moldova in 2004.

The pattern of trade
engagement of Croatia too has
been very similar to that of
Albania, with its main focus
being intra-regional engage-
ments with neighbouring
countries like Former Yugoslav
Republic of Macedonia, Bosnia
& Herzegovina, Albania, Serbia
Montenegro and Turkey. Croatia
has been involved with EFTA
and EU in 2002 and entered an
accord with Moldova in 2004 to
explore trade prospects with the
CIS region.

Unlike Albania, Croatia and
other European countries,
Turkey has been more extra
57
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Box 10:
PATTERN OF ENGAGEMENT IN FTAs IN EUROPE
Major Intra Regional Extra Regional
Participating Agreement with Agreement with Agreement with
Country/ Bloc Country Bloc Country
Albania
FYROM (2002)
EU (2006)
Moldova (2004)

UNMIK (Kosovo)
(2003)

Croatia (2003)

Bosnia and
Herzegovina (2004)

Serbia Montenegro
(2004)
Croatia
FYROM (1997)
EFTA (2002)
Moldova (2004)

Bosnia and
EU (2002)
Herzegovina (2001)

Albania (2003)

Turkey (2003)

Serbia and
Montenegro (2004)
Turkey
FYROM (2000)
EFTA (1992)
Israel (1997)

Bosnia and
Tunisia (2005)
Herzegovina (2003)
Palestine (2005)

Croatia (2003)
Morocco (2006)

Syria (2007)
EFTA
Turkey (1992)
Israel (1993)

FYROM (2001)
Morocco (1999)

Croatia (2002)
Palestine (1999)

Mexico (2001)

Jordan (2002)

Singapore (2003)

Chile (2004)

Tunisia (2005)

Korea (2006)

Lebanon (2007)

Egypt (2007)
EU
Ice Land (1973)
Syria (1977)

Norway (1973)
Palestine (1997)

Switzerland and
Tunisia (1998)
Liechtenstein (1973)
Mexico (2000)

FYROM (2001)
Israel (2000)

Croatia (2002)
Morocco (2000)

Albania (2006)
South Africa (2000)

Jordan (2002)

Chile (2003)

Lebanon (2003)

Egypt (2004)

Algeria (2005)

58

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regionally oriented in its
approach to trade initiatives.
The pattern of Turkey’s
engagement reveals its clear
inclination towards the West
Asian and North African region.
It has also established
preferential trade relations
within the European region both
with individual countries and
with EFTA. Turkey is also in a
process of entering the
European Union.

EFTA and EU, as discussed
earlier, being the major trading
blocs in the European region
have been involved in a number
of intra-regional and extra
regional trade agreements.

EFTA has been involved in
trade agreements with countries
in the North African region like
Morocco and Tunisia and in the
North American and Latin
American region with Mexico
and Chile since 2001. It has also
strengthened its trade relation
with Africa and the West Asian
countries with its agreements
with Egypt and Lebanon
respectively in 2007. In addition
to the EFTA-Singapore
agreement in 2003, EFTA’s
involvement in an FTA with
Korea in 2006 has strengthened
the link between East Asia and
EFTA. EFTA has also intra-
regional linkages with Turkey,
FYROM and Croatia.
12 The largest economy among the four countries is that of Georgia with GDP
size of US$ 7.7 billion in 2006.
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The European Union has strong
inter-linkages with many intra
and extra regional countries.
European countries like Former
Yugoslav Republic of
Macedonia, Croatia and Albania
have entered into FTAs with the
Union since 2001. The EU has
trade linkages with a number
of countries in different regions
of the world like Syria,
Palestine, Israel, Jordan and
Lebanon in West Asia; with
Tunisia, Morocco, South Africa,
Egypt and Algeria in Africa; with
Mexico in North America and
Chile in Latin America.
However, it is in the larger
interest of these partnering
countries to be associated with
the European Union, which
provides them an excellent
gateway to explore and tap the
immense potential of the
European market.
Free Trade Agreements in CIS
region
In the Commonwealth of
Independent States (CIS) region the
countries with greater inclination
towards FTAs include Armenia,
Georgia, Kyrgyz Republic and
Moldova. Though these countries are
relatively small in terms of size of the
economy12, compared to other larger
CIS countries like the Russian
Federation with a GDP of
US$ 984.6 billion and Ukraine with
US$ 105.5 billion in 2006, these
59
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countries were selected based on the of engagement in FTAs by CIS

number of trade agreements entered
into.
Analysis of the pattern of
engagement of CIS countries in Free
trade agreements, from Box 11,
reveals some interesting results:

A very important and interesting
feature that can be observed
from the analysis of the pattern
countries is that all bilateral
trade engagements of CIS
countries have entered into
force only after the creation of
the Commonwealth of
Independent States (CIS) trading
bloc in 1991.

Almost all the 12 CIS countries,
with the exception of Moldova,

Box 11:
PATTERN OF ENGAGEMENT IN FTAs IN CIS
Major Participating Intra Regional Extra Regional
Country Agreement with Country Agreement with Country
Armenia
Russian Federation (1993)

Moldova (1995)

Kyrgyz Republic (1995)

Ukraine (1996)

Turkmenistan (1996)

Georgia (1998)

Kazakhstan (2001)
Georgia
Russian Federation (1994)

Azerbaijan (1996)

Ukraine (1996)

Armenia (1998)

Kazakhstan (1999)

Turkmenistan (2000)
Kyrgyz Republic
Russian Federation (1993)

Armenia (1995)

Kazakhstan (1995)

Moldova (1996)

Uzbekistan (1998)

Ukraine (1998)
Moldova
Armenia (1995)
Bosnia and

Kyrgyz Republic (1996) Herzegovina (2004)

FYROM (2004)

Serbia and
Montenegro (2004)

Albania (2004)

Croatia (2004)

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are engaged in agreements with
only other CIS countries. Thus,
the CIS countries have explored
opportunities to enter into
bilateral agreements with
countries within the region to
foster economic growth and
cooperation and better mutual
trade relations. This shows that
despite having a trading bloc,
there have been tendencies
among countries to form
bilateral trade agreements with
countries within the bloc. This
is a distinct feature as compared
to the trend or pattern of trade
engagement in any other region
discussed above.

Countries like Armenia, Georgia
and Kyrgyz Republic are intra-
regionally well integrated
especially with larger countries
like the Russian Federation,
Kazakhstan and Ukraine with a
number of bilateral agreements.

An analysis of trade engagement
pattern of all the 12 CIS
countries shows that no recent
initiatives have been taken by
these countries, with the
exception of Moldova and
barring Armenia’s engagement
with Kazakhstan in 2001 and
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Georgia’s involvement with
Turkmenistan in 2000.

Among all CIS countries,
Moldova has been most
aggressive in entering into FTAs
with extra regional countries
especially during 2004, during
which it entered into as many
as 5 agreements with European
countries. This shows Moldova’s
strong desire to explore the
potential of West European
markets.
CONCLUSION
The overall conclusion that can be
drawn from observing the pattern
of engagement of select countries
in Free Trade Agreements is that
more and more countries in almost
all regions of the world are showing
an increasing interest in expanding
their trade opportunities with
countries both within and outside
the region. It is also observed that
countries prefer to engage bilaterally
on a one-to one basis with
countries. However, there are also
instances where countries have
engaged with trade blocs rather than
countries independently to gain
access to larger markets as in the
case of engagements with EU and
EFTA.
61

3. TRADE PERFORMANCE OF
SELECT MAJOR COUNTRIES
As discussed in the previous
chapter, with the recognition of the
importance of RTAs in achieving
global competitiveness, and
enhancing trade and economic
development, a number of countries
have engaged in more than one RTA.
Some countries are also involved in
as many as nineteen RTAs. Leading
countries that have been aggressively
pursuing regional trade agreements
with other countries and trade blocs
include Mexico, Singapore, Chile,
United States and Turkey. Table 3.1
gives a picture of the growing
importance of RTA in these countries.
With involvement in as many as
19 RTAs, Mexico is at the top with
the maximum number of RTAs,
Table 3.1:
COUNTRIES INVOLVED IN MOST
NUMBER OF RTAs
Countries No of RTAs
involved in
Mexico 19
Singapore 18
Chile 17
United States 15
Turkey 10
SOURCE: WTO
62
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followed by Singapore with 18
agreements. Chile, United States, and
Turkey are among the other top 5
countries aggressively pursuing
regional trade agreements in different
regions of the world. .
Having analysed in the previous
chapter, the pattern of engagement
of countries in RTAs around the globe
and having noted the countries, which
have been engaged in most number
of RTAs, an attempt is made in this
section to analyse the impact of
regional trade agreements on the
trade performance of these select
major countries, and to understand
the rationale behind these countries
to enter into so many agreements and
the factors that promoted the
proliferation of RTAs involving these
countries.
IMPACT OF RTAs ON
COUNTRIES ENGAGING MOST
IN AGREEMENTS
The impact of regional trade
agreements is varied. RTAs can have
positive or negative effects on trade
depending on their design and
implementation. The broader policy
context in which an RTA is designed
 CMYK

and implemented is crucial. Salvador in Latin America; and with

Agreements that have been designed
to complement a general
programme of economic reform
have been most effective in raising
trade. When RTAs have tended to
be fruitless, it is often because of
the lack of a coherent programme
of reform.
The trend in total trade, exports
and imports give a relatively good
picture of the impact of RTAs on a
country’s trade performance.
Analysis of Impact of RTAs on
Mexico’s Trade Performance
As discussed earlier in the previous
chapter, some of the countries/blocs
with which Mexico has entered into
RTAs are Costa Rica, Nicaragua,
Chile, Honduras, Guatemala, and El
Chart 3.1:
TREND IN MEXICO’S TOTAL TRADE
Israel, Japan, European Union and
EFTA outside the Americas. It has
also been a member of NAFTA
since its formation in 1994. An
analysis of the total trade
performance of Mexico during the
period 1995 to 2005 reveals some
interesting aspects. Chart 3.1
presents the growth in Mexico’s total
trade.
Mexico’s total trade has clearly
shown an increasing trend during the
above period increasing from around
US$ 152 billion in 1995 to over US$
436 billion in 2005. It is interesting to
note the apparent correlation between
Mexico’s engagement in major RTAs
and the sharp rise in total trade of
the country. The total trade of Mexico
has seen a steady increase especially

SOURCE: Direction of Trade Statistics, IMF

NOTE: Important RTAs are highlighted in the Graph.

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since the formation of NAFTA, a major trade of Mexico too increased since
trading bloc in North America, in 2001, after a marginal decline from
1994. Its engagement with Costa Rica, 2000 to 2001. However, the impact
Nicaragua, Chile, Israel, and EU of these RTAs on Mexico’s trade
during 1995 to 2000 has resulted in a performance could be seen more
steady increase in Mexico’s total clearly since 2003, when total trade
volume of trade. As a result of its increased at a faster pace. Mexico’s
engagement in RTAs with these engagement with Japan in 2005 is
countries, Mexico’s total trade, further likely to boost the total trade
increased from around US$ 152 billion of Mexico in the coming years.
in 1995 to US$ 343 billion in 2000. Having seen the overall trade
Mexico’s total trade with EU increased performance of Mexico since 1995, it
from US$ 20.6 billion in 2000 to US$ is pertinent to particularly analyse
34.2 billion in 2005. Mexico has Mexico’s trade performance over the
engaged in around four RTAs during past five years from 2000 to 2005, with
2001 with Latin American countries its RTA partner countries (refer Table
and EFTA. Subsequently the total 3.2).
Table 3.2:
MEXICO’S TRADE PERFORMANCE WITH RTA PARTNERS (US$ MN)
2000 2005
Exports Imports Exports Imports
Costa Rica 286 180 Costa Rica 421 883
Nicaragua 93 27 Nicaragua 324 159
Chile 431 894 Chile 668 1754
Honduras 204 13 Honduras 240 105
Guatemala 535 91 Guatemala 864 222
El Salvador 246 20 El Salvador 472 59
Israel 55 297 Israel 87 371
Japan 931 6466 Japan 1470 13078
United States 147400 127534 United States 183563 118547
Canada 3340 4017 Canada 4234 6169
European Union 5710 14938 European Union 9088 25182
EFTA 586 851 EFTA 153 1236
Total Trade with 96.16 87.73 Total Trade with 94.10 75.63
RTA Partners as RTA Partners as
% of Total Trade % of Total Trade
NOTE: United States and Canada have been included as they are members of
NAFTA
SOURCE: Direction of Trade Statistics 2006 Year Book, IMF.

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After the establishment of RTAs,
Mexico’s trade with individual partner
countries has increased significantly.
The share of Mexico’s exports and
imports with its trade partners as a
percentage share in its total exports
and imports respectively has been
very high. This is particularly true for
exports, as 94% of Mexico’s global
exports were diverted to RTA
partners. Share of imports, though
have declined between 2000 and
2005, nevertheless continues to be
distinctly high.
Mexico being a member of
NAFTA, its trade with USA and
Canada, and among other RTA
partners, primarily with Japan and the
European Union have been
responsible for enhancing Mexico’s
total trade. Mexico’s total trade with
USA has increased from around US$
275 billion in 2000 to more than US$
302 billion in 2005. Mexico’s exports
to the EU increased from US$ 5.7
billion in 2000 to US$ 9 billion in 2005
after the EU-Mexico FTA in 2000. The
imports from EU too rose from US$
14.9 billion to more than US$ 25
billion after the agreement. Mexico’s
total trade with Japan too has
increased from US$ 7.3 billion in 2000
to more than US$ 14 billion in 2005.
With Mexico’s FTA with Japan in 2005
this bilateral trade is expected to rise
further.
An overview of Mexico’s
Trade policy
Over the period, Mexico has moved
away from its past inward-looking
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trade policy to a more liberal, and
outward oriented trade policy driven
mainly by an aggressive policy of
reciprocal liberalisation, reinforced
by unilateral initiatives and
multilateral commitments. As a
result, Mexican trade is increasingly
being governed by the preferential
rules of free-trade agreements.
The Mexican economy, with a
present GDP of around US$ 768
billion in 2005, has undergone a
transformation since 1980s as a result
of economic liberalisation and joining
the North American Free-Trade
Agreement, which joins Mexico’s
market with those of the United States
and Canada, and more recently, due
to its trade deals with the EU, Japan
and other Latin American countries.
The transformation has been
particularly reflected in its export
diversification.
Mexico’s trade policy continues
to focus on promotion of foreign
investment as part of its multilateral
and preferential initiatives. With the
exception of the agreement with
Israel, all other Mexico’s FTAs provide
additional protection to investors
through specific investment
provisions. Since 1997, Mexico has
taken initiatives to attract foreign
investment in various service
activities, notably financial services
and telecommunications.
Mexico’s import regime is
governed by a number of tariff-quota
schemes. For instance, Mexico applies
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tariff quotas on several agricultural component. Maquila’s trade balance

products, with most quotas reserved
for specific countries. Mexico also
maintains import permits for sensitive
products for reasons of national
security, public health, and protection
of domestic industries. Mexico also
promotes exports through various
duty and tax concessions.
The majority of Mexico’s trade
takes place under preferential rules,
with the NAFTA remaining of
paramount economic significance.
Within NAFTA, the US, Canada and
Mexico accounted for 32% of global
GDP in 2005. The phase-out of tariffs
between the US and Mexico is due to
be completed by 2008.
A very important aspect in the
trade policy of the Mexican economy
is the presence of Maquiladoras13.
Maquiladoras have continued to play
a very important role in boosting
Mexico’s trade especially with the
United Sates. Growth of
manufacturing exports, which
accounted for over 70% of total export
earnings in 1990s, intensified
following NAFTA’s implementation,
as maquiladora operations along the
US border flourished. Maquiladora
exports entail a large import
with US sharply increased over the
past decade from US$ 4.9 billion in
1995 to US$ 21.7 billion in 2005.
As an integral part of its trade
policy, Mexico has been giving a
number of export incentives to boost
its foreign trade. Such incentives
include the Programa de Importación
Temporal para Producir Artículos de
Exportación (Pitex), which allows
duty-free entry of temporary imports
of raw materials, parts, machinery and
equipment used to manufacture
exports; the Programa de Empresas
Altamente Exportadoras (Altex),
which reimburses value-added tax
(VAT) and import tariffs for customs
clearance; and provision of export
credit below commercial bank rates
to exporters through the Banco
Nacional de Comercio Exterior
(Bancomext). Moreover, Maqui-
ladoras are exempt from paying
import duties as their products are
destined for re-export. However, if
those products come from countries
that enjoy no preferential trade
arrangements with Mexico, the
exporter could seek low or zero tariffs
through a Programa de Promoción
Sectorial (Prosec, sectoral promotion

13 A maquiladora or maquila is an offshore assembly factory that imports

materials and equipment on a duty-free and tariff-free basis for assembly or
manufacturing and then re-exports the assembled product, usually back to
the originating country. The term is primarily used to refer to factories in
Mexico along the United States–Mexico border, but increasingly is used to
refer to factories all over Latin America. Maquiladora factories encompass a
variety of industries including electronics, transportation, textile, and
machinery, among others.

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programme). Mexico has also been
giving concessions pertaining to
taxable profits to maquiladoras, as
part of its export incentives.
The external sector has been the
prime driver of growth of the Mexican
economy. Although exports have
diversified away from oil, which
accounted for over 60% of export
earnings in the 1970s and early 1980s,
they have remained heavily
dependent on a single market of that
of United States. Interestingly, one
very important reason behind the
proliferation of Mexico’s FTAs is its
endeavour to reduce its dependence
on trade with the US.
Despite measures to diversify,
Mexico’s reliance on the US market
has increased rather than diminished
in recent years. The US accounted for
87.5% of export sales in 2001-05, up
from 82.5% in 1991-95. Mexico has
enjoyed a trade surplus with the US
which has been substantially
increasing in recent years, amounting
US$ 65 billion in 2005.
Import tariffs in Mexico range
from 0% to 35%, with the trade-
weighted average tariff about 2.9%14.
Also due to Mexico’s vast array of free-
trade agreements, most import quotas
have been transformed into tariff-rate
quotas (TRQs, volume quotas) under
which imports up to a specific volume
limit enter the country at a favourable
tariff. Moreover, the absence of
14 Economist Intelligence Unit
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foreign-exchange controls and
gradual phasing out of Import licence
requirements make Mexico an
attractive trading partner.
Mexico is also contemplating
entering into trade agreements with
Panama and Trinidad & Tobago. Talks
with China also have been launched,
with an aim to promote and foster
trade and investment and reaching a
pact to avoid double tax payments.
Analysis of impact of RTAs on
Singapore’s trade performance
As highlighted in the earlier chapter,
Singapore has been aggressively
pursuing RTAs with a number of
countries and blocs like EFTA,
Japan, Australia, United States,
Jordan, New Zealand, Korea, India
and Panama. It has also been a
founder member of ASEAN since
1967 and is thus well connected
with many south east Asian nations
too. Singapore’s total trade
performance during the past decade
since 1995 is shown in Chart 3.2
below.
Singapore appears to be a classic
example of the impact of RTAs on
the trade performance of a country.
The pattern of Singapore’s trade over
the past decade clearly attests the fact
that engagement in RTAs has a large
positive impact on the trade of a
country and can possibly act as a
gateway to enhancing global trade.
67
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Chart 3.2:
TREND IN SINGAPORE’S TOTAL TRADE

SOURCE: Direction of Trade Statistics, IMF.

NOTE: Important RTAs are highlighted in the Graph

Singapore’s total trade has clearly
shown an increasing trend especially
after 2001, after a somewhat steady
and subdued pattern of total trade
averaging around US$ 243 billion
during the period 1995 to 2001. This
structural change in the pattern of
Singapore’s total trade since 2001
could well be attributed to its open
and liberal attitude during the post-
2001 period. This change in attitude
is clearly evident from the fact that
all its trade agreements have entered
into force only after 2001.
It is also interesting to note that
Singapore has been continuously
exploring new markets through trade
agreements. It has entered into trade
agreements with New Zealand in
2001, Japan in 2002, Australia and
EFTA in 2003, United States in 2004,
India and Jordan in 2005 and with
Panama in 2006. As a result of such
enthusiastic pursuits, the total trade
of Singapore has risen from US$ 237
billion in 2001 to nearly US$ 400
billion in 2005, increasing by more
than US$ 160 billion in just four years.
The compound growth rate of
Singapore’s total trade has been only
2.37% per annum during 1995 to 2000.
On the other hand, the corresponding
compounded growth rate for
Singapore during 2001 to 2005, during
which it entered into all its trade
engagements, was as high as 13.6%.
This clearly shows the positive impact
that RTAs have had on Singapore’s
trade performance.

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Another very interesting feature
of Singapore’s trade is its total trade
to GDP ratio, a reflection of the degree
of openness of the economy, which
has consistently been above 250%
during the past decade, as shown in
Chart 3.3. This is mainly due the large
volume of re-exports that take place
from Singapore to the rest of the
world. The ratio of openness to trade
has been as high as 340% in 2005 and
had shown an upward trend since
2001.
Having observed the general
trade behaviour of Singapore during
the last decade, it is interesting to
study Singapore’s trade pattern with
its RTA partners during the last five
years (see Table 3.3).
Chart 3.3:
SINGAPORE’S TOTAL TRADE TO GDP RATIO
SOURCE: Direction of Trade Statistics, IMF
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As can be seen from Table 3.3,
Singapore’s trade with almost all
partner countries has increased
significantly from 2000 to 2005. It can
be noted that Singapore’s total exports
to RTA partner countries as a
percentage of its global exports have
increased over the five-year period
from 61% to 65%. However,
Singapore’s import from partner
countries as a share in total imports
have declined marginally during the
period but nevertheless remains close
to as high as 60% in 2005. This could
possibly be due to Singapore’s
increasing trade with non RTA partner
countries like China, Hong Kong, and
the European Union as well.
Singapore’s trade with China has
increased from US$ 9 billion in 1999
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Table 3.3:
SINGAPORE’S TRADE PERFORMANCE WITH RTA PARTNERS (US$ MN)
2000 2005
Exports Imports Exports Imports
Japan 10404 23189 Japan 12536 19244
India 2871 1076 India 5897 4079
Korea 4916 4822 Korea 8053 8599
New Zealand 370 192 New Zealand 1164 320
Australia 3222 2298 Australia 8429 2910
United States 23891 20270 United States 23880 23482
Jordan 16 2 Jordan 34 3
Panama 1010 16 Panama 1908 44
EFTA 641 2472 EFTA 895 2715
Brunei 486 266 Brunei 496 149
Cambodia 426 75 Cambodia 303 100
Indonesia - - Indonesia 22109 10452
Laos 30 1 Laos 40 1
Malaysia 25041 22848 Malaysia 30405 27347
Myanmar 436 110 Myanmar 596 108
Philippines 3387 3358 Philippines 4185 4650
Thailand 5872 5801 Thailand 9431 7518
Vietnam 2091 820 Vietnam 4421 1814
Total Trade with 61.7 65.1 Total Trade with 65.0 59.8
RTA Partners as RTA Partners as
% of Total Trade % of Total Trade
NOTE: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar,
Philippines, Thailand and Vietnam are considered since they are members of
ASEAN.
SOURCE: Direction of Trade Statistics 2006 Year Book, IMF.

to more than US$ 40 billion in 2005,
with Hong Kong from nearly US$ 12
billion to US$ 25 billion, and with
European Union from nearly US$
33 billion to US$ 50 billion.
Among the RTA partners, exports
to Japan have recorded an increase
of US$ 2 billion and to Australia an
increase of over US$ 5 billion during
the five year period. Imports from

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United States too increased by over
US$ 3 billion during the period.
An overview of Singapore’s
Trade policy
Singapore has a highly industrialised
economy, manufacturing being the
most important sector, accounting
for around 27% of nominal GDP in
2006. Electronics constitute the most
important industry within the
manufacturing sector contributing to
32% of domestic exports in 2006.
However, Singapore considers
excessive dependence on electronics
as both a weakness, as well as
strength, due to the impact world
demand has on its economy.
The country is exceptionally
dependent on foreign trade. The total
value of trade in goods was equivalent
to 382% of GDP in 2006, compared
with less than 20% in Japan, for
instance. This, as explained earlier,
is primarily due to the large re-exports
that take place from Singapore, due
to its strategic location and excellent
port facilities. Re-exports accounted
for around 47% of total exports in
2006.
Singapore’s economic policy has
been highly interventionist. Individual
industries have been encouraged, and
the government is deeply involved in
economic development, not only
through its macro- and
microeconomic policies, but also
through its ownership of firms in
many sectors, which also helps in
lending exceptional stability to the
business environment.
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However, Singapore continues to
maintain a liberal trade policy and has
very few trade barriers; most of these
are maintained for health, security and
environmental reasons. Singapore has
virtually no tariffs, with only six tariff
lines subject to specific rates of duty.
An important feature of Singapore’s
trade policy during the past few years
has been its willingness to pursue
bilateral free-trade agreements. This
trend, as discussed earlier, is in
complete contrast to its earlier trade
pattern when it had no bilateral free
trade agreements. As a result of the
Uruguay Round, Singapore bound
69% of its tariff lines. The overall
simple average bound tariff is 7.5%,
thus resulting in a considerable gap
between the average applied MFN
tariff and the average bound rates.
Although this gap creates uncertainty
as it provides scope for governments
to raise their applied tariffs up to their
bound levels, Singapore has not taken
advantage of this scope.
Singapore’s predominant strategy
remains to export as much as possible
and to ensure minimum possible
barriers to trade for imports. Since the
conclusion of General Agreement on
Tariffs and Trade in 1994, Singapore
further removed a number of items
from its tariff list, further enhancing
liberalisation of an already open
economy. Singapore main trading
partners include Malaysia, US, China
and Japan. To promote trade
opportunities, Singapore employs a
three-pronged trade policy of
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multilateral, regional and bilateral
trade.
Analysis of impact of RTAs on
Chile’s Trade Performance
The main trading partners of Chile,
with whom it is engaged in RTAs
are Korea and China in Asia,
European Union and EFTA in
Europe and United States, Canada,
Mexico, Costa Rica and El Salvador
in America. Chile has also been a
part of the Latin American
Integration Association (LAIA) when
it was created in 1980 and is thus
well integrated with most Latin
American countries as well. Chart
3.4 highlights the trade performance
of Chile during the past decade.
An investigation of Chile’s trade
pattern over the decade too sub-
stantiates the point that engagement
in RTAs has been able to boost the
trade performance of a country.
Chile’s total trade has increased
rapidly especially since 2002. An
observation of the pattern of Chile’s
engagement in RTAs reveals that most
of its engagements have been post
2002 during which it entered into
agreements with Costa Rica, El
Salvador, EU, Korea, United States,
EFTA and recently with China in 2006.
During the period post 2002,
Chile’s total trade, doubled from US$
35 billion in 2002 to more than US$
71 billion in 2005. The total trade of
Chile has been growing at a
compounded annual growth rate of
around 2% since 1999 to 2002,
compared to a growth rate of more
than 26% with RTA Partners post 2002
till 2005 which further attests to the
positive impact of RTAs on the
country’s trade performance.

Chart 3.4:
TREND IN CHILE’S TOTAL TRADE

SOURCE: Direction of Trade Statistics, IMF

NOTE: Important RTAs are highlighted in the Graph

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Chile’s RTA engagements with EU Chile’s trade performance with

in 2003 and with United States in 2004
have boosted the overall trade of
Chile as depicted in the above Chart
3.4. It has also had an RTA with
Mexico in 1999, which also increased
its trade. Chile’s engagement with
China in 2006 is further expected to
boost Chile’s trade performance.
RTA partner countries as presented
in Table 3.4 also shows the relative
importance of Chile’s trade with RTA
partners in its total trade.
It can be observed from Table 3.4
that after the establishment of RTAs,
Chile’s trade with individual partner
countries have notably increased.

Table 3.4:
CHILE’S TRADE PERFORMANCE WITH RTA PARTNERS (US$ MN)
2000 2005
Exports Imports Exports Imports
European Union 4537 2911 European Union 9068 5041
Korea 796 535 Korea 2192 1560
China 906 950 China 4390 2535
United States 3243 3297 United States 6248 4722
Canada 243 510 Canada 1069 406
Mexico 818 615 Mexico 1582 765
Costa Rica 50 4 Costa Rica 116 9
El Salvador 15 2 El Salvador 85 2
EFTA 166 151 EFTA 100 203
Argentina 637 2869 Argentina 626 4791
Bolivia 166 30 Bolivia 211 38
Brazil 953 1332 Brazil 1728 3782
Colombia 237 205 Colombia 347 344
Cuba 36 1 Cuba 43 2
Ecuador 158 254 Ecuador 341 246
Mexico 818 615 Mexico 1582 765
Paraguay 47 67 Paraguay 40 118
Peru 439 256 Peru 724 1106
Uruguay 62 59 Uruguay 73 -
Venezuela 229 237 Venezuela 358 135
Total Trade with 75.4 80.4 Total Trade with 78.2 82.2
RTA Partners as RTA Partners as
% of Total Trade % of Total Trade

NOTE: Argentina, Bolivia, Brazil, Colombia, Cuba, Ecuador, Mexico, Paraguay,

Peru, Uruguay and Venezuela are considered since they are members of LAIA.
SOURCE: Direction of Trade Statistics 2006 Year Book, IMF.

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From the above table, it can be
noticed that Chile’s trade with RTA
partners constitutes a very major part
of Chile’s total trade, exports to RTA
partners contributing to more than
78% of total exports and imports more
than 82% of total imports in 2005,
which also indicates the high level of
success and effectiveness of Chile’s
RTAs. The share of exports and
imports to RTA partners in total
exports and imports has increased
from 75% and 80% respectively in
2000, reflecting the positive impact
of RTA over the years.
Among the RTA partners, the
countries that have primarily been
responsible for enhancing Chile’s total
trade include United States and the
European Union. Chile’s total trade
with United States increased from US$
6.5 billion in 2000 to nearly US$ 11
billion in 2005 and with the European
Union doubling from US$ 7.4 billion
to US$ 14 bn. Chile’s total trade with
China has also increased from US$
1.8 billion in 2000 to nearly US$
7 billion in 2005, even before the
establishment of the trade agreement.
Bilateral trade between these two
nations is expected to further expand
in the coming years.
An overview of Chile’s Trade
Policy
Chile being a relatively small
economy with a GDP size of
US$ 145 billion in 2006, is highly
dependant on foreign trade.
Consequently, over the past few
years, Chile’s has adopted a
multidimensional trade policy, which
74
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has given priority to improving and
ensuring access to the larger markets
for its goods and services and to
stimulate domestic and foreign
investment. It has been in vigourous
pursuit of trade liberalisation.
Chile pioneered trade
liberalisation in Latin America in the
mid-1970s, by eliminating non-tariff
barriers to trade and simplifying tariff
structures. Chile’s trade policies have
laid emphasis on a model of export-
led growth through free markets since
the mid-1970s. This has resulted in
the introduction of a single import
tariff rate in 1979, a policy that
continues even today. During 1999
to 2003, Chile’s applied MFN tariff was
unilaterally phased down from 11 per
cent to 6 per cent. This low and
uniform applied tariff has been
fundamental in enabling Chile to
negotiate trade agreements bilaterally
with different partners. Moreover, due
to tariff concessions granted through
trade preference agreements Chile’s
trade-weighted average import tariff
rate was less than 2% in 2006.
Such trade policies have led to a
profound change in the structure of
Chile’s economy. The opening of
Chile’s economy has enabled exports
of goods and services to grow at an
annual average rate of 8% in real
terms and imports of goods and
services to expand by an annual
average of 10.4% between 1990 and
2006. Exports of goods and services
accounted for 45.4% of GDP in 2006,
up from a 14-year low of 26% in 1998.

Chile’s export base is diversifying
yet dependence on copper is still
high, its contribution to merchandise
exports earnings being 40% in 2002-
05 and 55.6% in 2006. Cellulose, fruit,
wood, wine etc have emerged as
important new export items. A
number of protectionist barriers on
Chile’s agricultural production have
been lifted and the agriculture sector
is now more modern and efficient.
Thus, fruit and vegetables have
become a major export item of Chile.
Subsequently, Chile became the
largest fruit exporter in the southern
hemisphere, due to its engagement
in bilateral free trade agreements; total
exports of fruits reaching US$ 2.4
billion in 2006. Chile is also becoming
an increasingly important exporter of
meat and poultry products. In
February 2006, Chile began to export
beef and pork to the US under a quota
system established in the bilateral FTA
of 2004.
Chart 3.5:
TREND IN UNITED STATES’ TOTAL TRADE
SOURCE: Direction of Trade Statistics, IMF
NOTE: Important RTAs are highlighted in the Graph
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Thus, Chile’s economic openness
is consistent with development
strategies and a liberal trade policy.
Chile’s outward orientation has
helped to reduce the external
vulnerability of the economy, access
the leading world export markets, and
attract more foreign investment into
the country.
Analysis of Impact of RTAs on
USA’s Trade Performance
As far as the United States is
concerned it is mainly engaged in
RTAs with countries like Chile,
Dominican Republic, Jordan,
Australia, Bahrain, Israel, Morocco
and Singapore. Being a member of
NAFTA, it is well integrated with
the economies of Canada and
Mexico. The total trade performance
of United States during the period
1995-2005 is depicted in Chart 3.5.
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The total trade of United States all RTA partner countries as a

has seen a steady rise since the
establishment of NAFTA between
Canada, United States and Mexico in
1994. All the regional trade
agreements of United States have
entered into force only after 2001,
with the exception of the FTA with
Israel in 1985. A corresponding
growing trend in the total trade of
United States is also observed since
2001. It is also interesting to note
United States’ increasing interest in
RTAs as reflected by its involvement
in eight RTAs during 2005 and 2006.
It can be noted from Table 3.5
that United States’ trade with most of
its trade partners has increased over
the period. United States’ exports to
percentage of total exports has
increased, though marginally, from
around 42% in 2000 to 43% in 2005.
The share of USA’s imports from its
RTA partners in total imports has
shown a marginal decline from 33%
to 30% during the period. This could
be due to increasing imports of United
States from non-RTA partner countries
like Japan, Germany, China etc.
during the past few years.
Among the RTA partners, the
countries with which USA has
significant trade relations include
Canada, Mexico, Australia, Israel and
Singapore. USA has been involved in
an FTA with Israel since 1985. The
total trade between the two countries

Table 3.5:
UNITED STATES’ TRADE PERFORMANCE WITH RTA PARTNERS (US$ MN)
2000 2005
Exports Imports Exports Imports
Chile 3382 3602 Chile 5198 7446
Dominican Republic 4423 4474 Dominican Republic 4708 4721
Jordan 304 75 Jordan 643 1320
Australia 12332 6693 Australia 15771 7677
Bahrain 411 345 Bahrain 351 455
Israel 7675 12900 Israel 9732 17129
Morocco 530 465 Morocco 528 474
Singapore 17497 19630 Singapore 20647 15388
Canada 174616 229191 Canada 211420 291944
Mexico 108751 135080 Mexico 120049 172485
Total Trade with 42.7 33.3 Total Trade with 43.0 30.0
RTA Partners as RTA Partners as
% of Total Trade % of Total Trade
SOURCE: Direction of Trade Statistics 2006 Year Book, IMF.

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increased by over US$ 6 billion during
the last 5 years, reaching a level of
US$ 26.8 billion in 2005. United States’
trade with Australia increased from
US$ 19 billion in 2000 to US$ 23
billion in 2005.
An overview of United States’
Trade Policy
The United States is one of the most
advanced economies in the world
and is the world’s leading economic
power, with GDP amounting to US$
13.2 trillion in 2006. Moreover the
US economy is exceptionally diverse
and is self-sufficient in most raw
materials, with the notable exception
of oil. The steady growth in the US
economy during the past could be
largely attributed to the rapidly
expanding exports of the country.
United States gives high priority
to the integration of developing
countries into the multilateral trading
system. To enhance market access
opportunities for less developed
countries, the United States provided
duty-free access for most products
from developing countries through
several preferential trade programmes
like the Generalised System of
Preferences (GSP), the African
Growth and Opportunity Act (AGOA),
the Caribbean Basin Trade Partnership
Act (CBTPA) and the Andean Trade
Preference and Drug Eradication Act
(ATPDEA). As a result of the
incentives given by US to the AGOA
beneficiary countries, which comprise
39 Sub-Saharan African countries, the
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total trade between them has seen a
significant rise from US$ 27 billion in
2000 to more than US$ 66 billion in
2006. Similarly, the total trade
between US and ATPDEA countries,
comprising four Andean countries,
increased from US$ 17 billion in 2000
to US$ 34.15 billion in 2006.
Trade Capacity Building (TCB) is
a critical part of the United States’
strategy to enable developing
countries to negotiate and implement
market-opening and reform-oriented
trade agreements. The United States
is currently the largest single-country
provider of trade related assistance,
which includes trade-related physical
infrastructure assistance. Total U. S.
funding for TCB activities in 2005 was
$1.34 billion, up 46 percent since
2004.
US has reduced the overall tariff
burden to a large extent. The average
rate on all goods is about 4%,
according to the World Bank, and
zero tariffs apply to almost one third
of national tariff lines. When GSP and
other preferences are taken into
account, the U.S. trade weighted
average tariff is just 1.4 percent on
an applied basis.
US has been promoting trade
liberalisation, and has taken concrete
initiatives towards its promotion. The
fundamental features of U.S. trade
policy include maintenance of an
open, competitive market at home,
compliance with WTO obligations,
and leadership in the multilateral
trading system.
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Analysis of Impact of RTAs on performance of a country. Except for

Turkey’s Trade Performance
As discussed earlier, Turkey has
been involved in agreements with
European countries like Bosnia and
Herzegovina, Croatia, Macedonia,
European Union and EFTA; with
Israel, Palestine, Syria in West Asia
and Tunisia and Morocco in Africa.
Turkey’s total trade has steadily
grown during the past decade and
shows a very interesting trend.
Turkey’s trade increased from US$ 57
billion in 1995 to around US$ 190
billion in 2005. The pattern of
Turkey’s total trade is highlighted in
Chart 3.6.
An analysis of the trade pattern
of Turkey since 1995 further
strengthens our argument that
engagement in RTAs enhances trade
its RTA involvement with EFTA in
1992, with EU in 1996 and Israel in
1997, all its RTA involvements have
been post 2000. As in the case of
Singapore and Chile, there has been
a clear shift in the pattern of Turkey’s
total trade too since its involvement
in RTAs. Turkey’s trade, which had
grown from US$ 57 billion in 1995 to
only US$ 72 billion in 2001, had shot
up to US$ 190 billion in 2005. It is
also interesting to note that Turkey’s
total trade had grown at a CAGR of
4% during 1995 to 2001 compared to
a CAGR of 17.3% for the period post
2001 during which it entered into
most number of RTAs.
Another very important feature of
Turkey’s trade performance during
this period is the major change in
Turkey’s openness to trade measured

Chart 3.6:
TREND IN TURKEY’S TOTAL TRADE

SOURCE: Direction of Trade Statistics, IMF

NOTE: Important RTAs are highlighted in the Graph

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in terms of Turkey’s total trade as a
percentage of Turkey’s total GDP.
Turkey’s openness to trade has
increased from 34% in 1995 to more
than 52% in 2005, with a structural
shift during 2000-01 as depicted in
Chart 3.7.
Thus there exists clear evidence
to Turkey opening up its economy,
as shown by the increase in the
degree of its openness to trade, the
proliferation in its engagements in
regional trade agreements and the
increase in its total trade.
Table 3.6 shows that Turkey’s
trade with its RTA partners has
increased since the last five years. As
in the case of Chile’s experience,
Turkey’s trade with RTA partners too
constitutes a major part of Turkey’s
Chart 3.7:
TURKEY’S TOTAL TRADE TO GDP RATIO
SOURCE: Direction of Trade Statistics, IMF
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total trade. Exports to RTA partners
contribute to around 60% of Turkey’s
total exports and imports around 55%
of total imports. As mentioned earlier,
such high levels of proportions of
exports and imports with RTA
partners in total exports and imports
of a country, respectively, indicate
the success and effectiveness of
regional trade agreements. Though
these proportions have marginally
declined in 2005, they however,
remained high. This decline in
proportion could be due to Turkey
expanding trade with other non RTA
partner countries.
Among all its RTA partners, the
European Union has played a very
crucial and important role in
enhancing Turkey’s total trade
performance. Turkey’s total trade with
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Table 3.6:
TURKEY’S TRADE PERFORMANCE WITH RTA PARTNERS (US$ MN)
2000 2005
Exports Imports Exports Imports
Bosnia & Herzegovina 27 7 Bosnia & Herzegovina 128 15
Croatia 24 25 Croatia 168 86
Macedonia 108 10 Macedonia 162 52
Israel 650 505 Israel 1467 803
Morocco 70 73 Morocco 370 143
Palestine Palestine
Syria 184 545 Syria 552 272
Tunisia 162 65 Tunisia 295 117
European Union 15086 27388 European Union 38400 49155
EFTA 324 1155 EFTA 816 4435
Total Trade with 59.9 54.6 Total Trade with 57.7 47.3
RTA Partners as RTA Partners as
% of Total Trade % of Total Trade
SOURCE: Direction of Trade Statistics 2006 Year Book, IMF.

European Union increased from US$
42 billion in 2000 to US$ 87.5 billion
in 2005.
An overview of Turkey’s
Trade Policy
The past decades have witnessed a
significant transformation of the
Turkish economy, from a protected
and state-directed system to a free
market system, particularly resulting
from the trade reform initiatives
since 1980, especially due to trade
liberalisation, tariff reduction and
growth in exports.
Throughout the period following
the transformation of Turkey’s
economic and trade policies in early
1980s, Turkey’s foreign trade has
continuously expanded under liberal
trade policies. With the customs union
with EU, Turkey has integrated with
an important economic bloc of the
world. Obviously, it has become the
biggest impetus to Turkey since the
adoption of liberalisation measures of
the early 1980’s. With the customs
union, Turkey has opened its internal
market to the competition of the EU
and third countries, while
guaranteeing free access to the EU
market. Moreover, the Customs Union
has strengthened the traditionally
comprehensive trade relations. The
volume of trade between Turkey and

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the EU reached to the level of US$
87.6 billion in 2005 from the level of
US$ 36.8 billion in 1999.
As a result of Uruguay Round,
Turkey provided 29% tariff reduction
for industrial goods in compliance
with the Marrakesh Protocol. Apart
from this, due to its commitment to
the Customs Union in 1996, Turkey
adopted the EU’s Common Customs
Tariff for the imports from third
countries. Thus, Turkey provided one
of the most comprehensive reductions
with respect to average rate of
protection applicable in 1986, when
the negotiations launched.
Turkey has also extended
unilateral preferential treatment to
least developed countries by offering
556 products originating in the least
developed countries (LDC’s) to be
imported into Turkey as duty-free, in
line with the decisions taken in the
High Level Meeting for the LDC’s,
held in Geneva in 1997. These
products have been covered by the
GSP regime of Turkey since January
2002. Turkey granted preferential
treatment to the least developed and
developing countries under GSP
(Generalised System of Preferences)
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scheme in line with EU’ s scheme at
that time. In this context, 2884 tariff
lines (including 556 products
mentioned above) originating in the
least developed countries could be
imported into Turkey as duty free.
These products originating in
developing countries could also be
imported into Turkey at reduced rates
on MFN basis parallel with the EU’ s
GSP scheme.
CONCLUSION
An overall conclusion that can be
drawn from the detailed analysis of
the pattern of trade performance of
the countries that are involved in
the most number of regional trade
agreements over the past decade is
that RTAs have certainly had a
beneficial and notable impact on the
trade performance of these
countries. The value of trade of all
these countries with their RTA
partner countries over the past five
years has seen a sharp increase.
Moreover, trade with RTA partner
countries constitutes a major portion
of the total trade of these countries,
which also reflects the importance
and success of these agreements.
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4. INDIA’S ENGAGEMENTS IN
REGIONAL TRADE AGREEMENTS
In line with the objective of
increased globalisation through trade,
India has taken a number of initiatives
to contribute to multilateral trade
negotiations to facilitate enhanced
participation of developing countries
in global trade transactions. India’s
endeavour to foster its international
trade has also been well
complemented by its efforts to
promote regional trade. This has its
reflection in the various initiatives
India has effected in fostering and
facilitating trade with select countries
and regions.
Target countries and regions in
India’s regional trade initiatives cover
various regions of the world. In Asia,
India made a foray in RTAs with an
FTA with Sri Lanka in 1998. India’s
engagement with Sri Lanka has
proved to be beneficial both for India
and Sri Lanka with bilateral trade
rising from US$ 0.7 billion in 2001-02
to US$ 2.7 billion in 2006-07.
Subsequently, India has put in place
a Comprehensive Economic
Cooperation Agreement with
Singapore, an FTA with SAARC
members (SAFTA) and with the
members of the Bay of Bengal
Initiative for Multi-Sectoral Technical
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and Economic Cooperation
(BIMSTEC), a framework agreement
for FTA with Thailand and a
framework agreement for
Comprehensive Economic
Cooperation Agreement with ASEAN.
These initiatives form an integral part
of India’s ‘Look-East Policy’, which
took off in the early 1990s with India
entering into a sectoral dialogue
partnership with the ASEAN in 1992.
However, the policy has gained
substantial momentum only in recent
years.
The policy received an additional
thrust with India becoming a summit
level partner of the ASEAN in 2002
and its involvement in regional
initiatives like BIMSTEC and the
Ganga Mekong Cooperation and
membership to the East Asia Summit
(EAS) in December 2005. India also
became an associate member of the
Council for Security Cooperation in
the Asia Pacific (CSCAP) established
in 1993, as a non-governmental (Track
II) process for dialogue on security
issues in Asia Pacific, in 1994 and
subsequently a full member in 2000.
During the ASEAN Ministerial
Meeting at Bangkok in July 2000 it

was decided to initiate the ‘Thailand
Mekong Ganga Cooperation Project’
to revitalize and develop overland
trade, tourism, communication and
transport. India has played a crucial
role and has been instrumental in
launching this cooperative venture
between India and the ASEAN nations
of Myanmar, Thailand, Laos,
Cambodia and Vietnam.
Abundance in natural resources,
a significant technological base in
ASEAN and a strong human capital
base in India provide immense
opportunities to India and ASEAN to
integrate and synergize their trade and
investment potential. The present
level of bilateral trade with ASEAN
amounts to more than US$ 30 billion
in 2006-07, and is growing at a
compounded annual growth rate of
over 32%, since 2004-05. India’s
relationship with ASEAN, is going to
be stronger and more beneficial.
Look-East policy is now being
pursued aggressively and has started
yielding desirable results on the
economic, political and strategic
fronts. The policy, which was mainly
directed towards improving relations
with ASEAN, will now also cover
other nations of the region such as
China, Japan and Korea where the
interaction was more bilateral till date.
Other than looking East, India has
also seriously begun efforts to
develop preferential trade linkages
with developing countries located
elsewhere. In Latin America, India has
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in place preferential trade agreements
(PTA) with MERCOSUR, as also with
Chile. In West Asia, India has in place
a framework agreement for FTA with
the Gulf Cooperation Council (GCC).
In the African region, India and SACU
have a preferential trade agreement
in place, while India is in talks with
Mauritius to set in place a
Comprehensive Economic
Cooperation and Partnership
Agreement.
Besides these initiatives, a
number of Joint Study Groups (JSGs)
have also been set up to examine the
potential for cooperation in trade in
goods and services, investments and
other areas of economic cooperation
with a number of countries. The
following section provides an
overview of India’s bilateral
engagements with a number of
countries and trade blocs across the
globe.
INDIA’S ENGAGEMENTS IN
RTAs IN ASIA
India-Sri Lanka Free Trade
Agreement
Bilateral trade between India and Sri
Lanka is regulated by the India-Sri
Lanka Free Trade Agreement
(ISLFTA) signed in December 1998,
and operational with effect from
March 2000. Under this agreement,
both countries are committed to the
elimination of tariffs in a phased
manner. India has already
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completed its commitment of
reducing its duty to zero in March
2003, except for 429 items
appearing in the negative list. Sri
Lanka would do the same by 2008.
Both sides are now negotiating on
not only trade in goods but also
on trade in services and economic
cooperation. Negotiations are being
held to expand the FTA and
broaden it into a Comprehensive
Economic Partnership Agreement
(CEPA).
Comprehensive Economic
Cooperation Agreement
(CECA) between India and
Singapore
After the establishment of the Joint
Study Group (JSG) in 2002, the
Comprehensive Economic
Cooperation Agreement (CECA)
between India and Singapore was
signed on June 29, 2005, and has
become operational with effect from
August 1, 2005. The objectives of
the agreement are to strengthen and
enhance the economic, trade and
investment cooperation, to liberalise
and promote trade in goods and
services, to enhance competitiveness
in manufacturing and service
sectors, explore new areas of
economic cooperation and facilitate
and enhance regional economic
cooperation and integration.
The CECA has been structured as
an integrated package of agreement
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which includes: (a) a free trade
agreement, covering, inter-alia, trade
in goods and services and investment,
(b) a bilateral agreement on
investment promotion, protection and
cooperation, (c) an improved Double
Taxation Avoidance Agreement; (d)
a more liberal Air Services Agreement
for open skies for charter flights, and
(e) a work programme of cooperation
in a number of areas including health
care, education, media, and tourism.
Comprehensive Economic
Cooperation between ASEAN
and India
India’s engagement with the
Association of South East Asian
Nations (ASEAN) started with its
‘Look-East Policy’ in the early 1990s.
India became a Sectoral Dialogue
Partner of ASEAN in 1992 and Full
Dialogue Partner in 1996. In
November 2001, the ASEAN-India
relationship was upgraded to the
summit level. The first ASEAN
Economic Ministers (AEM) – India
Consultations were held in 2002,
where it was decided to establish
an ASEAN-India Economic Linkages
Task Force (AIELTF) to prepare a
draft Framework Agreement to
enhance the ASEAN-India trade and
economic cooperation. During the
first ASEAN-India Summit held in
November 2002, India agreed to
extend special and differential trade
treatment to ASEAN countries, based
on their levels of development to

improve their market access to
India, and enter into a free trade
agreement with ASEAN.
In October 2003, a framework
agreement on Comprehensive
Economic Cooperation between
ASEAN and India, covering FTA in
goods, services and investment, as
well as areas of economic cooperation
was signed during the Second ASEAN
– India Summit in Indonesia. The
objectives of the agreement were to
strengthen and enhance economic,
trade and investment co-operation
between the countries, promote
investment and trade in goods and
services through progressive
liberalisation, develop appropriate
measures for closer economic co-
operation in new areas, and facilitate
the effective economic integration of
the new ASEAN Member States and
bridge the development gap among
the Parties. The agreement also
provided for an Early Harvest
Programme (EHP), which covers
areas of economic cooperation and a
common list of items for exchange
under tariff concessions as a
confidence building measure.
The ASEAN-India Trade
Negotiating Committee (TNC) is
undertaking negotiations for a
Comprehensive Economic
Cooperation Agreement (CECA) to
establish an ASEAN-India Regional
Trade and Investment Area (RTIA),
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which includes a free trade area in
goods, services and investment to
enhance economic cooperation
through progressive liberalisation of
trade and investment and elimination
of tariff and non-tariff barriers.
However, due to difference of opinion
on Rules of Origin, the EHP, agreed
under the Framework Agreement on
goods could not be implemented. A
new time frame for FTA in goods has
been agreed. Agreement has been
reached on the Rules of Origin. The
TNC is now negotiating the Sensitive
Lists, modalities for tariff reduction
and elimination, dispute settlement
mechanism, etc. Negotiations in trade
in services and investment are
expected to begin immediately after
the agreement on trade in goods is
concluded. It was also agreed that,
India shall continue to accord Most-
Favoured Nation (MFN) Treatment
consistent with the WTO rules and
disciplines to all the non-WTO ASEAN
Member States on the signing of this
agreement.
The ASEAN-India FTA (AIFTA)
negotiations were targeted to be
concluded by July, 2007. However,
due to the continuing differences on
the size of the negative list, the
agreement could not be signed in July
and the earliest possible conclusion
of the talks appears to be the next
ASEAN-plus-One Summit in
November 2007.
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Framework Agreement for
Establishing Free Trade
Agreement between India and
Thailand
A Framework Agreement for
establishing a Free Trade Agreement
between India and Thailand was
signed on October 9, 2003, in
Bangkok, Thailand. The Framework
Agreement covers FTA in goods,
services and investment and areas
of economic cooperation. The
Framework Agreement also provides
for an Early Harvest Scheme (EHS)
under which 82 common items of
export which are of interest to both
sides have been agreed for
elimination of tariffs on a fast track
basis.
India-Thailand Trade Negotiating
Committee (TNC) has been
constituted and discussions are being
held on the text of FTA, Rules of
Origin, Dispute Settlement
Mechanism and Sensitive List. There
have been a number of rounds of
negotiations for FTA in goods so far;
but due to difference of opinion on
certain issues, the deadline prescribed
in the framework agreement for FTA
in goods, of March 2005, could not
be met. Negotiations for FTA in
services and investment have also
begun. A meeting of the India-
Thailand Trade Negotiating
Committee (TNC) was held in Chiang
Mai from 9-13 January 2006. While
negotiations on goods are at an
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advanced stage, talks on services are
at initial stages. The talks were to be
concluded by June 2007. However,
due to some persisting differences
over the range of goods to be covered,
the deadline could not be met. In
recent negotiations, Thailand has
been insisting on completing talks on
goods and then move on to services
and investments, contrary to India’s
stand to negotiate all the three areas
at the same time resulting in delay in
negotiations.
Agreement on India-Bhutan
Trade and Commerce
The Indo-Bhutan Trade and
Commerce Agreement, which was
concluded in 1972, is periodically
renewed, incorporating mutually
agreed modifications. The current
agreement on Trade, Commerce and
Transit was renewed on 28th July
2006 for a period of 10 years. The
salient features of the agreement
include free trade and commerce
between the two countries with
concessions granted to Bhutan to
impose non-tariff restrictions on
import of certain goods of Indian
origin for protection of their
industries, no restrictions by India
on Bhutan’s trade with third
countries, imposition of non-tariff
restrictions by both sides on import
of third country goods from each
other’s territory, and mutual refund
of annual excise duties on goods
exported to each other.

Trade Agreement between
India and Bangladesh
India had entered into a bilateral
agreement with Bangladesh in 1980
for a period of three years, which
was periodically renewed by mutual
consent. An amended Trade
Agreement was signed in March
2006, which is valid till March 2009.
This agreement primarily focuses on
expansion of trade and economic
cooperation, building a mutually
beneficial arrangement for the use
of waterways, railways and
roadways, exchange of business and
trade delegations and consultation
to review the working of the
agreement at least once a year.
India-Nepal Treaty of Trade
India-Nepal bilateral treaty of trade
was in force for a period of five
years with effect from March 2002.
With the expiry of the treaty in
March 2007 after a five-year period
of agreement, both Governments of
Nepal and India decided to renew
the Treaty in its current form with
effect from March 6, 2007. Mutual
consultations are also in progress to
amend the treaty of trade to replace
the existing treaty. Under this Treaty,
there is a provision for free trade
on mutually agreed primary
products from each other, and a
provision for India to provide on a
non-reciprocal basis, duty-free access
to Nepalese industrial goods without
any quantity restriction, subject to
fulfilment of some conditions.
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Under the current Treaty of
Transit, India provides transit facilities
to Nepal. The current Treaty was
renewed in January 2006 and would
be in force for a period of seven years
up to 2013. This Treaty provides for
free movement of traffic-in-transit
across territories of each other
through mutually agreed routes for
trade with third countries subject to
taking measures to ensure that this
does not infringe legitimate interests/
security interests of each other. Traffic
in transit is exempted from customs/
all transit duties. India has allowed
15 transit routes to Nepal but so far
not availed of this facility from Nepal.
India and Nepal have also signed
an Agreement of Cooperation to
Control Unauthorized Trade. Its main
objective is to check illegal trade
(smuggling) between the two
countries. This agreement has been
renewed in 2007 in its present form.
Both countries have also established
a forum known as Inter-
Governmental Committee to address
the problems relating to bilateral
trade, transit facilities and prevention
of unauthorized trade.
India-Afghanistan Preferential
Trade Agreement
The bilateral trade between India
and Afghanistan is regulated by the
India- Afghanistan Preferential Trade
Agreement signed between India
and Afghanistan on March 6, 2003
in New Delhi, which promotes
harmonious development of the
87

economic relations and free
movement of goods through
reduction of tariffs between the two
countries. By this agreement,
preferential tariff is granted by the
Government of Afghanistan to 8
items from India including tea,
medicines, refined sugar, cement
clinkers and white cement. India has
granted preferential tariff to 38
products from Afghanistan including
raisins, dry fruit, fresh fruits and
spices. The agreement would remain
in force till either party wishes to
terminate it through notification.
Bay of Bengal Initiative for
Multi-Sectoral Technical and
Economic Cooperation
(BIMSTEC)
The initiative to originally establish
Bangladesh-India-Sri Lanka-Thailand
Economic Cooperation (BISTEC)
was taken by Thailand in 1994 to
explore economic cooperation on a
sub-regional basis involving
neighbouring countries of South and
South-East Asia grouped around the
Bay of Bengal. With the inclusion
of Myanmar in December, 1997 the
initiative was renamed as BIMSTEC.
In July 2004, the initiative was
renamed as the Bay of Bengal
Initiative for Multi Sectoral Technical
and Economic Co-operation
(BIMSTEC) with the admission of
Bhutan and Nepal as members to
the group. The initiative involves
five members of SAARC (India,
Bangladesh, Bhutan, Nepal and Sri
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Lanka) and 2 members of ASEAN
(Thailand and Myanmar), and
therefore, is visualized as a ‘bridging
link’ between two major regional
groupings i.e., ASEAN and SAARC.
BIMSTEC is an important element
in India’s ‘Look-East’ strategy and
adds a new dimension to India’s
economic cooperation with South
Asian and South East Asian
countries.
At the first meeting of the
Economic/ Trade Ministers of
BIMSTEC, which was held in
Bangkok in August, 1998, it was
agreed that BIMSTEC should aim and
strive to develop into a Free Trade
Area, and should focus on activities
that facilitate trade, increase
investment & promote technical
cooperation among member
countries. Six areas were identified
for cooperation in BIMSTEC, namely,
trade and investment, technology,
transportation and communication,
energy, tourism and fisheries. In the
fourth BIMSTEC Trade & Economic
Ministers meeting held in Colombo
on March 7, 2003, it was decided to
constitute a Group of Experts (GoE)
for drafting the Framework
Agreement on BIMSTEC Free Trade
Area (FTA). Subsequently, the
Framework Agreement on the
BIMSTEC FTA was signed on
February 8, 2004 in Phuket, Thailand
by Bhutan, India, Myanmar, Nepal,
Sri Lanka and Thailand during the
Fifth BIMSTEC Economic Ministers’
Meeting. Bangladesh, however, did

not sign the BIMSTEC FTA Agreement
in February 2004, but nevertheless has
acceded by signing a Protocol to this
effect in June 2004. The Framework
Agreement includes provisions for
negotiations on FTA in goods, services
and investment. A Trade Negotiating
Committee (TNC) has been
constituted to carry forward the
programme of negotiations.
Agreement on South Asian
Free Trade Area (SAFTA)
The agreement on South Asian Free
Trade Area (SAFTA) was signed by
all the member states of the South
Asian Association for Regional
Cooperation (SAARC), namely, India,
Bangladesh, Bhutan, Maldives,
Nepal, Pakistan and Sri Lanka,
during the Twelfth SAARC Summit
held in Islamabad in January, 2004.
After ratification by the Member
States, the SAFTA has come into
force from January 1, 2006.
The SAFTA envisages a phased
tariff liberalisation programme under
which non-LDCs (viz. India, Pakistan
and Sri Lanka) will bring down tariffs
to 20% in two years, while LDC
members (viz. Bangladesh, Bhutan,
Maldives and Nepal) will bring them
down to 30%. Further, the non-LDC
members will further reduce tariffs
from 20% to 0-5% in 5 years (Sri Lanka
in 6 years), while LDC members will
do so in 8 years. Moreover, non-LDC
members will reduce their tariffs for
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LDC members’ products to 0-5% in 3
years.
Asia Pacific Trade Agreement
(APTA)
The Bangkok Agreement renamed
as Asia Pacific Trade Agreement
(APTA) was signed in November
2005 in Beijing and came into force
with effect from July 1, 2006. The
original agreement signed in 1975
was an initiative under the
Economic and Social Commission
for Asia and Pacific (ESCAP) for
trade expansion through exchange
of tariff concessions among
developing countries of the ESCAP
region. The agreement is operational
among five countries namely,
Bangladesh, China, India, Republic
of Korea and Sri Lanka. Till date
three rounds of trade negotiations
have taken place. The third round
of negotiations under the Bangkok
Agreement was launched in October
2001 and concluded in July 2004.
The objectives of this agreement
are to promote economic
development through a continuous
process of trade expansion among the
developing member countries of
ESCAP and to further international
economic co-operation through the
adoption of mutually beneficial trade
liberalisation measures consistent
with their respective present and
future development and trade needs.
89

Joint Study Group between
India and Korea
It was agreed to establish a Joint
Study Group between India and
Korea (South Korea) in 2004 to take
a comprehensive view of bilateral
economic linkages between the two
nations, covering among others,
trade in goods and services,
investment flows, and other areas
of economic cooperation, and to
analyse the feasibility of a
comprehensive economic
partnership agreement (CEPA)
between the two countries. The
report of the Joint Study Group,
which was signed in January 2006,
recommended that the Korea-India
CEPA cover, trade in goods and
services, measures for trade
facilitations and promotion,
facilitation and liberalisation of
investment flows, measures for
promoting bilateral economic
cooperation in identified sectors and
other areas to be explored for
furthering bilateral partnership. In
pursuance to the recommendation
of the JSG, a Joint Task Force
composed of Government officials
has been constituted and
negotiations are taking place
regularly.
Joint Study Group between
India and China
An India-China Joint Study Group
was constituted in June 2003 to
examine the possibility of expanding
trade and economic cooperation.
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The final report of the India-China
JSG was submitted in March 2005.
As per the recommendations of the
JSG, a Joint Task Force was set up
which met thrice till July 2007 to
work towards expanding trade and
bilateral cooperation.
Joint Study Group between
India and Japan
India and Japan, in November 2004,
agreed to constitute a Joint Study
Group, focusing on measures
required for a comprehensive
expansion of trade in goods, trade
in services, investment flows and
other areas of economic relations
between the two countries. The
recommendations of the report,
submitted in 2006, covered trade in
goods and services investment
flows, role of Japan in promoting
economic partnership and other
areas of economic cooperation. It
also recommended that India and
Japan launch inter-governmental
negotiations to develop an
Economic Partnership Agreement
(EPA) or Comprehensive Economic
Partnership Agreement (CEPA),
within a reasonable period of time.
It was decided to launch immediate
negotiations for the conclusion of a
bilateral Economic Partnership
Agreement/ Comprehensive
Economic Partnership Agreement
(EPA/CEPA), on the basis of the
recommendations submitted by the
Joint Study Group. The first round
of negotiations on the India-Japan

(Comprehensive) Economic
Partnership Agreement were held in
February 2007 in New Delhi.
Joint Study Group between
India and Russia
A Memorandum of Understanding
(MoU) on Cooperation between
India and Russia was signed in
February 2006. The MoU provides
for setting up of a JSG between
India-Russia with the objective of
enhancing bilateral trade between
the two countries to a level of
US$10 billion by 2010 and to study
the feasibility to consider the
possibility of signing Comprehensive
Economic Cooperation Agreement
between India and Russia.
Joint Study Group between
India and Malaysia
A Joint Study Group (JSG) to
explore the feasibility of
Comprehensive Economic Coopera-
tion Agreement (CECA) between
India and Malaysia was constituted
in March 2005.
Joint Study Group between
India and Indonesia
In August 2005, it was mutually
agreed between India and Indonesia
to examine the possibility of
entering into a bilateral
comprehensive economic coopera-
tion arrangement in the long term.
The setting up of a Joint Study
Group (JSG) on CECA comprising of
senior government officials is in
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progress after the signing of the
Memorandum of Understanding
(MoU) between the two sides in
November 2005.
INDIA’S ENGAGEMENTS IN
RTAs IN LATIN AMERICA
India-MERCOSUR PTA
A Framework Agreement was signed
between India and MERCOSUR on
June 17, 2003 at Asuncion,
Paraguay. The aim of this
Framework Agreement is primarily
to create conditions and mechanisms
for negotiations, by granting
reciprocal tariff preferences and, to
negotiate a free trade area between
the two parties in conformity with
the rules of the WTO.
As a follow up to the Framework
Agreement, a Preferential Trade
Agreement (PTA) was signed in New
Delhi on January 25, 2004. The aim
of this Preferential Trade Agreement
is to expand and strengthen the
existing relations between
MERCOSUR and India, and promote
the expansion of trade by granting
reciprocal fixed tariff preferences with
the ultimate objective of creating a
free trade area between the parties.
Under the PTA, India and MERCOSUR
have agreed to give tariff concession,
ranging from 10% to 100% to the other
side on 450 and 452 tariff lines,
respectively. It was mutually agreed
that India-MERCOSUR PTA would be
expanded by increasing the number
of products covered and increasing
the tariff concessions agreed by each
side.
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Preferential Trade Agreement
(PTA) between India and
Chile
India has negotiated a Preferential
Trade Agreement (PTA) with Chile.
The Framework Agreement to
Promote Economic Cooperation,
signed between India and Chile on
January 20, 2005, provided for a
Joint Study Group (JSG) to identify
the potential for cooperation
between the two sides in goods and
services, investments and other areas
of economic cooperation.
The PTA relates to the list of
products on which the two sides
agreed to give fixed tariff preferences
to each other, Rules of Origin,
Preferential Safeguard Measures and
Dispute Settlement Procedures have
been finalized during four rounds of
negotiations. While India has offered
to provide fixed tariff preferences
ranging from 10% to 50% on 178 tariff
lines at the 8 digit HS level to Chile,
the latter have offered a similar range
of tariff preferences on 296 tariff lines
at the 8 digit level.
The products on which India has
offered tariff concessions relate to
meat and fish products, rock salt,
iodine, copper ore and concentrates,
chemicals, leather products,
newsprint, paper and particle boards
and some industrial products. Chile’s
offer covers some agriculture
products, chemicals and
pharmaceuticals, leather products,
textiles and clothing and some
industrial products.
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The first meeting of the Joint
Study Group was held during the PTA
negotiations in November 2005. The
draft reports prepared by Chile and
India were discussed during the
meeting. Both sides agreed to submit
their conclusions and
recommendations to their
governments for guiding further
action on the matter.
INDIA’S ENGAGEMENTS IN
RTAs IN EUROPE
India-EU High Level Trade
Group
India-EU relations go back to the
early 1960s, India being among the
first countries to establish diplomatic
relations with the then existing
Eurasian Economic Community
(EEC). The 1994 agreement of
cooperation signed between EU and
India took bilateral relations beyond
merely trade and economic
cooperation. The first India-EU
Summit in Lisbon in June 2000
proved pivotal in the evolution of
this relationship. There have been
seven Summit-level interactions
between India and EU so far, the
last being the Seventh India-EU
Summit held in Helsinki from
October 12-13, 2006 under the
Finnish Presidency of the EU. The
areas of focus at the Seventh India-
EU Summit were the economic
aspects in the India-EU relations,
energy, cooperation in counter-
terrorism and the closer security and
political dialogue. The two sides
agreed to begin negotiations on a

broad-based trade and investment
agreement. India-EU relations have
grown exponentially from what used
to be a purely trade and economic
driven relationship to one covering
greater areas of interaction.
India and the EU agreed to take
positive steps to further increase
bilateral trade and economic
cooperation and to tackle barriers to
trade and investment. While trade and
investment flows between India and
the EU have been increasing, they
remain below potential. During the
6th India – EU Summit, it was decided
to launch India EU Joint Action Plan
for Strategic Partnership. Within the
Joint Action Plan, a High Level Trade
Group (HLTG) was set up to enhance
economic cooperation and to explore
ways and means to deepen and widen
bilateral trade and investment
relationship. The HLTG was also
tasked with examining the possibility
of launching negotiations on a broad
based Trade and Investment
Agreement. The two sides also agreed
to establish a Technical Barriers to
Trade (TBT)/Sanitary and
Phytosanitary (SPS) Issues Working
Group to deepen the dialogue on TBT
and SPS issues to facilitate bilateral
trade and increasing market access.
The eighth EU-India summit is
scheduled for November 30, 2007 in
New Delhi. Areas like information
technology, biotechnology, agri-
business and food processing,
tourism, textiles, chemicals and
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pharmaceuticals have been identified
as sectors for collaboration between
India and Portugal. Portugal intends
to use the EU Presidency to focus on
emerging economies, and reinforcing
Europe’s role in the world. With
Portugal taking presidency of the
European Union on July 1, 2007,
strong economic ties with India would
help expedite the proposed free trade
agreement between India and the EU.
Learning from its ASEAN
experience, India has asked the
European Union to reach an internal
consensus before putting offers on the
negotiating table for the proposed
comprehensive trade and investment
agreement. With EU having
reconciled to a common stand on
various trade and investment issues,
the meeting in the last week of June,
2007 in Brussels would mark the
formal launch of official level
negotiations.
According to official sources, the
actual list of items on which duties
would be reduced to zero would be
exchanged in October. India would
like the agreement to cover 90 per
cent of trade, which was 40 billion
Euros in 2005. In the services
agreement, India will press for
liberalisation of outsourcing norms
and movement of professionals. Apart
from trade in goods and services, the
agreement would also deal with non-
tariff barriers and lay down rules on
issues such as investment and
competition.
93

These agreements could boost
EU exports to India by around 57
percent, according to the studies
carried out by two independent think-
tanks on behalf of the European
Commission. The biggest gains for
India would include a 46 percent
increase (worth 3.6 billion Euro) in
its exports to the EU of textiles and
clothing.
The EU-India agreement could
provide tariff cuts for products of
specific export interest to each side.
The EU will be pressing for substantial
tariff cuts, on the grounds that India,
as well as ASEAN and South Korea,
combine high levels of protection
with large market potential.
Both India and the EU, however,
believe that a multilateral approach,
in which the UN plays a central role,
is the best way to address global
challenges such as development
which is economically, socially and
environmentally sustainable; effective
management of globalisation;
terrorism; drug trafficking; organised
crime; natural disasters; and energy
security.
INDIA’S ENGAGEMENTS IN
RTAs IN WEST ASIA
FTA Between India and Gulf
Cooperation Council (GCC)
India is in the process of negotiating
a Free Trade Agreement with GCC
and the first round of negotiations
in this regard was held in March
2006. The Gulf Co-operation Council
(GCC) is a customs union
94
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comprising of Bahrain, Kuwait,
Oman, Qatar, Saudi Arabia and
United Arab Emirates. The GCC
members are major trading partners
for India, accounting for around 13%
of India’s global exports and around
16% of India’s global imports in
2006-07. The FTA proposes to
include Trade in Services and
Investment Cooperation as well as
General Economic Cooperation.
Joint Study Group between
India and Israel
India and Israel have constituted a
Joint Study Group to examine ways
and means of promoting bilateral
economic relations and to consider
a Bilateral Economic Partnership
Agreement. The JSG report released
in November, 2005 recommended
an India-Israel Action Plan for
Comprehensive Economic
Cooperation between the two
countries. The JSG focused on
implementation of recommendations
like PTA, Customs Cooperation,
early utilization of R&D funds,
liberalisation of trade in services,
negotiations on bilateral shipping
agreement etc.
INDIA’S ENGAGEMENTS IN
RTAs IN AFRICA
Preferential Trade Agreement
(PTA) between India and
SACU
The South Africa Customs Union
(SACU), with a common Custom
Tariff Policy, comprises of South

Africa, Lesotho, Swaziland, Botswana
and Namibia. In September 2004,
the draft Framework Agreement for
a Preferential Trade Agreement
(PTA) between India and SACU
countries was finalised, by a Joint
Working Group (JWG) consisting of
Government representatives from
both sides. The sixth session of the
India-South Africa Joint Ministerial
Commission Meeting was held in
New Delhi in December 2005. Both
sides agreed that a comprehensive
Free Trade Agreement within a
reasonable time and in the interim,
a limited scope agreement providing
for exchange of tariff concessions
on select list of products, between
India and SACU would give further
impetus to bilateral trade and urged
its early conclusion. The agreement
will aim to promote expansion of
trade and provide a mechanism to
negotiate and conclude a significantly enhance India’s
comprehensive Free Trade
Agreement within a reasonable time.
Preferential Trade Agreement/
Comprehensive Economic
Cooperation and Partnership
Agreement (CECPA) between
India and Mauritius
A Joint Study Group (JSG)
constituted in November 2003
identified investment, trade in goods
and services and general economic
cooperation for developing
modalities of CECPA. During 2005,
India accepted the report by the
Joint Study Group on
Comprehensive Economic
Cooperation and Partnership
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Agreement and it was decided to
set up a high-powered negotiating
team for processing and finalizing
the recommendations of this report
within an year. The negotiations on
Preferential Trade Agreement (PTA)/
Comprehensive Economic
Cooperation & Partnership
Agreement (CECPA) are in progress.
TREND ANALYSIS OF
BILATERAL TRADE FLOWS
It may be observed from the
previous section that India has been
engaged in trade agreements with
a number of countries and is also
strongly negotiating free trade
agreements and comprehensive
economic cooperation agreements
with several other countries from
different parts of the world. These
trade agreements are expected to
international trade prospects.
Engagement in regional trade
agreements has had a significant
effect over the past decade on
India’s trade performance with its
partner countries. An attempt is
made in this section to analyse
India’s trade performance with its
main trading partners and highlight
some key issues regarding the
agreements.
Table 4.1 presents an overview
of the quantum of India’s exports and
imports with RTA partners over the
past 5 years. It may be noted that both
exports and imports have increased
significantly with respect to almost all
countries during this period.
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Table 4.1:
INDIA’S TRADE WITH RTA PARTNERS15 (US$ MN)
Region 2001-02 2006-07
Exports Imports Total Exports Imports Total
LATIN AMERICA
MERCOSUR 317.67 768.03 1085.70 1751.20 1854.75 3605.95
Chile 83.50 95.07 178.57 374.99 1917.60 2292.59
AFRICA
SACU 370.12 1445.61 1815.73 2283.82 2529.62 4813.44
Mauritius 163.39 3.27 166.66 735.86 14.50 750.36
ASIA
Sri Lanka 632.78 67.58 700.36 2252.59 470.20 2722.79
Singapore 975.21 1307.98 2283.19 6017.01 5466.47 11483.48
Thailand 635.02 424.35 1059.37 1442.52 1740.51 3183.03
Brunei 2.87 0.36 3.23 8.30 285.04 293.34
Cambodia 11.33 1.12 12.45 51.65 1.58 53.23
Indonesia 535.30 1039.91 1575.21 2025.97 4184.34 6210.31
Laos 3.17 0.04 3.21 2.38 0.36 2.74
Malaysia 776.00 1136.92 1912.92 1303.94 5276.73 6580.67
Myanmar 61.07 375.55 436.62 139.11 777.43 916.54
Philippines 248.53 95.13 343.66 582.54 167.26 749.80
Vietnam 218.82 18.97 237.79 981.84 171.41 1153.25
Bhutan 7.62 23.99 31.61 58.64 141.34 199.98
Bangladesh 1005.17 59.29 1064.46 1627.48 228.15 1855.63
Nepal 215.10 357.01 572.11 930.82 305.81 1236.63
Afghanistan 24.44 17.58 42.02 181.57 34.48 216.05
Maldives 26.96 0.40 27.36 68.56 3.05 71.61
Pakistan 144.44 64.95 209.39 1347.41 322.97 1670.38
WEST ASIA
GCC 3809.38 1691.99 5501.37 16336.73 30993.23 47329.96
Trade with RTA partners as % of total 20.17 30.75
trade
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

15 Though some countries, mentioned in the above table, do not have a

particular bilateral trade agreement with India, they have been considered
because they are members of particular trade blocs with which India has
preferential trade arrangements. These countries include Bhutan and Nepal
which are members of SAARC and BIMSTEC; Bangladesh which is a member
of SAARC, BIMSTEC and APTA; Brunei Darussalam, Cambodia, Indonesia,
Malaysia, Philippines and Vietnam are members of ASEAN; Laos a member
of ASEAN and APTA; Myanmar a member of ASEAN and BIMSTEC; Maldives
and Pakistan members of SAARC.

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An analysis of India’s trade
performance with its RTA partners,
over the period of five years since
2001-02, reveals some interesting
features. A mere observation of the
trend in India’s trade during the
period, attests to the success of RTAs
involving India, as depicted by the
sharp increase in bilateral trade
benefiting both the partners to the
agreement. Exports have grown at a
CAGR of 32% and imports at 44%
during the period. India’s total trade
with its RTA partners, as a percentage
of its global trade has shown a decent
rise from 20% to around 30% of total
trade during the period 2001-02 and
2006-07. This clearly indicates that
more of India’s trade is increasingly
taking place with countries with
which it has established some kind
of preferential trade arrangement or
with countries with which it is strongly
negotiating a free trade agreement or
a comprehensive economic
cooperation agreement to foster
bilateral trade. This trend in India’s
trade performance strongly supports
the belief that regional trade
agreements indeed act as a gateway
to global trade.
As far as India’s relation with Latin
America is concerned, its total trade
with Chile and MERCOSUR together,
has grown by more than 4 times from
US$ 1.26 billion in 2001-02 to US$ 5.89
billion in 2006-07.
In the African region, India’s trade
with SACU showed a healthy
performance, with India’s exports
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shooting up from US$ 0.37 billion in
2001-02 to more than US$ 2 billion in
2006-07. Similarly, India’s exports to
Mauritius have increased substantially
in recent years.
Asia forms a very important
region as far as India’s regional trade
initiatives are concerned, with nearly
40% of India’s total trade with RTA
partners accounted for by the Asian
countries. However, it is interesting
to note that in 2001-02, the
corresponding share was 54.5%. The
decline in the share between 2001-
02 and 2006-07 could be due to India’s
growing trade relations with other
countries in different regions of the
world. Within Asia, China is emerging
as a major trading partner. Among
other RTA partners in Asia, India’s
major trade partners include
Singapore, Malaysia, Indonesia and
Sri Lanka. Singapore and Malaysia
together account for 47% of India’s
total trade with its RTA partners in
Asia in 2006-07. India’s total trade with
Indonesia increased from US$ 1.6
billion in 2001-02 to more than US$ 6
billion in 2006-07. India’s trade with
Brunei also shot up from a mere US$
3.2 million to more than US$ 293
million during the same period
primarily because of the sharp
increase in India’s imports from the
country. Moreover, India’s trade with
most of the Asian trading partners,
most of which are member of trading
blocs with which has India is engaged
in preferential agreements, has seen
an impressive growth.
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The extent to which the trade 2006-07, growing at a promising

between India and the GCC has CAGR of 31% during the past five
grown is evident from the fact that years. The trade balance however
India’s trade with GCC has increased remains marginally in favour of
by more than 8 times during the ASEAN. The total exports of India to
period. Exports and Imports both ASEAN have increased from US$ 3.4
have contributed to the growth of billion in 2001-02 to US$ 12.56 billion
bilateral trade between the two in 2006-07. The corresponding
economies. Bilateral trade is further imports too have risen steadily to US$
expected to increase once the India- 18 billion in 2006-07. The Table 4.2
GCC FTA materialises. and Chart 4.1 below show the recent
trends in Indo-ASEAN trade.
Thus, the overall trend in India’s
trade performance with its partner It can be noticed from the chart
countries reveals the positive impact that there has been a steady rise in
that engagement in preferential trade India’s total trade with ASEAN since
engagements with a number of 2001-02, due to a steady and
countries has had on India’s trade. consistent increase in both imports
and exports. It is interesting to note
INDIA and ASEAN that the increasing trend in India’s
Introduction of FTA with ASEAN trade has been more prominent since
provides varied opportunities for 2003, when the framework agreement
India. ASEAN offers an attractive for a comprehensive economic
market for Indian companies to cooperation agreement was signed.
invest either on their own or in the
The sectors of cooperation
form of joint ventures with Indian
between India and ASEAN, that were
companies.
identified in the agreement include
India’s trade with ASEAN has agriculture, fisheries and forestry;
increased to over US$ 30 billion in services sector like media and
Table 4.2:
TRENDS IN INDIA-ASEAN TRADE
Year Exports % growth Imports % growth Total % growth
(US$ bn) (US$ bn) (US$ bn)
2001-02 3.47 - 4.40 - 7.87 -
2002-03 4.63 33.46 5.16 17.27 9.79 24.41
2003-04 5.83 25.89 7.44 44.14 13.26 35.51
2004-05 8.42 44.57 9.11 22.49 17.53 32.19
2005-06 10.41 23.60 10.88 19.44 21.29 21.44
2006-07 12.56 20.61 18.07 66.06 30.63 43.84
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Chart 4.1:
TRENDS IN INDIA-ASEAN TRADE
entertainment, health, financial,
tourism, construction, business
process outsourcing, environmental
services; power & energy; information
and communications technology,
electronic-commerce, biotechnology;
transport and infrastructure;
automotive, drugs and
pharmaceuticals, textiles,
petrochemicals, garments, food
processing, leather goods, light
engineering goods, gems and
jewellery processing; and education.
India enjoys strong business
complementarities and trade
advantage in these sectors.
Sectoral performance
It is important to analyse the trends
in the composition of trade basket
after the establishment of the
framework agreement on compre-
hensive economic cooperation
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between India and ASAEN in October
2003. It is interesting to note that
around 33% of India’s export basket
to ASEAN in 2006-07 comprised of
petroleum products (Table 4.3).
Further analysis shows that the largest
export destination of petroleum
products from India is Singapore to
which exports amounted more than
US$ 3.3 billion in 2006-07, followed
by Indonesia and Thailand which
account for US$ 553 million and US$
178 million respectively. The other
main items of export to ASEAN
include non-ferrous metals, oil meals,
dyes intermediates & coal tar
chemicals and gems & jewellery,
which have all accounted for more
than US$ 500 million each during
2006-07. The CAGR of India’s total
exports to ASEAN has been 29%
during 2003-04 to 2006-07. Moreover,
though the magnitude of trade
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between India and ASEAN has more
than tripled over the five-year period,
the compounded annual growth rate
over the five-year period, too has
been 29%. Owing to the immense size
of the economies, there remains huge
potential to further grow at a faster
rate post the agreement period of
2003.
The top import items into India
from ASEAN comprise petroleum
crude, electronic goods and edible
vegetable oil (refer table 4.4). The
imports of petroleum crude accounted
for around 23% of the total imports
in 2006-07. The import of electronic
goods has increased three-folds
during the last five years from around
US$ 1 billion to around US$ 3 billion
in 2006-07. It is noted that US$ 1.6
billion worth of imports of electronic
goods come from Singapore followed
by Malaysia and Thailand. The import
of edible vegetable oil, which
accounts for 7% of India’s total
imports from ASEAN has reduced to
US$ 1.2 billion in 2006-07 from US$
1.8 billion in 2003-04. The growth in
the imports of metaliferrous ores &
metal scrap, coal, coke & briquettes
and organic chemicals too has been
high especially after the framework
agreement came into existence.
India’s total imports have grown at a
compounded annual growth rate of
34% post signing of the framework
agreement with ASEAN compared to
32% during 2001-02 to 2006-07.

Table 4.3:
TREND IN TOP 10 EXPORT ITEMS FROM INDIA TO ASEAN
(US$ MILLION)
Commodity Name 2001-02 2003-04 2006-07
Petroleum products 1.1 1157.0 4145.4
Non-ferrous metals 14.5 92.6 597.6
Oil meals 279.8 329.9 594.5
Dyes intermediates & coal tar chemicals 50.6 223.1 549.1
Gems & jewellery 370.4 399.8 505.5
Machinery & instruments 154.9 237.1 500.0
Transport equipment 58.4 103.5 477.5
Primary & semi-finished iron & steel 106.1 333.2 445.9
Drugs, pharmaceuticals & fine chemicals 179.3 255.1 400.0
Electronic goods 318.1 253.3 347.9
Other Commodities 1934.2 2441.2 3991.1
All Commodities 3467.3 5825.7 12555.3
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Table 4.4:
TREND IN TOP 10 IMPORT ITEMS FROM ASEAN TO INDIA
(US$ MILLION)
Commodity Name 2001-02 2003-04 2006-07
Petroleum crude & products - - 4208.6
Electronic goods 1005.1 1492.6 3062.1
Vegetable oils (edible) 808.9 1897.9 1280.5
Metaliferrous ores & metal scrap 142.0 189.9 1105.1
Coal, coke & briquettes 115.9 176.9 1008.9
Organic chemicals 249.0 436.6 972.1
Non-electrical machinery 192.5 298.9 808.7
Wood & wood products 337.6 501.1 586.1
Transport equipment 50.8 445.0 474.6
Iron & steel 33.5 51.8 389.9
Other commodities 1465.2 1947.7 4174.7
All Commodities 4400.3 7438.2 18071.1
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

Recent Key Developments and that a further reduction of duties

Issues

India has offered tariff cuts on
around 80 percent of goods and
services traded between India
and ASEAN. The negotiations
are, however, deadlocked on
agricultural products, which
India wants to exclude from
tariff cuts. Farm products are
among ASEAN’s biggest exports
to India.

The Prime Minister’s Trade and
Economic Relations Committee
which met in the first week of
July 2007 to discuss key
strategies and matters pertaining
to India’s “sensitivities” during
negotiations with ASEAN felt
on sensitive products such as
palm oils, tea and pepper
would adversely affect India’s
agriculture, for which it is a
livelihood issue.

According to Government of
India sources, Malaysia wants
the tariff on palm oil to be
reduced to 35 per cent by 2018
as against India’s proposal to
bring down the duty on crude
palm oil to 50 per cent by 2018.
Vietnam wants greater market
access and the tariff on tea and
coffee to be reduced to 30 per
cent and that on pepper be
reduced to 25 per cent by 2018,
against India’s offer to reduce

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them to 50 per cent by 2018.
These products are also
important to India in terms of
economic value and
employment and any decision
on this should result in a win-
win situation for both countries.

Recent negotiations on the
proposed trade deal were
hampered with ASEAN not
agreeing to the pruned negative
list of 563 items suggested by
India and insisting on restricting
the number to its own list of
just 60 items. In its latest offer,
India proposed to scale its list
to 490. The figure of 60 items
being far elusive. The negative
list includes items such as
spices, plantation crops (tea and
coffee), vegetable oils (vanaspati
and other edible oils), rice, fish,
textiles, chemicals and plastics,
electronics, automobile
components and footwear.

While Vietnam’s bilateral trade
with China and US is in excess
of US$ 10 billion each, its trade
with India has just touched US$
1 billion. Vietnam has expressed
keenness to largely enhance
bilateral trade and investment
with India. Energy sector was
considered as a potential sector
of investment by India. Vietnam
has proposed setting up of a
Forum for Trade and Investment
16 For example a joint study by the Malaysian Institute of Economic Research
and the Indian Institute of Foreign trade. The study was based on UNCTAD
methodology.
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Policy Exchange to enhance
trade and investment relations.
Vietnam and India have also
agreed to officially establish a
strategic partnership between
the two countries. The two
countries expressed willingness
to increase two-way trade to
US$ 2 billion in 2010 and US$ 5
billion in 2015.

India’s manufacturing capability
is not as competitive as
compared to its potential free-
trade partners. Many segments
of the domestic manufacturing
industry need to gear up and
acquire competitive strength to
take on tax-free imports.

In services, India has a
comparative advantage in many
sectors like health, tourism, law
and accounting. India also
needs to attract large amounts
of foreign investments to spur
its manufacturing and services
industries, with gains for
agriculture as well.

According to some studies16, the
ASEAN FTA holds a high-level
of asymmetry. In terms of
aggregate trade potential, the
benefit to ASEAN members and
India is in the ratio of 1:4.
Indonesia and the Philippines
would be the major
beneficiaries. The export
potential for ASEAN members
 CMYK

like Indonesia, Malaysia, India has increased significantly in

Philippines, Singapore and
Thailand was estimated by the
study at US$ 10.2bn. In
comparison, the benefit
potential for India has been
estimated at US$ 2.7bn.

While Singapore will emerge as
a major trade partner for India
in the ASEAN in services,
banking and legal profession, its
trade prospects in other ASEAN
countries such as Thailand,
Malaysia, Indonesia, Philippines
and Vietnam could suffer
because of protective measures,
both tariff and non-tariff, which
these nations are unlikely to lift
until the Free Trade Agreement
(FTA) between India and
ASEAN is executed by 2012.
INDIA and SINGAPORE
The free trade agreement with
Singapore gives considerable trade
and investment opportunities to
India. Singapore’s total trade with
the last couple of years, especially
since 2003-04 (refer to Table 4.5 and
Chart 4.2). The increase in total
trade has largely been the result of
a sharp increase in India’s exports to
Singapore. The value of India’s
exports to Singapore has increased
from US$ 0.98 billion in 2001-02 to
more than US$ 6 billion in 2006-07
recording a CAGR of 43%. The value
of imports too has increased from
US$ 1.3 billion in 2001-02 to
US$ 5.4 billion in 2006-07. The very
fact that the total trade between the
two countries has seen a rapid five-
fold increase during the five years
period reveals the high level of trade
complementarities and growth
potential.
It appears that India’s trade
reforms since 1991 has led to fostering
India-Singapore trade links. India’s
trade with Singapore is presently more
than $11 billion which has immense
potential to increase because of
complementarities that exists between

Table 4.5:
TRENDS IN INDIA-SINGAPORE TRADE
Year Exports % growth Imports % growth Total % growth
(US$ bn) (US$ bn) (US$ bn)
2001-02 0.98 - 1.31 - 2.28 -
2002-03 1.42 46.06 1.44 9.91 2.86 25.35
2003-04 2.13 49.28 2.09 45.15 4.21 47.21
2004-05 4.00 88.07 2.65 27.00 6.65 57.82
2005-06 5.42 35.65 3.35 26.52 8.78 32.01
2006-07 6.02 10.92 5.47 63.02 11.48 30.82
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Chart 4.2:
TRENDS IN INDIA-SINGAPORE TRADE
Singapore and India in areas of
manufacturing and services.
The importance of the IT industry
in both Singapore and India, may lead
to economic and technical co-
operation between the two countries
for the following reasons:
(i) Singapore has a well-developed
IT infrastructure and capital
surplus while India has trained
human capital. There are ample
opportunities for co-operation in
production.
(ii) A large number of opportunities
exist for designing, manu-
facturing, distribution and
trading of commodities in which
software is an important input.
The major commodities/sectors
in which Indian software
companies have a proved
specialisation are: (a) financial
services; (b) manufacturing,
104
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marketing and distribution;
(c) electronic, engineering;
(d) telecommunication, and
(e) education, health and
medical services. Singapore has
been dealing in these sectors in
a prominent way. Hence, there
exist complementarities in
supply of IT software to these
sectors.
Singapore gives a number of
incentives in the forms of tax holidays,
exemption, concessional tax rates,
exemption on taxable income and
non-tax incentives. India could ask
for more concessions as a part of
bilateral free trade agreement.
Petroleum products constitute a
very significant part of India’s export
basket to Singapore constituting
around 55%, followed by transport
equipment, electronic goods and non-
ferros metals (refer Table 4.6). Exports
 CMYK

of petroleum products have seen a and transport equipment too are

quantum increase from a mere US$
0.28 million in 2001-02 to more than
US$ 3 billion in 2006-07. The exports
of transport equipment, electronic
goods and non-ferros metals have
steadily increased over the period.
India’s exports to Singapore have
grown at a CAGR of 44% during 2001-
02 to 2006-07.
As far as imports from Singapore
are concerned the largest imported
commodities include electronic goods
constituting around 30% of India’s
total imports from Singapore growing
at a rate of 26% over the last year
(see table 4.7). Petroleum crude &
products constitute around 19% of
India’s total imports from Singapore.
Other top items of import like organic
chemicals, non-electrical machinery
growing at an impressive rate but their
share in India’s total imports from
Singapore is relatively low. India’s
Imports from Singapore have grown
at a compound rate of 33% during
the five year period.
Recent Key Developments and
Issues

India has listed 506 items with
zero duty under the early
harvest scheme for export from
Singapore from 1st August 2005.
Singapore has agreed to
eliminate customs duties on all
originating goods of India as
per the agreement.

Under the India-Singapore CECA
signed in June 2005, India has

Table 4.6:
TREND IN TOP 10 EXPORT ITEMS FROM INDIA TO SINGAPORE
(US$ MILLION)
Commodity Name 2001-02 2005-06 2006-07
Petroleum products 0.3 2117.9 3339.5
Transport equipment 11.7 485.3 352.3
Electronic goods 128.1 201.7 262.1
Non-ferrous metals 1.3 72.7 202.4
Machinery & instruments 60.7 151.1 195.9
Aluminium other than products 99.9 93.0 186.0
Gems & jewellery 121.9 1240.9 150.0
Manufactures of metals 41.4 104.9 119.2
Dyes intermediates & coal tar chemicals 12.3 121.6 116.3
Drugs, pharmaceuticals & fine chemicals 42.3 86.7 89.4
Other commodities 455.3 748.8 1004.0
All Commodities 975.2 5424.5 6017.0
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Table 4.7:
TREND IN TOP 10 IMPORT ITEMS FROM SINGAPORE TO INDIA
(US$ MILLION)
Commodity Name 2001-02 2005-06 2006-07
Electronic goods 512.6 1312.2 1656.1
Petroleum crude & products - - 1073.8
Organic chemicals 127.4 411.0 546.0
Non-electrical machinery 107.2 265.6 405.8
Transport equipment 32.2 355.2 324.9
Printed books, newspapers, journals etc. 105.4 258.3 317.9
Project goods 2.3 4.9 216.6
Artificial resins, plastic materials etc. 54.0 116.1 126.3
Professional inst, optical goods etc. 36.8 82.9 113.5
Electrical machinery 26.1 66.5 88.3
Other commodities 303.9 480.6 597.3
All Commodities 1308.0 3353.3 5466.5
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

offered tariff liberalisation on terms. Singapore also wants

5,099 lines while keeping 6,551
lines in the negative list.
Singapore wants India to review
the negative list and bring down
the number of protected items.
The list of items which
Singapore wants to be excluded
from India’s negative list include
condensed items like milk,
edible oils, chocolate & cocoa
products, tea, coffee,
confectionery items, cigarettes,
high speed diesel, shampoos,
deodorants, yarn & fibre, CD &
DVD players and auto-parts.

Singapore had asked India to
add 752 items ranging from
edible oils to electronics to the
list of products being imported
from Singapore on concessional
India to relax the rules for
determining the origin of
products so that more items
could qualify for preferential
treatment.

It may be highlighted that
Singapore has imposed
prohibitions under various
orders and license measures for
considerations of public safety,
health, environment, etc.
Bilateral trade negotiations
should also address the issue of
non-tariff barriers.
INDIA AND SRI LANKA
Sri Lanka is an important trading
partner of India in South Asia. Table
4.8 and Chart 4.3 reveal the recent

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trend in Indo-Sri Lankan trade from
2001-02 to 2006-07. The total trade
between India and Sri Lanka has
increased form US$ 0.7 billion in
2001-02 to more than US$ 2.7 billion
in 2006-07, primarily due to increase
in India’s exports to Sri Lanka since
2001. This could also be attributed
to the free trade agreement between
the two countries that became
operational from March 2000. The
aggregate of exports to Sri Lanka
amounted to US$ 0.6 billion in 2001-
02, increasing to around US$ 2.25
billion by 2006-07. Though India’s
imports from Sri Lanka too have
steadily increased, the magnitude of
total imports remain relatively low
being US$ 0.47 billion in 2006-07.
This reveals that India’s exports to
Sri Lanka are much higher than its
imports and thus India enjoys
favourable trade surplus with Sri
Lanka.

Table 4.8:
TRENDS IN INDIA-SRI LANKA TRADE
Year Exports % growth Imports % growth Total % growth
(US$ bn) (US$ bn) (US$ bn)
2001-02 0.63 - 0.07 - 0.70 -
2002-03 0.92 45.83 0.09 34.66 1.01 44.75
2003-04 1.32 43.05 0.19 114.14 1.51 49.43
2004-05 1.41 7.01 0.38 94.10 1.79 18.21
2005-06 2.02 43.31 0.58 52.71 2.60 45.29
2006-07 2.25 11.27 0.47 -18.60 2.72 4.64
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

Chart 4.3:
TRENDS IN INDIA-SRI LANKA TRADE

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Sectoral Performance An analysis of the trend in the

It can be noted from the Table 4.9 composition of India’s import basket
from Sri Lanka reveals that non ferrous
that petroleum products and
metals, which comprised a mere 7%
transport equipment have played a
of India’s total imports from Sri Lanka
very significant role in boosting
in 2001-02 have grown to constitute
India’s exports to Sri Lanka. Share nearly 15% of India’s imports from
of India’s exports of petroleum the country in 2006-07. Electrical
products to Sri Lanka account to machinery, manufacturers of metals
around 31% of its total exports to and non metallic mineral
Sri Lanka. India’s exports of manufacturers too have shown a good
petroleum products to Sri Lanka, growth performance in the recent
which amounted to a mere US$ 0.1 years (see Table 4.10).
million in 2001-02 has shot up to
US$ 699 million in 2006-07. There have however, been some
areas of concern on both sides.
Transport equipment, cotton yarn
fabrics and primary and semi-
The areas of concern for India
finished iron and steel are the other include the issue of
important export items also showing circumvention of rules of origin
an impressive growth over the (inexplicable surges in Sri
period. Lankan exports of certain
Table 4.9:
TREND IN TOP 10 EXPORT ITEMS FROM INDIA TO SRI LANKA
(US$ MILLION)
Commodity Name 2001-02 2006-07
Petroleum products 0.1 699.5
Transport equipment 49.7 351.2
Cotton yarn fabrics madeups etc. 70.3 125.9
Primary & semi-finished iron & steel 28.1 107.1
Machinery & instruments 41.5 88.3
Drugs, pharmaceuticals & fine chemicals 32.1 87.5
Sugar 62.9 70.9
Paper/wood products 29.1 63.2
Manmade yarn fabrics madeups 24.5 58.0
Plastic & linoleum products 20.7 55.8
Other commodities 273.8 545.2
All Commodities 632.8 2252.6
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Table 4.10:
TREND IN TOP 10 IMPORT ITEMS FROM SRI LANKA TO INDIA
(US$ MILLION)
Commodity Name 2001-02 2006-07
Non-ferrous metals 5.3 73.9
Electrical machinery 0.1 41.8
Manufactures of metals 0.3 39.4
Spices 26.1 28.5
Non metalic mineral manufactures excluding pearls 1.6 24.9
Natural rubber 0.5 15.6
Paper board & manufactures 1.4 15.0
Metaliferrous ores & metal scrap 4.9 11.6
Pulp & waste paper 3.0 11.6
Non-electrical machinery 1.0 11.4
Other commodities 23.4 196.5
All Commodities 67.6 470.2
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

commodities such as copper talks between the two sides that

and pepper).

Exploitation of duty differentials
that may harm Indian producers
(there is a concern that
vanaspati plants being set up in
Sri Lanka will have an adverse
impact on the Indian vanaspati
industry. Duty on palm oil
imports in Sri Lanka is zero as
against 65% in India) are also
a matter of concern.

In the latest trade talks between
the two countries, India has
agreed to lift restrictions relating
to fabric origins on duty free
Sri Lankan apparel exports to
the Indian market. The recent
agreement on fabric was part
of a wider deal during the last
saw restrictions on Ceylon tea
exports too being lifted.

To arrive at an agreement on
the Comprehensive Economic
Partnership Agreement (CEPA).
INDIA AND THAILAND
Thailand is an important trading
partner of India in South East Asia.
Though India’s total trade with
Thailand as a percentage of India’s
total global trade accounts for a
modest 1% in 2006-07, and the same
is true from Thailand’s point of view
as well, Thailand continue to remain
an important trading partner for
India due to its strategic location
right at the heart of Asia. It serves
as a gateway to Southeast Asia and

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the Greater Mekong sub-region,
where newly emerging markets offer
great business potential.
The amount of India’s total
exports to Thailand, in 2001-02,
amounted to US$ 0.64 billion while
the corresponding value of India’s
imports from Thailand was US$ 0.42
billion. By 2006-07, the exports have
crossed over US$ 1.4 billion and
imports over US$ 1.7 billion. The
Table 4.11 and Chart 4.4 show the
recent trend in Indo-Thailand trade.
Though it is seen that the present
level of India-Thailand trade is low,
it is increasing over time. India’s total
trade with Thailand has increased
especially since 2002-03 during which
the framework agreement for a free
trade agreement between the two
countries was signed. Imports from
Thailand have been increasing at a

Table 4.11:
TRENDS IN INDIA-THAILAND TRADE
Year Exports % growth Imports % growth Total % growth
(US$ bn) (US$ bn) (US$ bn)
2001-02 0.64 - 0.42 - 1.06 -
2002-03 0.71 12.22 0.38 -10.51 1.09 3.11
2003-04 0.83 16.79 0.61 60.49 1.44 31.98
2004-05 0.90 8.26 0.87 42.01 1.77 22.53
2005-06 1.08 19.33 1.21 39.96 2.29 29.44
2006-07 1.44 34.17 1.74 43.68 3.18 39.21
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

Chart 4.4:
TRENDS IN INDIA-THAILAND TRADE

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faster rate than the increase in exports. of India’s total export to Thailand. The
India has enjoyed a trade surplus since reduction in tariff will give more
2001-02 to 2004-05 after which export opportunities for India. The
imports have been more other main items of export include
predominant. Thailand’s import petroleum products, non-ferrous
demands are high and India has great metals, oil meals, primary & semi-
capacity to meet export supply for a finished iron & steel (refer Table 4.12).
large number of commodities of Export of petroleum products has
Thailand’s import demands. Indian recorded a robust growth since 2001-
business can also take the advantage 02. Exports of cotton raw have also
of Thailand’s liberal attitude towards seen a sharp increase since 2001-02
foreign investment as the Thai increasing from a mere US$ 0.05
government recognises the important million to more than US$ 65 million
contribution of foreign investment to in 2006-07. Other items, which have
the domestic economy. shown a good performance in
export’s growth, include transport
Sectoral performance equipment, and non ferrous metals.
Thailand’s export basket to India is India’s total exports to Thailand have
diversified, while India’s export grown at a CAGR of 17% during 2001-
basket to Thailand is relatively 02 to 2006-07. After the framework
skewed and is dominated by gems & agreement with Thailand in October
jewellery accounting for around 23% 2003, the exports have grown at a
Table 4.12:
TREND IN TOP 10 EXPORT ITEMS FROM INDIA TO THAILAND
(US$ MILLION)
Commodity Name 2001-02 2003-04 2006-07
Gems & jewellery 238.2 202.2 339.8
Petroleum products 0.6 17.7 178.3
Non-ferrous metals 11.8 43.4 125.2
Oil meals 73.4 59.9 80.6
Primary & semi-finished iron & steel 39.9 110.9 79.1
Machinery & instruments 19.6 38.8 68.7
Cotton raw including waste 0.1 7.8 65.7
Drugs, pharmaceuticals & fine chemicals 31.8 51.7 62.1
Transport equipment 7.5 15.6 54.0
Inorganic/organic/agro chemicals 39.0 33.7 51.7
Other commodities 173.1 250.6 337.4
All Commodities 635.0 832.3 1442.5
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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CAGR of 20% during 2003-04 to the framework agreement was signed

2006-07.
As far as imports from Thailand
are concerned, electronic goods, non-
electrical machinery, artificial resins,
plastic material etc. are the main items
that come into India (Table 4.13).
Electronic goods comprise around
18% of India’s total imports from
Thailand and non electrical machinery
around 16%. It is interesting to note
that the total imports from Thailand
have grown at a compounded annual
growth rate of 32% between 2001-02
and 2006-07, as compared to 42%
since 2003-04 during which the
framework agreement was signed.
Thus, an overall trend in the
growth of exports and imports
between India and Thailand shows
that the growth in both exports and
imports has been at faster rate after
between the two nations.
Recent Developments and
Some Important Issues

Thailand has expressed
optimism over the agreed target
of India-Thailand trade of US$
4 billion by end of 2007 being
achieved. Indian industry groups
too expect total trade to reach
US$ 7 billion by 2010.

Thailand has sought more
Indian investment in IT and
pharmaceuticals - the two areas
in which India has proven
expertise.

India and Thailand have already
cut duties on 82 products,
including fruits, vegetables,
wheat, diamonds and some

Table 4.13:
TREND IN TOP 10 IMPORT ITEMS FROM THAILAND TO INDIA
(US$ MILLION)
Commodity Name 2001-02 2003-04 2006-07
Electronic goods 155.7 91.6 322.5
Non-electrical machinery 52.0 114.9 273.9
Artificial resins, plastic materials etc. 27.6 53.3 129.0
Non-ferrous metals 6.5 13.4 88.6
Iron & steel 14.5 21.4 87.0
Organic chemicals 9.2 13.8 71.8
Electrical machinery 11.1 26.6 63.5
Transport equipment 2.6 28.7 60.1
Natural rubber 10.6 13.8 60.0
Other textile yarn, fabrics, madeups articles 14.9 31.2 54.2
Other commodities 119.8 200.8 530.0
All Commodities 424.4 609.5 1740.5
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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metals, under a framework
agreement that came into
operation in September 2004.
India and Thailand are aiming
to abolish duties on goods
traded between the two
countries by 2010.

According to government
sources, Thailand wants greater
market access in natural rubber,
being a major exporter of the
product. However, natural
rubber is expected to be a part
of India’s negative list. In the
negotiations on goods, India has
agreed to eliminate tariff on
more than 4,000 products in a
phased manner, while 500
others will be in the sensitive
list, which will see partial duty
cuts, over a period of time.
Nearly 500 other items in the
negative list will not be subject
to any tariff cut, so as to protect
the interests of the domestic
industry.

Thailand, which used to run a
deficit in its trade with India,
has registered a $140-million
trade surplus in 2005-06, even
before tariffs on 82 items
covered under the scheme were
brought to zero.

Overall, the balance of trade has
tilted in favour of Thailand with
India’s exports growing at an
average of 14% for the past 3
years since 2003 and Indian
imports growing at 42% during
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the period. Seven of the top 10
items imported from Thailand in
terms of value have shown a
growth of above 45% in 2005-
06, compared to only dyes
intermediates & coal tar
chemicals having grown above
an impressive 45% among the
exported commodities.

High rates of taxes and duties,
low labour productivity and
procedural complexities are
impacting the competitiveness
of Indian industries.

India needs to improve the
quality of infrastructure facilities
with a view to become more
competitive vis-à-vis imports
from Thailand.
INDIA AND BIMSTEC
The following Table 4.14 and Chart
4.5 present the recent trend in India-
BIMSTEC trade.
The chart presents an interesting
picture of the trade pattern of India
with BIMSTEC since 2001-02. India’s
total trade has steadily risen since
2002-03 owing to the sharp increase
in India’s exports to BIMSTEC
countries. The exports have grown
steadily since 2004-05, subsequent to
the signing of the framework
agreement between BIMSTEC and
India. The value of India’s exports to
BIMSTEC has increased from US$ 2.56
billion in 2001-02 to US$ 6.45 billion
in 2006-07 at a CAGR of 20%. Imports
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Table 4.14:
TRENDS IN INDIA-BIMSTEC TRADE
Year Exports % growth Imports % growth Total % growth
(US$ bn) (US$ bn) (US$ bn)
2001-02 2.6 - 1.3 - 3.9 -
2002-03 3.3 28.3 1.2 -9.5 4.5 15.5
2003-04 4.7 44.7 1.6 37.7 6.4 42.8
2004-05 4.9 3.0 2.1 30.4 7.0 10.0
2005-06 5.8 19.4 2.9 36.9 8.7 24.7
2006-07 6.5 10.6 3.7 25.9 10.1 15.7
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

Chart 4.5:
TRENDS IN INDIA-BIMSTEC TRADE

have been steady over the period
being US$ 3.66 billion in 2006-07.
As far as India’s relation with
Bhutan is concerned the total trade
though has been very low, it has been
increasing over time from US$ 31
million in 2001-02 to around US$ 200
million in 2006-07. The export basket
from India to Bhutan mainly
comprises machinery & instruments,
transport equipment, manufactures of
metals and petroleum products. The
imports from Bhutan to India
amounted to US$141 million in 2006-
07 and primarily include non-ferrous
metals, edible vegetable oils, primary
steel, pig iron based items, iron & steel
and inorganic chemicals.
With regard to India’s trade
relation with Nepal, India enjoys a
favourable trade balance which has
been consistently increasing in India’s

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favour over the period. The trade
surplus has been around US$ 625
million in 2006-07. The main items of
import to India from Nepal include
iron & steel, manmade filament, spun
yarn, chemical material & products,
essential oil & cosmetic preparations,
other textile yarn, fabrics etc. India’s
export basket to Nepal is dominated
by petroleum products, constituting
around 40% of India exports to Nepal.
The other commodities include
transport equipment, drugs,
pharmaceuticals & fine chemicals,
glass & glassware, ceramics, cement,
machinery & instruments, non-
basmati rice.
In case of Bangladesh it is noticed
that India has huge trade surplus
being more than US$ 1.4 billion in
2006-07. Bangladesh’s exports to
India are concentrated in very few
commodities like inorganic chemicals,
manufactured fertilizers, and raw jute.
The main items of export to
Bangladesh include cotton yarn
fabrics, cereals, sugar, transport
equipment etc. In this context, it
should be remembered that India has
already given tariff concessions on a
large number of items/lines to
Bangladesh, as a part of SAPTA
process.
India has been maintaning a
consistent trade deficit with Myanmar
since 2001-02. The amount of deficit
is quite significant and it has been
continuing for last couple of years.
The gap was to the tune of US$ 638
million in 2006-07. The export basket
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of Myanmar to India is concentrated
in few items such as pulses and wood
& wood products, which account for
about 80% of the total exports from
Myanmar to India. India has already
given preferential tariff, for most of
these items, to Myanmar. On the other
hand, India’s export basket to
Myanmar mainly comprises of
primary & semi-finished iron & steel,
drugs, pharmaceuticals & fine
chemicals, manufactures of metals,
machinery & instruments,
manufactured rubber products, plastic
& linoleum products, transport
equipment.
India’s exports to both
Bangladesh and Myanmar have seen
a decent increase over the past five
years (refer Table 4.15). Most
prominent commodities in the export
basket include cotton yarn fabrics
madeups, drugs, pharmaceuticals &
fine chemicals and fresh vegetables.
Though the magnitude of imports
from Bangladesh and Myanmar to
India has been low, imports have
been steadily increasing over the
period (see Table 4.16). Inorganic
chemicals, manufactured fertilizers
and raw jute comprise the main
import items to India.
India has export competitiveness
in a large number of commodities as
compared to other BIMSTEC
countries and there exists a great
scope and capacity for India to
penetrate the markets of other
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Table 4.15:
TREND IN TOP 10 EXPORT ITEMS FROM INDIA TO BIMSTEC17
(US$ MILLION)
Commodity Name 2001-02 2006-07
Cotton yarn fabrics madeups etc. 166.9 227.3
Drugs, pharmaceuticals & fine chemicals 37.5 102.5
Fresh vegetables 16.7 70.8
Machinery & instruments 78.9 67.7
Coal 42.5 57.8
Manmade yarn fabrics madeups 16.1 48.9
Cotton raw including waste 0.4 45.8
Manufactures of metals 38.1 45.1
Electronic goods 27.6 43.8
Fresh fruits 24.4 31.8
Other Commodities 617.2 1025.0
All Commodities 1066.2 1766.6
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

Table 4.16:
TREND IN TOP TEN IMPORT ITEMS FROM BIMSTEC TO INDIA
(US$ MILLION)
Commodity Name 2001-02 2006-07
Inorganic chemicals 15.1 41.5
Fertiliser manufactured 1.8 29.9
Jute raw 18.5 24.9
Madeup textile articles 9.5 19.3
Electrical machinery 0.6 12.5
Metaliferrous ores & metal scrap 0.1 7.6
Fruits & nuts 1.6 5.5
Leather 1.5 3.6
Cotton raw: combed/uncombed/waste 1.1 2.4
Cement - 1.4
Other Commodities 385.0 857.0
All Commodities 434.8 1005.6
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

17 In our analysis in Table 4.15 and 4.16 BIMSTEC includes only Bangladesh
and Myanmar (Burma). Other nations have not been included here as they
have been analysed separately.

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BIMSTEC countries. However, lack of up to more than US 2.29 billion in

basic infrastructure in the region, in
particular transportation and
communication linkages, act as a
bottleneck to the development of
trade and development.
INDIA AND CHILE
India and Chile entered into a
Preferential Trade Agreement (PTA)
on March 9, 2006. This is the first
such agreement between India and
an individual Latin American
country. The PTA between both
countries is expected to increase
bilateral trade and investment. The
PTA is expected to be the first step
towards an India-Chile free trade
agreement (FTA). It would enable
India to better use raw materials
from South America and gain access
into the vast markets in the
continent.
The total trade has been rising
steadily from 2001-02 to 2006-07.
Owing to the sharp increase in
imports from Chile, the total trade shot
2006-07 from US$ 0.59 billion in 2005-
06. The aggregate Indian exports have
remained subdued over the period,
but nevertheless, have been growing.
As a result, India is experiencing trade
deficit from the year 2001-02 onwards
and it has been widening. The imports
from Chile rose from US$ 0.1 billion
in 2001-02 to US$ 1.92 billion in 2006-
07. It is interesting to note that among
all the countries in the Latin American
and Caribbean region, Chile has
emerged as the main sources of
imports to India. It is expected that
the introduction of preferential trade
agreement between India and Chile
may lead to increase in bilateral trade
due to tariff reduction. The following
Table 4.17 and Chart 4.6 presents the
trend in India-Chile trade.
As indicated above, India’s total
exports to Chile have been relatively
low. The main items of export from
India to Chile include marine
products, iron ore, raw cotton and

Table 4.17:
TRENDS IN INDIA-CHILE TRADE
Year Exports % growth Imports % growth Total % growth
(US$ bn) (US$ bn) (US$ bn)
2001-02 0.08 - 0.10 - 0.18 -
2002-03 0.07 -13.45 0.17 76.33 0.24 34.35
2003-04 0.08 14.96 0.16 -6.44 0.24 0.00
2004-05 0.11 33.80 0.35 120.24 0.46 90.31
2005-06 0.15 36.86 0.43 25.77 0.59 28.47
2006-07 0.37 146.49 1.92 341.40 2.29 290.85
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Chart 4.6:
TRENDS IN INDIA-CHILE TRADE

ores & minerals (refer table 4.18). The 146% during the last year after the
exports have grown at a CAGR of 16% PTA was signed between the two
during the period 2001-02 to 2005- nations.
06, compared to the growth rate of
Table 4.18:
TREND IN TOP 10 EXPORT ITEMS FROM INDIA TO CHILE
(US$ MILLION)
Commodity Name 2001-02 2005-06 2006-07
Marine products 2.7 0 84.9
Iron ore 6.0 - 40.0
Cotton raw including waste - 0.1 34.7
Other ores & minerals 0.3 0.01 31.4
Transport equipment 3.9 12.3 23.6
Machinery & instruments 3.1 18.7 23.1
Drugs, pharmaceuticals & fine chemicals 6.7 16.3 15.6
Cotton yarn fabrics madeups etc. 9.1 13.8 14.3
Primary & semi-finished iron & steel 1.5 3.4 12.3
Manufactures of metals 5.7 8.4 9.8
Other Commodities 44.4 79.4 83.5
All Commodities 83.5 152.1 375.0
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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An observation of table 4.19 is investment worthy and thus Indian

reveals that Imports from Chile to
India predominantly consists of
metaliferrous ores & metal scrap,
which accounts for 96% of total
imports in 2006-07 from Chile to India,
compared to 86% share during the
previous year.
It is believed that the success of
the preferential trade agreement
depends on phasing out of barriers
by Chile. Moreover, due to low labour
costs and a good infrastructure, Chile
investors seeking overseas investment
should be encouraged to invest in this
country.
INDIA AND GCC
India’s negotiations with GCC to
explore the possibility of a free
trade agreement have opened many
trade opportunities for India in the
West Asian region. The following
Table 4.20 and Chart 4.7 presents
the trend in India-GCC trade.

Table 4.19:
TREND IN TOP 10 IMPORT ITEMS FROM CHILE TO INDIA
(US$ MILLION)
Commodity Name 2001-02 2005-06 2006-07
Metaliferrous ores & metal scrap 86.2 373.3 1843.3
Inorganic chemicals 4.1 31.6 36.9
Newsprint - 5.8 5.1
Fruits & nuts 0.2 3.4 5.0
Non-ferrous metals - 0.5 3.6
Artificial resins, plastic materials etc. - 0.1 3.0
Electronic goods - 0.1 2.0
Petroleum crude & products - - 1.5
Organic chemicals 0.2 0.03 1.0
All Commodities 95.07 434.4 1917.6
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

Table 4.20:
TRENDS IN INDIA-GCC TRADE
Year Exports % growth Imports % growth Total % growth
(US$ bn) (US$ bn) (US$ bn)
2001-02 3.81 - 1.69 - 5.5 -
2002-03 4.92 29.23 1.89 11.88 6.81 23.82
2003-04 7.07 43.66 3.25 71.94 10.32 51.54
2004-05 9.81 38.73 7.06 116.93 16.87 63.47
2005-06 11.77 20.01 7.80 10.53 19.57 16.00
2006-07 16.34 38.76 30.99 297.15 47.33 141.85
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Chart 4.7:
TRENDS IN INDIA-GCC TRADE
India’s trade with GCC has shown
a steady increase from 2001-02 to
2005-06. India- GCC trade has
witnessed a very sharp increase in
imports from GCC to India since 2005-
06. It is highly interesting to note that
this sharp rise in imports from US$
19.6 billion in 2005-06 to more than
US$ 47 billion in 2006-07, immediately
follows the India- GCC first round of
negotiations towards an FTA held in
March 2006. This substantial increase
in imports has also boosted the total
trade between India and GCC. The
total trade between India and GCC
has increased from US$ 5.5 billion in
2001-02 to US$ 47.33 in 2006-07.
India’s exports to GCC mainly
comprise of petroleum products,
gems & jewellery, non-ferrous metals,
machinery & instruments and
manufactures of metals (see Table
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4.21). Moreover, petroleum products
and gems & jewellery together consti-
tute around 42% of the total exports
from India to GCC. Petroleum exports
have seen the largest increase from a
mere US$ 5 million in 2001-02 to more
than US$ 3.7 billion in 2006-07.
The main items of import to India
from GCC include petroleum crude
& products, gold, pearls precious &
semiprecious stones, metaliferrous
ores & metal scrap, organic chemicals,
manufactured fertilisers artificial
resins, plastic materials and electronic
goods (refer table 4.22). Petroleum
crude & products are the most
important item of India’s imports from
GCC constituting around 80% of total
imports from the region. The imports
of gold have also sharply increased
from US$ 0.2 billion in 2001-02 to
more than US$ 1.6 billion in 2006-07.
 CMYK

Table 4.21:
TREND IN TOP 10 EXPORT ITEMS FROM INDIA TO GCC
(US$ MILLION)
Commodity Name 2001-02 2006-07
Petroleum products 5.9 3705.0
Gems & jewellery 558.7 3213.0
Non-ferrous metals 49.9 1087.8
Machinery & instruments 176.9 966.3
Manufactures of metals 264.3 854.1
Manmade yarn fabrics madeups 295.6 485.0
Basmati rice 279.2 418.5
Plastic & linoleum products 111.0 315.2
Electronic goods 63.5 238.2
Cotton yarn fabrics madeups etc. 125.1 158.3
Other Commodities 1879.3 4895.4
All Commodities 3809.4 16336.7
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

Table 4.22
TREND IN TOP 10 IMPORT ITEMS FROM GCC TO INDIA
(US$ MILLION)
Commodity Name 2001-02 2006-07
Petroleum crude & products - 24807.8
Gold 248.5 1633.0
Pearls precious & semiprecious stones 248.5 732.5
Metaliferrous ores & metal scrap 143.9 700.3
Organic chemicals 162.9 620.1
Fertiliser manufactured 12.2 421.3
Artificial resins, plastic materials etc. 67.4 323.7
Electronic goods 10.8 315.1
Inorganic chemicals 105.7 291.9
Transport equipment 12.7 291.6
Other Commodities 679.4 856.1
All Commodities 1692.0 30993.2
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Recent Developments include: mineral fuels and oils,

The Prime Minister’s Trade and bituminous substances, mineral
Economic Relations Committee waxes, other petroleum oils, cotton
which met in the first week of July yarn, fabrics, made-ups, man-made
2007 discussed negotiations on the yarn, and fabrics, drugs,
proposed trade agreement with the pharmaceuticals & fine chemicals.
Gulf countries and felt that the The imports from Mauritius to
Indian petrochemical industry could India have been relatively low.
be adversely impacted as imports However, the aggregate of imports
of refined petroleum could possibly from Mauritius doubled from US$ 7.33
have a negative impact on the million in 2005-06 to US$ 14.51 million
Indian petrochemical industry, in the in 2006-07. The main items of imports
long run. from Mauritius include: iron and steel,
electrical machinery and equipment
INDIA AND MAURITIUS and parts thereof, sound recorders
India’s trade with Mauritius is in and reproducers, television image and
favour of India, as India has much sound recorders other waste and
diversified export relation with scrap, machinery and mechanical
Mauritius. The imports on the other appliances.
hand from Mauritius are almost
Thus, introduction of preferential
negligible. The Table 4.23 and Chart
trade agreement with Mauritius may
4.8 present the recent trend in India-
Mauritius trade. The aggregate of lead to increase in trade.
exports to Mauritius amounted to US$
163 million in 2001-02 and increased Some Important issues
to US$ 736 million in 2006-07. The
Mauritius, with a population of
important export items to Mauritius just 1.25 mn, offers a limited
Table 4.23:
TRENDS IN INDIA-MAURITIUS TRADE
Year Exports % growth Imports % growth Total % growth
(US$ mn) (US$ mn) (US$ mn)
2001-02 163.4 - 3.3 - 166.7 -
2002-03 164.7 0.80 16.2 394.50 180.9 8.52
2003-04 203.2 23.36 7.6 -53.31 210.7 16.50
2004-05 258.0 27.04 7.2 -4.90 265.3 25.89
2005-06 199.4 -22.74 7.3 2.09 206.7 -22.06
2006-07 735.9 269.02 14.5 97.82 750.4 262.95
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Chart 4.8:
TRENDS IN INDIA-MAURITIUS TRADE

market to Indian industries. An Therefore, Mauritius could be

agreement between the two viewed as a promising manufacturing
nations could prove to be more hub to explore the market of the
beneficial to Mauritius due to region.
large number of opportunities
provided by the Indian market. INDIA AND SACU
However, with an agreement with India’s trade relations with SACU
Mauritius, India could possibly have been growing over the period.
explore avenues of trade with The total trade between India and
SADC and COMESA, blocs in SACU has seen an increase from
which Mauritius is a member. US$ 1.8 billion in 2001-02 to US$ 4.8
billion in 2006-07 (see table 4.24).
Table 4.24:
TRENDS IN INDIA-SACU TRADE
Year Exports % growth Imports % growth Total % growth
(US$ bn) (US$ bn) (US$ bn)
2001-02 0.4 - 1.4 - 1.8 -
2002-03 0.5 25.0 2.1 50.0 2.6 44.4
2003-04 0.6 20.0 1.9 -9.5 2.5 -3.8
2004-05 1.0 66.7 2.2 15.8 3.2 28.0
2005-06 1.6 60.0 2.5 13.6 4.1 28.1
2006-07 2.3 43.8 2.5 0.0 4.8 17.1
SOURCE: DGCIS, Ministry of Commerce and Industry, GOI

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Chart 4.9:
TRENDS IN INDIA-SACU TRADE
An analysis of Chart 4.9 reveals
that, India’s imports from SACU have
dominated the total trade between
India and SACU. However, India’s
exports too caught up pace since
2003-04 increasing from US$ 0.6
billion in 2003-04 to US$ 2.3 billion
in 2006-07. Imports rose from
US$ 1.4 billion in 2001-02 to US$ 2.5
billion in 2006-07. As a result of the
increase in exports from India to
SACU the trade deficit has been
reducing in India’s favour at a fast rate
124
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from US$ 1.3 billion in 2003-04 to US$
0.2 billion in 2006-07. The main items
in India’s export basket to SACU
include petroleum products, transport
equipment, electronic goods, and
primary & semi-finished iron & steel.
The exports of petroleum products
from India rose from US$ 0.03 million
in 2001-02 to US$ 793 million in 2006-
07. As far as imports are concerned,
the main import items from SACU into
India include pearls and precious
stones, chemicals, ores, iron & steel
and electrical machinery.
 CMYK

5. EMERGING TRENDS IN RTAs

In the previous chapters, an As discussed earlier, most of the

analysis of the trends in the
proliferation of regional trade
agreements across the globe over a
period of time and especially since
2000 has been attempted along with
the factors that led to their
proliferation, the emergence of
various trade blocs and their trade
performance, the pattern of
engagement by countries in free trade
agreements in different regions of the
world and the impact that regional
trade agreements has had on the trade
performance of select major countries
engaged in most number of RTAs. It
is now pertinent to analyse the very
nature of these trade agreements.
regional trade agreements have
entered into force only after the dawn
of the new millennium, accounting
for about 60% of all the RTAs notified
to WTO and entering into force. Of
all the bilateral RTAs entering into
force since 2000, 46% of the
agreements have been between
developing and developed countries,
followed by agreements between
developing and developing countries
which account for about 39% of all
the agreements (refer Table 5.1 and
Chart 5.1).
An interesting point that can be
noted here is that the growth in the
present decade is in complete contrast

Table 5.1:
TRENDS IN ENGAGEMENT IN RTAs BASED ON
THE NATURE OF AGREEMENT18
Nature of Agreement/ Developing- Developing- Developed-
Time Period Developing Developed Developed
2000-2007 (July) 42 51 16
1995- 1999 (Dec) 20 10 0
SOURCE: WTO

18 The classification of countries as ‘Developed’ and ‘Developing’ is based on

the classification done by IMF in Direction of Trade Statistics. For our
analysis in this section of the study, Singapore and Korea have also been
considered as developed nations due to the high level of their economic
performance, trend in growth and GDP, comparable to other developed
countries.

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Chart 5.1:
% SHARE OF AGREEMENTS ENTERING INTO FORCE
(BASED UPON THE NATURE OF AGREEMENT)
SOURCE: WTO
to the trend depicted during the last
five years prior to 2000. During the
period 1995 to 1999, of all the bilateral
agreements, those among developing
countries accounted for around 67%
of all the RTAs (refer to Chart 5.1).
Agreements between the developing
and developed countries accounted
for only 33%. This reflects the growing
interest among developing countries
to engage in agreements with more
developed nations to gain access to
the larger and more potential markets
and benefit from the immense trade
opportunities inherent in these
markets. It is also very interesting to
note that no trade agreements were
entered into among the developed
countries during 1995-1999. The trade
agreements among the developed
countries themselves accounted for
around 15% of the total agreements
during 2000-2007. The trend in the
nature of engagement in RTAs by
developed countries reveals that
developed countries apart from
striking accords among themselves
126
CMYK
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have also evinced keen interest in
agreements with developing countries
as depicted by the increasing share
of agreements between the
developing and the developed
countries from 1995-1999 to 2000-
2007. Developed countries could be
more interested in targeting the
cheaper, less sophisticated and ‘easy
to approach’ markets with their
engagement in preferential
agreements with developing
countries.
A further in-depth year wise
investigation of the nature of
agreements entered into force since
2000, reveals a subtle and gradual shift
in the interest among developing
countries to engage in agreements
with developed countries (refer Chart
5.2). This gradual shift has been
particularly noticed since 2004, prior
to which developing countries were
more interested in engaging in
agreements with similar developing
countries. For example in 2005, in

Chart 5.2:
YEAR WISE DISTRIBUTION OF AGREEMENTS
(BASED UPON THE NATURE OF AGREEMENT)
SOURCE: WTO
comparison to 13 agreements
between developed and developing
countries, only 2 agreements took
place between developing countries.
This also clearly reflects the interest
among developed countries to engage
in bilateral agreements with
developing countries subsequent to
the erosion of their confidence in
multilateralism.
EMERGING REGIONALISM IN
ASIA
Regional cooperation is becoming
increasingly important in today’s
economic growth. Recognising the
potential for greater regional
cooperation for development, there
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has been an array of initiatives in
regional cooperation across the
globe. Major Asian economies too
have rapidly embraced regionalism
in the course of the past decade,
which has led to the proliferation
of several regional trading
agreements involving most of the
Asian economies. However,
regionalism is still in its infancy in
Asia. Nevertheless, Asia too is
making its presence felt in the
global scene with the emergence of
significant trade blocs like ASEAN,
which contributed to around 27.4%
of Asia’s global trade in 2005, and
rapidly growing economies like
China, Korea and India. The recent
127

interest shown by Japan in
regionalism, with its involvement in
trade agreements with Singapore,
Mexico and Malaysia, has further
boosted the prospects of Asia to
emerge as a major player in
regionalism.
Asia has made tremendous
progress in the last four decades. Asia
has moved from being a region with
per capita income less than that of
Africa in the 1960s to a region which
now accounts for 24% of global GDP
establishing itself as a vibrant
economic region of the world.
The trade within the Asian region
is also relatively significant implying
that many countries in the region are
keen to trade with each other. This
has been primarily the outcome of
several trading blocs and regional
trading agreements that came into
force in the region.
This section particularly deals
with major emerging RTAs involving
ASEAN, which aim at integration of
ASEAN with China, Japan, Korea and
India. These include the ‘ASEAN plus
three’, ASEAN-China FTA (ACFTA),
ASEAN-Japan Closer Economic
Partnership (CEP) Agreement,
ASEAN- Korea FTA (AKFTA), and
ASEAN-India FTA (AIFTA).
ASEAN plus Three
As discussed above, ASEAN, China,
Japan, Korea and India are the
leading economies in Asia which are
promoting economic development
128
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and prosperity of the region and
acting as engines of growth for Asia.
In order to establish a peaceful,
stable, progressive and prosperous
East Asian regional environment
through mutual solidarity, it was
decided to establish the ‘ASEAN plus
Three’ (APT). It was envisaged that
the mutual cooperation and
integration between ASEAN and the
three East Asian countries would
promote greater dialogue with
collective efforts to both harness
opportunities and meet the
challenges posed by a fast-changing
and globalising world.
The ASEAN Plus Three
cooperation began in December 1997
with the convention of an informal
Summit among the Leaders of ASEAN
and their counterparts from East Asia,
namely China, Japan and the Republic
of Korea (RoK).
It was agreed among the
economies to strengthen efforts to
accelerate trade, investments, and
technology transfer. Technical
cooperation in information
technology, promotion of industrial
and agricultural cooperation,
strengthening of SMEs, promotion of
tourism, encouraging active
participation in the development of
growth areas in East Asia, including
the Mekong River Basin are other
areas of mutual cooperation. The
economies decided to continue
structural reforms to strengthen
cooperation since these are essential
to sustain economic growth and
indispensable safeguards against the

recurrence of economic crises in East
Asia.
The ASEAN Plus Three process
was institutionalised in 1999 when the
leaders issued a Joint Statement on
East Asia Cooperation during the 3rd
ASEAN Plus Three Summit in Manila.
The ASEAN Plus Three Leaders
expressed greater resolve and
confidence in further strengthening
and deepening East Asia cooperation
at various levels and in various areas,
particularly in economic, social,
political, and other fields. The Report
of the East Asia Vision Group (EAVG)
of 2001 and the Report of the East
Asia Study Group (EASG) of 2002
were key documents that have been
adopted towards the implementation
of ASEAN Plus Three cooperation.
Since the adoption of the EASG’s
Final Report in 2002, all EASG short-
term measures have been taken up
by the ASEAN Plus Three Countries.
The ASEAN Plus Three Countries have
agreed to implement all the short-term
measures by 2007.
Four Short-term measures have
been implemented which include (a)
implementation of a comprehensive
human resources development
programme for East Asia by
establishing the ASEAN Plus Three
Study Group on Facilitation and
Promotion of Exchange of People and
Human Resources Development by
Japan; (b) building of a Network of
East Asia Think-Tanks (NEAT) by
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China and Thailand; (c) establishment
of an East Asia Forum (EAF) by Korea
and Malaysia; and (d) formation of
an East Asia Business Council (EABC)
by Malaysia. Some measures have
been implemented through ASEAN
Plus Three sectoral cooperation, such
as to establish GSP status and
preferential treatment for the least
developed countries and
strengthening of mechanisms for
cooperation on non-traditional
security issues.
Closer interaction among the
ASEAN plus three countries has had
a positive impact on global trade.
Value of total trade of ASEAN Plus
Three Countries reached US$ 4.3
trillion in 2005. The effects of a
successful ASEAN Plus Three FTA, if
realised, would be significant for
international trade. APT would join
the European Union (EU) and the
North American Free Trade Area
(NAFTA) as one of three major
regional trading blocs.
Under the ASEAN Plus Three
process there are 48 mechanisms,
coordinating 16 areas of ASEAN Plus
Three cooperation, comprising
economic, monetary and finance,
political and security, tourism,
agriculture, environment, energy, and
information communication
technology.
In order to assist the ASEAN Plus
Three Co-chairs to coordinate and
monitor ASEAN Plus Three
cooperation the ASEAN Plus Three
129

Unit was established at the ASEAN
Secretariat in December 2003. Since
the conceptualisation of ASEAN plus
Three, ASEAN has also been
bilaterally engaging in negotiations
with China, Japan, Korea and India
to pursue free trade arrangements.
These arrangements will serve as the
building blocks for a possible
establishment of a Pan Asia Free
Trade Area to closely integrate the
Asian community in the long run.
ASEAN-China FTA (ACFTA)
The ACFTA, which entered into
force in July 2003, is China’s first
initiative in regional trade
agreements since its membership to
WTO. Its significance to regionalism
in Asia can be gauged from the fact
that it would be one of the largest
FTAs ever negotiated, in terms of
magnitude, countries involved and
size of economies. The FTA involves
around 1.8 billion people, with a
combined GDP of over US$ 3.3
trillion, in 2006.
The concept of an ACFTA was
first envisaged during the ASEAN-
China Summit held in November 2001
and subsequently the Framework
Agreement for this FTA was
developed in Cambodia during the
ASEAN Summit in 2002. It is proposed
to establish the ACFTA in goods for
the founding ASEAN members
(ASEAN-5)19, and Brunei, by 2010, and
that for the newer members (i.e.
Cambodia, Myanmar, Laos and
Vietnam) by 2015, to facilitate
19 ASEAN-5 include: Indonesia, Malaysia, Philippines, Singapore and Thailand.
130
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adjustment by newer members. The
“early harvest” clause constitutes a
very important feature of the
agreement, which ensures reduction
of tariffs on especially agricultural
products by ASEAN and China within
a span of three years.
Through closer interaction among
ASEAN countries and China, due to
the establishment of the free trade
agreement, mutual economic
interdependence is further believed
to enhance and strengthen. ASEAN’s
total trade with China amounted to
US$ 113.4 billion in 2005 accounting
for 9.3% of ASEAN’s global trade. The
impact of the trade agreement,
however, could vary for each ASAEN
member based upon the economic
structure and composition of trade
basket. Nevertheless, owing to the
immense size of the economic trade
agreement between China and
ASEAN, it is certain to have a
significant impact on the world
economy further boosting Asia’s share
in world trade and promoting better
regional economic integration.
The ACFTA negotiates
liberalisation of services and
investment, apart from trade in goods.
Agriculture, information and
communication technology (ICT),
human resource development (HRD),
investment and the Mekong River
basin development were identified as
the priority sectors in the agreement.
The FTA also focuses on
implementation of capacity building

programmes and provision of
technical assistance for newer ASEAN
members.
With the establishment of the
trade agreement between ASEAN and
China, the countries involved in the
agreement are perceived to mutually
benefit to a great extent in terms of
reduced transaction costs and efficient
procurement of product components
in the region, especially benefiting all
countries involved in regional
production network along with China.
The FTA also contributes to greater
regional stability besides offering
more systematic channels to dispute
settlement.
ASEAN-Japan Closer Economic
Partnership (AJCEP)
ASEAN and Japan continue to be
important trading partners in Asia.
In addition to being one of the most
important economic partners of
ASEAN, Japan is a major contributor
to development cooperation
activities in ASEAN. It has also been
providing technical assistance to
ASEAN through several programmes
and channels, over the period. In
order to further strengthen bilateral
cooperation and regional integration,
a closer economic Partnership
between them was envisaged. The
Joint Declaration on the
Comprehensive Economic
Partnership (CEP) between ASEAN
and Japan was signed on November
5, 2002 during the ASEAN-Japan
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Summit in Cambodia. It was
mutually agreed to establish a Free
Trade Area (FTA) to foster economic
cooperation within a period of ten
years, considering the different
levels of economic development and
sensitive sectors of each of the
member countries involved in this
agreement. To facilitate better
adjustment by newer ASEAN
members, Japan would also provide
special and differential treatment to
these countries. It was also
proposed to conclude the
negotiations on the AJCEP by 2007.
The CEP lays special emphasis on
cooperation in areas of financial
services, information and
communications technology, human
resource development, small and
medium enterprises, tourism,
transport, energy, food security, trade
and investment liberalisation, customs
procedures, non-tariff measures and
standards and conformance.
During the ASEAN-Japan summit
meeting in Bali in October 2003, the
Framework Agreement for the CEP
was signed between the countries to
enhance liberalisation of trade in
goods and services and investment.
Subsequent meetings also negotiated
issues pertaining to ASEAN-Japan
cumulative rules of origin, customs
classification and collecting and
analyzing trade and custom data. The
framework agreement also facilitates
negotiations on a bilateral basis
131

pertaining to liberalisation
concessions by other countries that
were not part of the bilateral
Economic Partnership Agreement
(EPA) with Japan. These negotiations
would remain intact even for ASEAN-
Japan CEP.
The CEP agreement also aims to
open up new opportunities for
investment by creating enhanced
business and trade opportunities for
both ASEAN and Japan. This
immensely potential strategic
economic partnership agreement is
also expected to bring about greater
stability and prosperity to the region.
It is also pertinent to note that Japan
has already put in place an FTA with
Singapore in 2002 and has recently
signed an FTA with Malaysia in 2006.
It is also pursuing negotiations with
Thailand, Philippines and Vietnam for
bilateral FTA deals. Thus, Japan has
already taken steps to enhance
economic integration with ASEAN
members. The CEP could become an
overarching framework for economic
cooperation between Japan and
ASEAN as a regional group.
The relations have been further
enhanced and strengthened by the
signing of the ‘Tokyo Declaration for
the Dynamic and Enduring ASEAN-
Japan Partnership in the New
Millennium’ and the adoption of the
‘ASEAN-Japan Plan of Action’ at the
ASEAN-Japan Commemorative
Summit held on 11-12 December 2003
in Tokyo. These declarations reflect
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the commitment of both sides to
develop an enduring and
comprehensive partnership in the 21st
century.
In terms of trade, in 2005,
ASEAN’s exports to Japan stood at
US$ 72.7 billion, accounting for 11.2%
of its total exports to the world.
Imports from Japan amounted US$ 81
billion or 14% of its total imports from
the world. ASEAN and Japan
represent a market of around
695million people (approximately
10% of the total world population),
and a total GDP of around US$ 5.4
trillion (approximately 12% of global
GDP).
ASEAN-KOREA FTA (AKFTA)
A further boost was given to the
emerging regionalism in Asia with
the increasing cooperation between
ASEAN and Korea, two very
important and major trading
members in Asia. ASEAN and Korea
have also been important trading
partners to one another. In 2005,
exports of ASEAN to Korea were
worth US$ 24.36 billion accounting
for around 4% of ASEAN’s total
global exports, and imports from
Korea to the tune of US$ 23.6 bn,
which accounted for 4.1% of
ASEAN’s total imports from the
world.
As far as foreign investment is
concerned, Korean investment in
ASEAN has generally accounted for
about 3% of the total foreign direct
investment (FDI) flows into ASEAN

over the period of 1995-2003.
However, Korea’s cumulative
investments in ASEAN amount to US$
11 billion, which accounts for 15.2%
of Korea’s total FDI outflow, making
ASEAN the third largest investment
destination for Korean firms. To give
a further thrust to the growing
relations and to enhance the ASEAN-
RoK economic cooperation, the
leaders of ASEAN and Korea
expressed commitment to develop a
comprehensive economic partnership
at the ASEAN-RoK Summit in October
2003 in Bali, Indonesia.
Subsequently, the Framework
Agreement on Comprehensive
Economic Cooperation among the
ASEAN member countries and Korea
was signed on December 13, 2005
and proposed to enter into force on
July 1, 2006. Continuous efforts have
been made since then to promote
economic relations and establish an
early ASEAN-Korea Free Trade Area.
Subsequent to the discussions, the
Trade in Goods (TIG) Agreement was
signed in August 2006. Efforts were
made to include Thailand in the TIG
agreement through mutual
negotiations between Korea and
Thailand. Significant progress has also
been made since then on negotiations
pertaining to services and investment
agreements as well. It was proposed
during the ASEAN – Republic of Korea
Summit held in Philippines in January
2007, that the target date for the
finalisation of these agreements
would be November 2007.
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Earlier during the 4th ASEAN
Informal Summit held in 2000 in
Singapore, ASEAN and Korea had
identified information technology,
human resource development,
cultural exchanges, medical assistance
and Mekong Basin development
cooperation, as priority areas for
cooperation. Subsequently to further
trade relations between the countries
it was decided to include investment,
financial services, tourism, science
and technology, energy, natural
resources and environment as other
potential areas of cooperation.
The AKFTA provides for special
and differential treatment and
additional flexibility for the new
ASEAN Member viz. Cambodia, Laos,
Myanmar and Vietnam. The
agreement is envisaged to promote
growth and development, increase
the living standard of the people
throughout the region and provide
further dynamic benefits to the region
in the long term. The proposed
cooperation is expected to further
strengthen and elevate mutual
relationship to a higher and more
comprehensive level, empowering
Asia’s stand in the global scenario.
Through progressive
liberalisation and elimination of tariff
and non-tariff barriers to trade in
goods and services, establishment of
an open and competitive investment
regime that facilitates and promotes
investment among the member
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countries, and provision of special
and differential treatment to the
parties, AKFTA would not only
contribute to harmonious
development among the member
countries but would also expand
world trade and provide a catalyst to
broader international cooperation, in
particular within East Asia.
ASEAN-India FTA
During the First ASEAN-India
Summit held in Cambodia in 2002,
India proposed the initiative to
launch an ASEAN-India FTA, to
negotiate a closer economic
partnership agreement. The ASEAN-
India FTA is to be established within
a decade.
India being one of the fastest
growing economies in the world,
enhancement and strengthening of
ties and cooperation between India
and ASEAN would prove to be a major
force of development. This initiative
aims to enhance and promote better
economic and political cooperation
between India and the ASEAN
member countries.
With the signing of the
Framework Agreement for a
Comprehensive Economic Partnership
Agreement between ASEAN and India
during the Second ASEAN-India
Summit in Bali in October 2003, India
again emphasised its commitment to
intensify its economic relations with
the Asian bloc. Due to the socio-
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cultural affinity among the ASEAN
countries and India, the agreement is
expected to go well beyond a
traditional FTA and prove to be a
significant, dynamic, strategic and
political partnership.
India’s dynamic comparative
advantage in the fields of information
and communication technology,
advanced technology and research in
agriculture, biotechnology, remote
sensing, pharmaceuticals and
healthcare would benefit especially
the newer ASEAN countries in
improving their levels of economic
development.
The early harvest programme
provided in the framework agreement
identifies areas for collaboration and
a common list of items for preferential
tariff concessions among the
countries. It was proposed in the
agreement that tariffs on imports from
Brunei, Cambodia, Laos, Indonesia,
Malaysia, Myanmar, Singapore,
Thailand and Vietnam would be
eliminated by India by 2011, with
Cambodia, Laos, Myanmar and
Vietnam (CLMV) members eliminating
tariffs for India from 2016. Tariffs
between India and Philippines would
be eliminated on a reciprocal basis
by 2016. In order to extend special
and differential treatment to the newer
ASEAN members as per its
commitment, India has also agreed
to extend unilateral tariff concessions
to the CLMV countries on a number
of items.

This agreement, once established
is expected to link India more closely
with the East Asian economies, and
give a new thrust to regionalism
efforts in Asia. The bilateral trade
between ASEAN and India is at
present US$ 30 billion in 2006-07 up
from US$ 23 billion in 2004-05.
Bilateral trade is likely to grow and
strengthen further with the
establishment of the FTA between the
economies.
To sum up, besides these
initiatives a number of bilateral and
regional initiatives among the Asian
economies are also being currently
negotiated. As discussed in the
previous chapters, a number of Asian
countries have already engaged in
free trade agreements with a number
of countries both within and outside
the region. Singapore has been the
most aggressive among all Asian
countries in terms of its engagement
in trade agreements. It is widely
acknowledged that Asia will be the
engine of growth for the world in near
future.
The pattern of emerging
regionalism in Asia and the preceding
trends, as elaborated in the earlier
sections, highlights the significant
scope for enhancing trade and
investment flows among the Asian
economies. The rising regionalism in
in the region would lead to a more
integrated Asia that would become
highly competitive in the global
economy, pushing global trade and
investment to greater heights.
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SOME SPECIAL INITIATIVES
As indicated earlier in the previous
sections of the study, engagement
in any sort of a regional trade
agreement is desirable; however, it
is not always possible to establish
a trade agreement between two
countries due to some hindrances
or socio-political-economic
considerations. There are a few
instances, in such cases, where
countries like the United States and
the European Union have engaged
in trade relations with countries,
outside the purview of any regional
trade agreement, by granting them
special privileges, concessions and
benefits. Examples of such
programmes include the Generalised
System of Preferences (GSP), the
African Growth and Opportunity Act
(AGOA) and the Andean Trade
Preference and Drug Eradication
Program (ATPDEP). These special
initiatives are briefly discussed in the
following section.
United States Generalised
System of Preferences (US
GSP)
The United States designed a
proagramme to promote economic
growth and development especially
in the developing countries. This
programme, called the Generalised
System of Preferences, instituted in
1976, provides preferential duty free
entry for more than 4650 products
from 143 designated beneficiary
countries and territories. This
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programme was authorised for a
period of 10 years under the Trade
Act of 1974 and renewed
periodically. Most recently it was
renewed in 2006 for a period of two
years. There are currently 43 least-
developed GSP beneficiary
countries. The imports from these
beneficiary countries into U.S. under
GSP in 2006 amounted to US$ 32.6
billion, an increase of 22 percent
over 2005.
Products that are eligible to
receive preferential treatment under
the GSP include most dutiable
manufactures and semi-manufactures,
and certain agricultural, fishery, and
primary industrial products. Products
that are excluded from preferential
treatment and benefits are textiles
produced with cotton, wool,
manmade fiber, other vegetable fiber;
watches; certain footwear and
handbags; luggage; and certain silk
and leather products.
In order to ensure that the
benefits of the scheme reach the least
developed countries, for which they
are actually meant, the act specifies
some product and country specific
eligibility criteria, which among
others, specifies that when product
inputs are imported from non GSP
beneficiary countries, the product
must undergo at least 35% value
addition in the GSP beneficiary
country to be sold for export into the
20 The GSP+ beneficiary countries include Bolivia, Colombia, Costa Rica,
Ecuador, Georgia, Guatemala, Honduras, Sri Lanka, Moldova, Mongolia,
Nicaragua, Panama, Peru, El Salvador and Venezuela.
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United States under preferential
treatment.
European Union Generalised
System of Preferences (EU
GSP)
The European Community
implemented the GSP scheme in
1971, granting products imported
from the developing GSP beneficiary
countries preferential treatment,
either through duty-free access or a
tariff reduction based upon specific
arrangements. The guidelines for the
GSP scheme for the period 2006 -
2015 were adopted in 2004. In 2003,
imports from these GSP beneficiary
countries into EU amounted to
US$ 52 billion. Moreover, the share
of developing countries in total EU
imports under EU GSP increased
from 33% to 40%. It was proposed
to extend the coverage of the
general GSP scheme to include 300
additional products mostly in the
agriculture and fishery sectors.
A special incentive scheme for
sustainable development and good
governance, providing preferential
treatment to developing countries
with especially lower share of EU
imports, known as the “GSP-plus” or
“GSP+” incentive20 was introduced in
July 2005. The special incentive
“GSP+” scheme provides additional
benefits for countries implementing
certain international standards in
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human and labour rights, African Growth and

environmental protection, the fight
against drugs, and good governance.
The new scheme would allow 7200
products to enter the EU market duty
free. According to the GSP+, product
groups from beneficiary countries that
account for more than 15% of EU
imports in a given sector from GSP
countries cease to benefit from
preferential access. The
corresponding share for textiles is
12.5% as in case of clothing.
Under the new scheme, 80% of
China’s exports to EU will cease to
gain preferential treatment, although
it remains in the GSP. EU is also
reforming its Rules of Origin that
govern GSP eligibility to provide
further access for developing
countries.
The EU also has in place a special
arrangement for the least-developed
countries (LDCs), known as the
“Everything But Arms” (EBA)
initiative, which provides most
favourable preferential treatment to
the least developed countries through
“duty-free and quota-free” access to
the EU’s market.
Opportunity Act (AGOA)
The African Growth and
Opportunity Act (AGOA), which was
enacted in May 2000 as part of the
Trade and Development Act of
2000, is the centrepiece of U.S. trade
policy for Sub-Saharan Africa (SSA).
AGOA provides numerous economic
benefits, incentives and concessions
to promote economic reform and
trade expansion in Sub-Saharan
Africa, including duty-free access to
the U.S. market for almost all
products made in the beneficiary
Sub-Saharan African countries 21 .
AGOA extends duty-free entry into
the U.S. for approximately 4600
product lines to the AGOA-eligible
SSA countries. The Act also
institutionalises a process through
which U.S. trade relations with Sub-
Saharan African countries are
strengthened by the establishment
of a regular ministerial-level forum
with AGOA-eligible countries.
Eligibility of African countries to
AGOA requires fulfilment of certain
criteria which include establishment
of a market-based economy and the
rule of law, the elimination of barriers

21 The eligible AGOA beneficiary Sub-Saharan African countries include Angola,

Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Chad,
Congo, Dem. Rep of Congo, Djibouti, Ethiopia, Gabon, Gambia, Ghana,
Guinea, Guinea Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali,
Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao
Tome, Senegal, Seychelles, Sierra Leone, South Africa, Swaziland, Tanzania,
Uganda and Zambia.

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to U.S. trade and investment,
implementation of economic policies
to reduce poverty, the protection of
internationally recognised worker
rights, and establishment of a system
to combat corruption apart from
adhering to internationally recognised
human rights and discouraging acts
of international terrorism.
The AGOA Acceleration Act of
2004, amended several key provisions
of AGOA. An important provision
made in the Act is the extension of
the authorisation of the overall AGOA
programme from 2008 to 2015 and
extension of AGOA’s special third-
country fabric provision by three
years, to September 30, 2007. The Act
also amended several technical
aspects of AGOA’s apparel provisions
to allow broader eligibility for
products incorporating certain inputs.
Under this provision, less-developed
beneficiary countries are permitted to
use regional or third-country fabric
in apparel imported into the United
States under AGOA, subject to an
overall cap. The Act encouraged the
administration to develop policies that
enhance trade capacity, support
infrastructure projects and the eco-
tourism industry.
Through the Africa Global
Competitiveness Initiative (AGCI),
announced in 2005, US provided an
additional financial assistance worth
US$ 200 million over the next five
years for trade related capacity
building. AGCI helps build the
capacity of African nations to take
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advantage of trade opportunities and
increase their competitiveness.
As a result of the benefits and
concessions being provided by the US
to AGOA countries, the total trade has
seen a significant rise from US$ 27
billion in 2000 to more than US$ 66
billion in 2006 (AGOA’s trade pattern
with US over the last six years is
presented in Table A7 in the
annexure). The trade balance has
been consistently in favour of AGOA
countries, with exports from AGOA
countries to US being consistently
much higher than imports. The
exports from AGOA countries to US
accounted to US$ 56.15 billion in 2006
compared to US$ 21.87 billion in 2000.
Though the magnitude of AGOA
imports too have doubled, during the
period, the magnitude remains
relatively much lower at only US$
10.63 billion in 2006. It is also
interesting to note that the trade
surplus for AGOA countries has been
continuously increasing since 2002
from US$ 11.8 billion in 2003 to US$
45.5 billion in 2006, reflecting the
highly beneficial nature of AGOA for
the Sub Saharan African countries.
A substantial portion of the value
of SSA countries’ combined exports
to the U.S. consists of ‘energy-related’
products, which comprise mainly of
oil and natural gas. Items from the
various manufacturing sectors, on the
other hand, dominate U.S. exports to
SSA countries. AGOA also establishes
a U.S.-Sub-Saharan Africa Trade and
Economic Cooperation Forum,

informally known as “the AGOA
Forum”, to annually discuss
expanding trade and investment
relations between the United States
and Sub-Saharan African countries,
and implementation of AGOA. The
Sixth AGOA Forum was held in Accra,
Ghana from July 18- 19, 2007.
Andean Trade Preference and
Drug Eradication Programme
(ATPDEP)
The Andean Trade Preference Act
(ATPA) was implemented by US in
December 1991 to help four Andean
countries (Bolivia, Colombia,
Ecuador and Peru)22 fight against
drug production and trafficking by
expanding their economic
alternatives and providing duty-free
access to U.S. markets.
The objective of the ATPA is to
promote broad-based economic
development, diversify exports,
consolidate democracy, and defeat
the scourge of drug trafficking by
providing sustainable economic
alternatives to drug-crop production
in these Andean countries.
The Andean Trade Preference Act
(ATPA), was amended by the Andean
Trade Promotion and Drug
Eradication Act (ATPDEA), which was
signed into law in August 2002, as
part of the Trade Act of 2002. The
programme provides enhanced trade
22 Although Venezuela is a member of the Andean Community along with the
four ATPA beneficiary countries, it is not eligible under the statute to be
designated as an ATPA beneficiary country.
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benefits for the four ATPA beneficiary
countries. The ATPDEA renewed and
amended ATPA to provide duty-free
preferential treatment for certain
products previously excluded under
the ATPA viz. certain textile and
apparel articles, footwear, tuna
packaged in foil or other flexible
packages, petroleum and petroleum
derivatives, watches and watch parts,
and certain leather goods. In 2002,
all four ATPA beneficiary countries
were designated as ATPDEA
beneficiary countries, considering the
various eligibility criteria provided in
different sections of the act, and thus
became eligible for the enhanced
trade benefits of the Andean Trade
Promotion and Drug Eradication Act.
In ATPDEA, duty-free treatment
applies only to articles that meet the
programme’s rules of origin
necessities, including a requirement
that the sum of the cost or value of
the inputs produced in the beneficiary
country and the cost of processing
operations performed in the country
must not be less than 35 percent of
the value of the article.
As a result of the United States’
provision of concessions and
economic incentives, U.S. trade with
the ATPDEA countries has continued
to grow substantially during the past
few years. In 2006, two-way trade
increased 18 percent, following a
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25 percent increase in 2005. The total
trade between US and ATPDEA
countries accounted for US$ 34.15
billion in 2006, rising from US$ 17
billion in 2000. Good economic
performance in the United States as
well as in each of the four ATPDEA
countries in 2006 fueled trade in both
directions. Since 1991 when ATPA
was enacted, U.S. imports from the
region have increased by almost five
times, while exports have tripled.
(refer Table A8 in annexure for trade
pattern between US and ATPDEA
from 1991 to 2006).
U.S. imports from ATPDEA
countries reached record levels in
2005 and again in 2006. They rose by
12 percent in 2006 to US$ 22.5 billion
following a 30 percent increase in
2005. US imports from ATPDEA
countries as a share of US global
imports also increased during this
time period, accounting for 1.2
percent of total US imports in 2006,
the highest share recorded since ATPA
was enacted in 1991. Exports from
US to ATPDEA countries too
increased substantially, recording a
growth rate of more than 30% in 2006
since the previous year. Total US
exports accounted for US$ 11.63
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billion in 2006 compared to only US$
3 billion in 1991.
The Andean Trade Preference Act
(ATPA) as amended by the Andean
Trade Promotion and Drug
Eradication Act (ATPDEA) (jointly
referred to as ATPA/ ATPDEA) was
extended in July 2007 by a legislation
being signed by the US President. It
is also noted that the ATPA/ ATPDEA
is alleviating poverty by creating jobs
and economic opportunities for the
people of the Andean countries, apart
from rising bilateral trade and
cooperation. Thus, it can be
concluded that the ATPDEA has
proved mutually beneficial to both the
Andean region and the United States.
Such trade preference
programmes offered by U.S,
demonstrate US leadership and are
important tools for building prosperity
and openness, and furthering
economic integration and
cooperation. The ATPDEA has been
successful in strengthening economic
and commercial ties. Moreover, as can
be observed from the earlier
discussion, the United States is the
leading source of imports and the
leading export market for each of the
beneficiary countries.

6. THE WAY FORWARD: MAJOR
OBSERVATIONS AND STRATEGY
RECOMMENDATIONS
The study so far has attempted
to analyse the key trends in regional
trade agreements across the globe
including India. The recent spur in
such agreements indicates that the
trend is likely to continue in the years
to come. This could be particularly
buttressed by the gradual weakening
of progress in multilateral
negotiations. Emerging trends in
economic integration attests to the fact
that bilateral and plurilateral
integration stand as effective avenues
through which economies,
irrespective of their state of
development, would enhance their
global integration. Therefore,
bilateralism has emerged as the
preferred avenue for arriving at
multilateralism eventually. With a
view to project this central feature in
global economic integration, it is
crucial to briefly outline the key
trends, which have emerged out of
the study. The following section,
therefore, makes an attempt to
highlight key observations from the
study. An attempt has also been made
to identify possible broad strategies,
which India could adopt, in tune with
global trends and development.
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General Observations

There exists an increasing
interest among countries to
establish regional trade blocs
and to partner with
neighbouring countries in the
region as well as with distant
countries and trading blocs.
Physical geographical borders
cease to be a hindrance in the
endeavour to foster and
strengthen intra and extra
regional linkages and economic
cooperation. The need for such
regional trade agreements has
arisen from a number of socio-
economic, political and security
considerations.

Bilateral regional trade
agreements continue to
proliferate, across the globe, as
progress on the WTO based
multilateral trade talks has
remained subdued and talks
have been mostly inconclusive
in recent times. The gradual
erosion of faith in
multilateralism has given a new
thrust to the concept of
regionalism as a highly effective
tool for expanding international
141

trade, economic cooperation
and global integration. Presently,
more than one third of the
world’s trade takes place within
the framework of such
agreements23.

The number of RTAs have
almost tripled in the current
decade, compared to the
previous decade from 46 to 137
agreements. There are at present
205 RTAs, 124 agreements of
which have entered into force
post 2000. Moreover, 60% of the
total RTAs comprise of FTAs
followed by EIAs. The
predominance of FTAs is
probably due to the fact that
they are faster to conclude and
require a lower degree of policy
coordination among the
contracting parties. During
recent years, the maximum
number of 24 RTAs were
notified to the WTO and
entered into force in 2004,
followed by 19 agreements in
2006. This trend could possibly
be attributed to the failure of
the Fifth WTO Ministerial
Conference held in Cancún,
Mexico in 2003 and the Sixth
WTO Ministerial Conference
held in Hong Kong in 2005 that
could have eroded the
confidence of the member
nations in the WTO based
multilateralism and encouraged
them to engage bilaterally in
regional trade agreements.
23 World Development Indicators 2007, World Bank, Washington, D.C.
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Of all the bilateral RTAs
entering into force since 2000,
a significant proportion of the
agreements have been between
developing and developed
countries, followed by
agreements between developing
and developing countries. This
pattern is in contrast to the
trend depicted during 1995 to
1999, during which agreements
among developing countries
were more dominant. This
reflects an interest among
developing countries to engage
in agreements with more
developed nations to gain
access to the larger and more
potential markets and benefit
from the significant trade
opportunities inherent in these
markets. Similarly, it also reflects
the growing interest among
developed countries to engage
in trade agreements with
developing countries to target
the cheaper, less sophisticated
and ‘easy to approach’ markets
of these economies which
display considerable growth
possibilities. This could also
point to the eroding confidence
of developed countries in
multilateralism.

The study also highlights an
important feature associated
with customs union and
common markets. Countries,
which are members of customs

union or common markets, are
required to have a common
external tariff with respect to
imports from non-member
countries. This, on one hand,
has associated benefits and on
the other, could limit gains from
trade. This is explained as
follows.
 As far as member countries
are concerned, trade within
the bloc with other
member countries is highly
liberalised and open and
every member country has
free access to the markets
of all other countries in the
bloc. In case of a common
market there is also free
movement of factors of
production among the
member countries, in
addition to the free flow of
products. This type of an
institutional framework is
particularly beneficial for
smaller countries. However,
for a member country, it
restricts the choice and
freedom to enter into
bilateral agreements with
non-member countries.
This is particularly true for
larger and relatively more
advanced member
countries in the bloc. It
could be cited in this
regard, that though
MERCOSUR has been
involved in trade
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agreement with India, but
individually member
countries like Brazil and
Argentina do not have any
such trade agreements with
countries which are not
members of MERCOSUR.
 With regard to a non-
member country,
engagement with a customs
union or a common market
is advantageous as it is
easier for the country to
negotiate issues with a bloc
as a whole rather than with
individual countries with
diverse opinions and
interests. Engagement with
a customs union or a
common market as a
whole, also gives it access
to the markets of all the
member countries, which
would not have been
possible in case of bilateral
one-to-one agreements.
Typical example could be
the advantage of entering
into an agreement with EU,
which provides access to
all member countries of the
EU.

Leading countries that have
been aggressively pursuing
regional trade agreements with
other countries and trade blocs
include Mexico, Singapore,
Chile, United States and Turkey.
Analysis of the pattern of trade
performance of these countries
143

evidently substantiates the point
that engagement in Regional
Trade Agreements has had a
very beneficial and notable
impact on the trade
performance of these countries.
The value of trade of all these
countries with their RTA partner
countries over the past five
years has seen a sizeable
increase. Moreover, trade with
RTA partner countries
constitutes a major portion of
the total trade of these
countries, which also reflects the
importance and success of these
agreements. For instance, the

To conclude, an observation
total trade with RTA partner
countries as a percentage of
total trade of Mexico was as
high as 85% in 2005. The
corresponding share of Chile’s
trade with RTA partner countries
was 80% during the same year.

As discussed in the previous
chapter, developed countries
like US and EU have also
engaged in trade relations with
less developed countries,
providing preferential treatment
to their imports, outside the
purview of any regional trade
agreement, by granting them
special privileges, concessions
and benefits to promote trade
and economic development in
the region. Examples of such
special initiatives include the EU
and US Generalised System of
Preferences (GSP); African
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Growth and Opportunity Act
(AGOA) for the Sub-Saharan
African countries and Andean
Trade Preference and Drug
Eradication Act (ATPDEA) for
the Latin American countries by
United States. Such preferential
trade initiatives have
significantly impacted the
growth of these lesser-
developed beneficiary countries
and opened new avenues for
them to promote trade with
developed countries in the
absence of the possibility of a
trade agreement.
that very clearly emerges from
the study is that there is an
increasingly growing tendency
among countries to encourage
regionalism as a more
productive and efficient
alternative to foster trade and
development. This does not
understate or play down the
importance of multilateralism in
global trade. However, it is
interesting to note that
regionalism has been playing a
very crucial role in paving way
for eventual multilateralism. As
evident from the pattern of
trade engagement of most
countries and the emergence of
trade blocs and their expansion,
the approach could be ‘from
regionalism to multilateralism’.
This can also be viewed as a
‘bottom-up’ approach in contrast

to the notion of ‘top-down’
approach exhibited by the
concept of multilateralism. The
‘ASEAN plus three’ initiative
could be cited as a classic
example in this regard, where
initially the five countries
namely Indonesia, Malaysia,
Philippines, Singapore and
Thailand constituted the
Association of South East Asian
Nations (ASEAN), which later
expanded to include Brunei,
Cambodia, Myanmar, Laos and
Vietnam. The ASEAN FTA
(AFTA) was subsequently
further expanded and was
termed as ‘ASEAN plus three’
with AFTA’s engagement with
Japan, China and Korea. This
could be viewed as a classic
case of ‘bottom-up’ approach to
global economic integration.
Regional Observations
America

In America, Southern Cone
Common Market (MERCOSUR),
Latin American Integration
Association (LAIA), North
American Free Trade Agreement
(NAFTA) and Free Trade
Agreement of America (FTAA)
could be identified as the major
trading blocs. Intra bloc
merchandise exports of NAFTA
and FTAA are exceptionally
high compared to other trade
blocs in the region averaging
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close to 55% and 60%
respectively.

Almost all countries in Latin
America and Caribbean are
already well integrated among
themselves, being members of
one or the other main trading
blocs like MERCOSUR, Andean
Group, LAIA, CACM and
CARICOM, the countries of
North America are well knit by
NAFTA and interestingly the two
giant blocs are bound by FTAA
to a great extent.

US, Mexico and Chile are the
important countries in the
region which are involved in
bilateral trade agreements. Chile
has shown more interest in
entering into bilateral RTAs with
Central and North American
countries as compared to South
American countries. It has also
shown interest in the East with
its engagement with Korea and
China more recently. Mexico
has been involved in the largest
number of RTAs in the world,
with 19 agreements. Its bilateral
trade engagements have been
more concentrated in Central
American countries. The United
States, on the other hand, has
maintained good trade relations
with West Asia through
engagement in FTAs and has
shown an increasing interest in
FTAs especially since 2004. The
trend in extra regional
engagements of these countries,
145

generally, is more bilaterally
focused and on a one-to-one
basis with individual countries
rather than with any group of
countries or any trading bloc,
though some countries like
Chile and Mexico have also
engaged in agreements with
regional blocs like EU and
EFTA.
Africa

As far as the African region is
concerned, the main trading
blocs are ECOWAS, SADC,
COMESA and UEMOA. Though
modest, nevertheless, the intra-
bloc merchandise exports of
African trade blocs have shown
a steady increase in recent
years. Between 1999 and 2005,
intra-bloc exports have more
than doubled for COMESA and
ECOWAS and have grown
substantially in case of SADC.
However, declining shares of
intra-bloc exports as percentage
of global exports of these blocs
imply a growing tendency to
trade beyond the region by
member countries. With regard
to EAC and UEMOA, although
in absolute terms intra-bloc
exports are extremely modest,
but these two blocs show the
highest share of intra-bloc
exports as percentage of global
exports of these blocs.

Most African countries are
members of one or more
trading blocs and thus, are intra-
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regionally well knit. However,
countries like Tunisia, Morocco,
Algeria, Egypt and South Africa
have looked beyond the African
region and have tried to explore
opportunities to enhance and
further their trade relations with
countries outside the region.
Most African countries either
being low income or lower
middle income countries, sought
to explore trade opportunities
outside the African region, as a
result all bilateral engagements
of African countries have been
outward oriented. Particularly
EU has been a preferred partner
in all such cases.
Asia

ASEAN has emerged as a very
important and crucial trade bloc
in Asia. The contribution of
ASEAN to global exports has
consistently been above 6%
during 1999-2005. The share of
intra-bloc exports of ASEAN in
total bloc exports has
maintained a steady ratio of
around 22% during the period.
ASEAN has also developed
linkages with India, China,
Korea and Japan, which projects
a potentially vibrant and
integrated Asia in the years
ahead.

Asia has been more receptive,
open and forward looking,
especially since the dawn of the
new millennium, with almost all
trade agreements by the Asian

countries entering into force
only after 2001. The East Asian
financial crisis has also been
instrumental in promoting
economic integration in the
region. In Asia, economies like
China, Singapore, Korea,
Thailand and Japan are
increasingly participating in
trade agreements outside Asia to
expand their trade potential by
exploring opportunities to enter
the potential markets of the
West, through association in
FTAs with USA, Chile and
Mexico. More recently,
Singapore, Korea and Japan
have also shown interest in
reinforcing their ties within Asia.
Among all Asian economies,
Singapore has been the most
aggressive in pursuit of RTAs
with a spectrum of agreements
with a number of countries
ranging across different regions
of the world.

India’s endeavour to foster its
international trade has also been
well complemented by its
efforts to promote regional
trade. This has its reflection in
the various initiatives India has
effected, in line with the global
trend, in fostering and
facilitating trade with select
countries and blocs. In Asia,
India has been involved in trade
agreements and negotiations
with Sri Lanka, Singapore,
Thailand, ASEAN, BIMSTEC and
SAFTA. Other than looking East,
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India has also seriously begun
efforts to develop preferential
trade linkages with developing
countries located elsewhere like
a PTA with MERCOSUR and
Chile in Latin America; a
framework agreement for FTA
with the GCC in West Asia; PTA
with SACU in the African
region; and negotiations to
establish a Comprehensive
Economic Cooperation and
Partnership Agreement with
Mauritius. An analysis of India’s
trade performance with its RTA
partners, over the period of five
years since 2001-02, reveals a
sharp increase in bilateral trade.
India’s total trade with its RTA
partners, as a percentage of its
global trade has shown a decent
rise from 20% to around 30%
of total trade during the period
2001-02 and 2006-07. Moreover,
exports have grown at a CAGR
of 32% and imports at 44%
during the period. This clearly
indicates that more of India’s
trade is increasingly taking place
with countries with which it has
established some kind of
preferential trade arrangement
or with countries with which it
is strongly negotiating a free
trade agreement or a
comprehensive economic
cooperation agreement to foster
bilateral trade. Development of
India’s engagement with ASEAN
into a Free Trade Agreement
147

could provide a major boost to
the ongoing efforts to promote
regionalism in Asia and could
help in the creation of a Pan
Asia Free Trade Area.

As earlier discussed, an
interesting feature of the pattern
of engagement in trade
agreements by Japan is its
interest and willingness to strike
an accord with ASEAN in spite
of its engagement in RTAs with
Singapore and Malaysia, both
being members of ASEAN. A
somewhat similar interest has
also been shown by India with
its engagement with Singapore
in a CECA and its proposed
FTA with Thailand, both being
members of ASEAN, in spite of
India’s association with and
efforts to conclude an FTA with
ASEAN separately. Such bilateral
trade accords reinforce and
further strengthen the
relationship among countries
and could be an avenue to
foster trade relations and
economic growth.
West Asia

The West Asian region has seen
the emergence of GAFTA and
GCC as the main trading blocs
in the region. The intra-bloc
merchandise exports of GAFTA
have shown a continuous
impressive growth from
US$ 13 billion in 1999 to more
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than US$ 44 billion in 2005
growing at a compounded
annual rate of 21.7% during the
period. GCC and the Arab
Common Market too have
recorded a notable increase in
exports within the bloc during
the period. However, the share
of intra-bloc exports in total
exports of GCC has declined
from 1999 to 2005, which
possibly indicates the
willingness on part of its
member countries to explore
trade opportunities with other
countries outside the region.

Being well knit intra-regionally,
the West Asian countries are
exploring opportunities for trade
association outside the region
with other countries and trade
blocs. Israel and Jordan are the
only two countries in West Asia
which have shown some
interest in engagement in trade
agreements outside the region,
except for Lebanon’s
involvement with EU in 2003
and more recently with EFTA
in January 2007 and Syria’s
involvement with Turkey also in
January 2007. However,
countries collectively,
represented by trading blocs
like GCC and GAFTA are
exploring opportunities to
establish free trade agreements
with extra regional countries
and blocs.

Europe

In Europe, the most prominent
trading blocs are EU and EFTA,
which are engaged in
agreements with a number of
countries. The share of
European Union exports in total
world exports has been close
to 40% during the past decade.
A high constant share of intra-
bloc exports of EU and EMFTA
in total bloc exports, together
with increasing intra-bloc
merchandise exports, to the
tune of around US$ 2.6 trillion
and US$ 2.8 trillion respectively
in 2005, shows the growing
cooperation and trade linkage
among the member countries
within the blocs and the
immense trade potential in the
region.

The main players in RTAs in
Europe are Albania, Croatia,
Turkey, EFTA and EU. While
Albania, Croatia and Turkey
have evinced interest in bilateral
agreements with countries and
blocs, however, Western
European countries have united
to form the European Union.
The EU has strong and diverse
intra and extra bloc trade
linkages with number of
countries in West Asia, Africa,
North America and Latin
America. However, it is in the
larger interest of these
partnering countries to be
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associated with the European
Union, which provides them an
excellent gateway to explore
and tap the immense potential
of the European market. Apart
from EU, Albania and Croatia
have focused on strengthening
their ties within the European
region, rather than ambitiously
exploring extra regional
opportunities. Unlike other
European countries, Turkey has
been more extra regionally
oriented in its approach to trade
initiatives with an inclination
towards the West Asian and
North African region. EFTA has
been mainly involved in trade
agreements with countries in the
North African, North American
and Latin American region. It
has also tried to foster trade
relations with East Asia with
FTAs with Singapore and Korea.
CIS region

The intra bloc merchandise
exports of CIS have shown a
steady increase over the period
1999 to 2005. Though the intra
bloc merchandise exports of CIS
as a proportion of global
exports of the bloc have
declined, it still remains a very
important bloc in the region
uniting the Commonwealth of
Independent States and
promoting economic
development of the region as a
whole.
149


It is very interesting to note that
all bilateral trade engagements
of CIS countries have entered
into force only after the creation
of the Commonwealth of
Independent States (CIS) trading
bloc in 1991 and that no new
initiatives have entered into
force since 2001, with the
exception of Moldova, which
entered into as many as 5
agreements with European
countries during 2004. Almost
all the 12 CIS countries, with
the exception of Moldova, are
engaged in agreements with
only other CIS countries. Thus,
the CIS countries have explored
opportunities to enter into
bilateral agreements with
countries within the region to
foster economic growth and
cooperation and better mutual
trade relations. This shows that
despite having a trading bloc,
there have been tendencies
among countries to form
bilateral trade agreements with
countries within the bloc, which
is a distinct feature as compared
to the trend or pattern of trade
engagement in any other region
discussed in the study.
Strategy Recommendations
India has significantly enhanced its
global economic integration in
recent years. This is evidenced by
the sharp rise in India’s merchandise
trade-GDP ratio from around 13%
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in 1990-91 to around 35% in 2006-
07. However, India’s share in global
merchandise exports stands at a
modest 1%, which is not
commensurate with the potential of
the Indian economy. India is set
to emerge as the third largest
economy in the world by 2032 and
this calls for substantial progress in
India’s international trade. Trade
could act as an engine of growth
for the Indian economy and thereby,
play a pivotal role in enhancing the
economic prowess of India. In this
regard, regional trade agreements
could be a preferred avenue for
India to strengthen its global
economic integration. Recognising
this and in tune with global trends,
India in recent times has begun the
process of exploring opportunities
in the form of regional trade
agreements. However, India needs
to take calculated steps in this
direction on the basis of
opportunities and concerns. In the
era of increasing bilateral trade
agreements, India needs to
understand the long-term
implications arising out of its RTAs
and adopt an approach, which does
not act against the long-term interest
and potential of the Indian
economy. As the benefits from a
RTA typically erode when the
partner country enters into a similar
trade agreement with a third
country, free trade at the multilateral
level appears as the ideal situation,
which also attests equality and fair

trade. India has been a founder
member of GATT and has emerged
as a key representative of
developing countries in the WTO
negotiations, despite its modest
share in international trade. India
therefore, needs to continue its
strive in multilateral trade
negotiations as the returns from
successful negotiations could be
manifolds as compared to bilateral
agreements. In short, India’s broad
strategy could be continuation of its
strive for eventual multilateralism, in
simultaneity with considering
bilateral and plurilateral trade
initiatives, however safeguarding the
long-term potential and interests of
the Indian economy. This strategy
could be outlined in terms of the
following three broad perspectives
- a) advancing on the road to
multilateralism, b) adopting
calculated steps towards regional
trade agreements, and c)
approaching effective regionalism:
looking beyond free trade
agreements. The following sections
delineate each of these perspectives.
(a) Advancing on the road to
multilateralism: Multilateralism
is an egalitarian form of global
economic cooperation, which
refutes discrimination. Successful
multilateral negotiations serve
the interest of all, irrespective
of their levels of development,
and creates a common platform
for free and fair trade to take
place. However, the path to
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successful settlement of
individual interests is rigorous
and therefore, it often distracts
the constituents to undertake
alternative approaches to
economic integration,
bilateralism being the most
sought after route. Nevertheless,
bilateralism or regionalism has
its own limitations. A key
drawback of regionalism is its
requirement for reciprocal
commitment from its parti-
cipants. While in multilateral
negotiations, developing
countries have the Special &
Differential Treatment (S&DT)
working in favour of them, in
FTAs governed by reciprocity,
they are exposed to the same
degree of liberalisation as
extended by the partner
country/countries. This limits
the potential economic gains of
the developing country,
particularly if the partner is a
developed country. The S&DT
is applicable to India and by
virtue of it India is eligible for
longer time periods for
implementing agreements and
commitments. Secondly, as
mentioned in the previous
section, the gains from a RTA
cease once the partner country
enters into a similar agreement
with a third country. In view
of the above, India should
continue its strive for
multilateralism and consider
151

regionalism as one of the
avenues for enhancing its
international economic
collaboration.
(b) Undertaking calculated
initiatives in regionalism:
Given the global trend in
regionalism, India needs to
maintain its current focus on
entering into bilateral and
plurilateral trade agreements.
Non-participation in RTAs would
constrain India’s competitiveness
with respect to other developing
countries who might have
entered into free trade
agreements with India’s
prospective FTA partners.
However, multiple agreements
pose a challenge in the form
of management of customs in
the face of different rules of
origin as per different
agreements. It is therefore,
important to have an integrated
approach while identifying
countries/blocs with whom
India could negotiate the
possibilities of a RTA. The
following approach may be
considered in this regard:
i. To maintain consistency
in negative lists: The
basic purpose of a negative
list is to safeguard a section
of the domestic industry by
restricting imports.
Therefore, difference in
negative lists could be self-
defeating in the sense that
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the listed products could
be imported freely from
other FTA partners. In
order to rule out this
possibility it is crucial for
India to maintain
consistency in negative lists
of different trade
agreements.
ii. To address the issue of
Non-Tariff Barriers: It is
important to note that RTAs
provide an opportunity for
international trade to take
place between the
participating countries in a
liberalised environment and
do not automatically
endorse the increase in
bilateral trade. This is
because most RTAs focus
on the reduction of tariffs
and not on the non-tariff
barriers to trade. However,
non-tariff barriers such as
health and safety
requirements or technical
barriers to trade could act
as important impediments
to export growth,
particularly for developing
countries like India, even
if tariffs are brought down
by the partner country. It
is important therefore, for
India to address the issue
of NTBs in free trade
negotiations with a view to
effectively promote bilateral
trade with the partner

country. This would be
particularly required while
negotiating free trade
agreements with developed
countries like the US or the
European Union. It may
be cited that elimination of
NTBs has been an integral
part of NAFTA agreement,
which facilitated growth of
Mexico’s exports to the
United States.
iii. To explore trade
agreements with all
major trade blocs:
Having noted the positive
impact of regional trade
agreements on a country’s
trade performance an
overall conclusion that can
be drawn from this study
is that India could explore
trade accords with all major
trading blocs in different
regions of the world viz.
MERCOSUR in Latin
America, NAFTA in North
America, EU in Europe,
ASEAN in Asia, GCC or
GAFTA in West Asia, SADC
& SACU in Africa and the
CIS countries. Successful
negotiations would lead to
substantial enhancement of
market access in these
blocs, on one hand, and
would widen the choice set
for competitive imports on
the other. For those which
are customs unions or
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common markets, there is
no option but entering into
agreements with the blocs
as a whole, but even in
other cases too striking an
accord with a bloc rather
than an individual country
implies maximum gains.
India has already signed
trade agreements with
MERCOSUR, GCC, ASEAN
and SACU, which have
strengthened India’s trade
linkages in Latin America,
West Asia and Africa. This
trend could be further
strengthened in the years
ahead.
iv. To enter into trade
agreement with at least
one major country of a
trade bloc: If the trade
bloc is not a customs union
or a common market but
only a free trade area, it
makes sense to consider
entering into a free trade
agreement with at least one
of the major members of
the bloc. This would
provide access to the
market of not only that
country, but the partner
country could also act as
a base for enhancing trade
with other countries of the
bloc. This indirectly would
facilitate India’s
international trade with the
bloc as a whole. In this
153

regard, it may be cited that
India has initiated the
process of negotiations for
a trade agreement with
Russia. Russia, being the
most important member of
the CIS countries, this
initiative is well crafted, as
it would result in access to
the Russian market directly,
and to other CIS countries
markets’ indirectly through
Russia. Similarly, India
may consider exploring a
free trade agreement with
Mexico, which can act as
a gateway to NAFTA as
well as to Central America.
Mexico is among the
leading trading partners of
India in the Latin American
& Caribbean region.
However, bilateral trade is
modest in comparison to its
potential, which implies
significant opportunities for
enhancing India-Mexico
trade. Mexico is also
actively engaged in
regional trade agreements,
which reflects its preferred
mode of integration with
the global economy.
Though majority of
Mexico’s international trade
is with the United States,
however, in recent times
Mexico’s non-US trade has
risen faster in comparison
to Mexico’s trade with the
US. This implies an
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opportunity for India to
negotiate a free trade
agreement with Mexico.
v. To focus on North-South
Agreements: A key
observation that has
emerged out of the study
is the growing interest in
free trade agreements
among developed
countries. The United States
and EU have been most
active in this regard.
However, India’s initiatives
till date have been
primarily with other
developing countries as the
linkages have been mostly
with Asian countries. It
may be noted that it is
crucial for India to
strengthen its trade linkages
with developed countries,
which is capable of
bringing in a quantum
increase in India’s
international trade. It may
be cited in this regard that
NAFTA led to a sharp rise
in Mexico’s exports to the
United States. Similarly,
Chile has largely benefited
from its FTAs with the US
and the EU. Free trade
agreements with the
developed countries such
as US, EU, Japan and
Australia could therefore,
substantially enhance
India’s international trade

through greater market
access in these economies.
It is worth mentioning here
that India has initiated
efforts to negotiate an India-
Japan (Comprehensive)
Economic Partnership
(c) Looking beyond free trade
Agreement, the first round
of negotiations for which
have commenced in 2007.
India has also made efforts
to negotiate a broad-based
trade and investment
agreement with EU and
negotiations between the
two parties are in progress.
United States being one of
the world’s largest
economies, India could
also explore opportunities
to enter into a preferential
trade agreement with the
US, given the vast market
potential of the country.
Such a linkage could
enable lower import duties
on manufactured exports
from India, greater
employment opportunities
for highly skilled Indian
technical personnel in the
US, and boost inflows of
US investment in key
sectors like telecommuni-
cations, IT, financial
services and infrastructure.
It is also observed that free
trade agreements work best
between countries that
have complementarities. In
this regard, an FTA with US
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might work well because
there are obvious
complementarities, such as
low cost advantage of India
and high intensity of capital
and technology of the US.
agreements: It has been noted
earlier in the study that along
with an increase in number of
bilateral FTAs, there has also
been a rise in number of
Economic Integration
Agreements (EIAs) in recent
times. Since 2000, 37 EIAs
have come into force, which
primarily look beyond free trade
in goods by incorporating free
trade in services, investments
and other regulatory issues.
Typically, EIAs relate to greater
levels of economic cooperation,
which are not restricted only by
free trade in goods. India has
also expanded its regional trade
agreements in recent times
beyond free trade in goods by
signing a number of compre-
hensive economic cooperation/
partnership agreements with
countries/blocs like Singapore
and ASEAN. Similarly, the
India-Sri Lanka Free Trade
Agreement is being transformed
into a CEPA and India is
negotiating such an agreement
with Mauritius. This trend
needs to be sustained as it
provides an opportunity for
achieving greater levels of
global economic integration, in
155

goods, services as well as in
investment. Moreover, by
involving services and
investment, an overall balancing
factor gets added to a typical
free trade agreement, where a
possible negative impact
emerging from free trade in
goods could be balanced by
gains from trade in services and
higher investment linkages. In
tune with this trend the
following strategies are
proposed which India could
explore and adopt.

To explore independent
service agreements: India
has a comparative
advantage in the services
sector compared to many
leading economies in the
world. The current
dynamism in the Indian
economy has been largely
the resultant of a consi-
stently growing services
sector. The services sector’s
performance has improved
each year since 2000-01
and in 2006-07 it grew by
a robust 11.2%. This
explains why it has
consistently accounted for
over half of India’s GDP
since 2000-01. India has
also emerged as a major
player in global trade in
services. Particularly, in
2006, India stood as the
10th largest services
24 Offshoring for Long Term Advantage; The 2007 A T Kearney Global Services
Location Index.
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exporter in the world with
a 2.7% share in global
exports of commercial
services. Both software
and business services have
significantly enhanced the
global stature of India’s
service sector. It is also
appropriate to note here
that India has ranked the
top among all countries of
the world in terms of
global services location
index in a study conducted
by A T Kearney24. While
India’s trade balance has
widened in recent years,
the positive balance in
services trade has
considerably contributed
towards containing India’s
current account deficit at
modest levels. It could be
therefore, in the interest of
India to pursue FTAs on
services, primarily with the
developed countries and
the leading emerging
economies where the
services sector is a major
component of economic
activity. This could be
considered given India’s
potential to gain from all
four modes of trade in
services, namely, cross
border supply,
consumption abroad,
commercial presence and
movement of people. India
could emerge as a pioneer

in setting a trend in FTAs
exclusively on services.
This would also strengthen
India’s stand in WTO
negotiations in services.
Apart from entering into
exclusive service trade
agreements, India could
also adopt the strategy of
moving from free trade in
services to free trade in
goods and thereby, set a
new trend in global
economic integration.

To focus on investment
agreements: On the
strength of economic
fundamentals and policy
incentives, India’s
investment attractiveness
has improved substantially
in recent years. This is
evidenced by an increase
in foreign investment
inflows to India from a
modest US$ 6 billion in
2002-03 to US$ 27 billion
in 2006-07. The trend is
likely to get strengthened
in the years ahead with
increasing investment
opportunities emerging in
manufacturing, services as
well as in agribusiness.
Another key sector
reflecting significant
investment opportunities is
the infrastructure sector,
where an investment target
of US$ 320 billion has been
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put by 2010. Similarly,
India’s overseas
investments have also risen
in recent years with
increasing endeavours by
Indian corporates to
venture global
opportunities matched by
gradual liberalisation of
overseas investment norms
by the Government. This
trend is also likely to
continue in the years
ahead. Therefore, bilateral
investment agreements
could play a crucial role in
facilitating the prospective
growth of FDI in India as
also contribute towards
higher levels of outward
investment from India. It
may be cited that India
already has in place more
than 50 Bilateral Investment
Promotion Agreements
(BIPA) which encourage
capital flows into India and
provide secured business
environment to Indian
overseas investors.
However, there are a
number of countries with
whom India has signed a
BIPA but the agreements
have not come into force.
Therefore, there is a need
to fill this existing gap.
Moreover, India could
consider entering into BIPA
with potential FTA partners
157

such as Mexico and Chile.
As trade and investment
are interwined, greater
levels of investment would
also promote greater levels
of bilateral trade. BIPAs
create favourable
conditions for enhancing
greater levels of
investments by providing a
legal basis for enforcing the
rights of the investors in
the countries involved in
the agreement. With a
view to stimulate
investments, India could
also consider expanding
the scope of BIPAs to
include specific investment
incentives in sectors such
as infrastructure.

To enhance regional
monetary cooperation:
In an era of volatile capital
flows, emerging economies
are increasingly considering
regional monetary
cooperation as an effective
tool to reduce the
repercussions of any
financial crisis or distress.
The Asian Bond Market
Initiative launched in 2003
following the Asian
financial crisis envisages to
deepen regional bond
markets in Asia and could
be cited as an important
development in this
direction. The basic thrust
25 Source: Asian Development Bank
158
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of ABMI is to develop
efficient and liquid bond
markets in Asia in order to
meet the needs for
indigenous medium and
long-term financial
resources and enable
further economic
development in the
region25. Therefore, ABMI
facilitates intra-Asian
investments, and in turn
regional economic
integration, through the
development of a regional
bond market. Similarly, a
clearing arrangement
among a group of central
banks could also promote
trade integration by
providing liquidity
financing to members of a
trade agreement. The
examples of Central
American Monetary
Stabilisation Fund found in
1969, and the reciprocal
credit and payment
agreement between the
central banks of the
members of LAIA (1965),
the Arab Monetary Fund
(1976), the clearing house
of COMESA members
found in 1984 could be
cited in this regard. In
recent times, the ASEAN+3
countries launched the
Chiang Mai Initiative in
2000, which permits

bilateral swap arrangements
between member countries.
However, India’s

To enhance cooperation
participation in these forms
of monetary cooperation
agreements has been
limited. India could
therefore, consider
enhancing its regional
monetary cooperation with
a view to support and
facilitate its regional trade.
Innovative ways and means
of monetary cooperation
may be considered in this
regard. A particular model,
which could be replicated
in the SAARC region, is
that of the Mercosur
Structural Convergence
Fund (FOCEM). FOCEM is
an instrument for
transferring funds from the
relatively advanced
countries of Mercosur
(Brazil and Argentina) to
the relatively less
developed countries in the
bloc (Uruguay and
Paraguay). The Fund co-
finances individual projects
submitted by the members
with the pre-determined
distribution of total
resources among the four
countries. Such an
initiative in the SAARC
region could meaningfully
contribute towards
economic development of
the region and truly
capture the essence of
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regional economic
integration.
in trade logistics: In the
WTO regime, reduction in
trade barriers, both tariffs
and non-tariff, as also
tightening of rules are
expected to intensify the
global trading environment.
There is, therefore, the
need to continuously
monitor the exporting
environment with a view to
reducing impediments to
external trade. Transaction
costs are identified as a key
impediment which not only
delays the process of
international trade but also
erode the profitability
arising out of international
business. Transaction costs
emerge from the various
procedural complexities
linked with exports, the
crucial being logistical
impediments. Transaction
costs of exports are
particularly high in case of
developing countries and
in case of India, though the
costs have come down,
they still continue to
encumber export growth.
India could therefore,
consider enhancing
regional cooperation in
trade logistics and trade
facilitation with a view to
reduce transaction costs of
159

exports. Several trade
blocs have addressed this
problem. SADC has a
Protocol on Transport,
Communications and
Meteorology, Association of
Caribbean States have a
common agreement on air
transport services, and
COMESA countries have a
common customs
document. The SAARC
agreement on Mutual
Administrative Assistance in
Customs matters could also
be cited in this regard.
However, India could also
explore similar possibilities
beyond SAARC, particularly
with key trading partners
like ASEAN and GCC
countries. India could also
explore opportunities in
trans-shipment services
given its strategic location
between the west and the
east and this could
meaningfully contribute
towards enhancing India’s
regional as well as global
trade.
160
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CONCLUSION
With the growing recognition of
regionalism or regional trade as an
engine of economic growth and a
gateway to global trade, a number
of countries have ventured to
complement their multilateral trade
efforts with regional trade initiatives
to boost bilateral/ multilateral trade
and eventually foster economic
growth. Evidence from countries
engaged in such regional trade
initiatives also substantiates the point
that engagement in such agreements
has a positive and significant impact
on a country’s trade performance,
giving an impetus for other
countries to also explore such
initiatives. Developed countries too
have shown an increasing interest
in such initiatives. Thus,
engagement in regional trade
agreements after carefully examining
the pros and cons of an accord
could well complement
multilateralism and prove to be
stepping stones or building blocks
to world trade and not stumbling
blocks to achieving the universal
goal of global amalgamation.
 CMYK

ANNEXURE

Table A1:
FTAs NOTIFIED TO WTO AND ENTERED INTO FORCE SINCE 2000
Year Name of the FTA Date of entry
into force
2007 EFTA-Egypt 1-Aug-07
(upto EFTA-Lebanon 1-Jan-07
July 18) Turkey-Syria 1-Jan-07
2006 EC-Albania 1-Dec-06
Chile-China 1-Oct-06
EFTA-Republic of Korea 1-Sep-06
United States-Bahrain 1-Aug-06
Panama-Singapore 24-Jul-06
Japan-Malaysia 13-Jul-06
Republic of Korea-Singapore 2-Mar-06
Dominican Republic-Central America-United States 1-Mar-06
(CAFTA-DR)
Turkey-Morocco 1-Jan-06
United States-Morocco 1-Jan-06
2005 EC-Algeria 1-Sep-05
Jordan-Singapore 22-Aug-05
India-Singapore 1-Aug-05
Thailand-New Zealand 1-Jul-05
Turkey-Tunisia 1-Jul-05
EFTA-Tunisia 1-Jun-05
Turkey-Palestine 1-Jun-05
Japan-Mexico 1-Apr-05
Thailand-Australia 1-Jan-05
United States-Australia 1-Jan-05

(Contd...)

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(Contd...)
Year Name of the FTA Date of entry
into force
2004 Albania-Bosnia and Herzegovina 1-Dec-04
EFTA-Chile 1-Dec-04
Moldova-FYROM 1-Dec-04
Albania-Moldova 1-Nov-04
Moldova-Croatia 1-Oct-04
Albania-Serbia Montenegro 1-Sep-04
Moldova-Serbia and Montenegro 1-Sep-04
SACU 15-Jul-04
Croatia-Serbia and Montenegro 1-Jul-04
EC-Egypt 1-Jun-04
Moldova-Bosnia and Herzegovina 1-May-04
Republic of Korea-Chile 1-Apr-04
China-Hong Kong, China 1-Jan-04
China-Macao, China 1-Jan-04
United States-Chile 1-Jan-04
United States-Singapore 1-Jan-04
2003 Albania-UNMIK (Kosovo) 1-Oct-03
Singapore-Australia 28-Jul-03
Turkey-Bosnia and Herzegovina 1-Jul-03
Turkey-Croatia 1-Jul-03
Croatia-Albania 1-Jun-03
Panama-El Salvador 11-Apr-03
EC-Lebanon 1-Mar-03
EC-Chile 1-Feb-03
EFTA-Singapore 1-Jan-03
2002 Japan-Singapore 30-Nov-02
Canada-Costa Rica 1-Nov-02
FYROM-Bosnia and Herzegovina 15-Jul-02
Albania-FYROM 1-Jul-02
Chile-El Salvador 1-Jun-02
EC-Jordan 1-May-02
EC-Croatia 1-Mar-02
Chile-Costa Rica 15-Feb-02
EFTA-Croatia 1-Jan-02
EFTA-Jordan 1-Jan-02
(Contd...)

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(Contd...)
Year Name of the FTA Date of entry
into force
2001 Armenia-Kazakhstan 25-Dec-01
United States-Jordan 17-Dec-01
India-Sri Lanka 15-Dec-01
EFTA-Mexico 1-Jul-01
EC-FYROM 1-Jun-01
Honduras-Mexico 1-Jun-01
El Salvador-Mexico 15-Mar-01
Guatemala-Mexico 15-Mar-01
Croatia-Bosnia and Herzegovina 1-Jan-01
EFTA-FYROM 1-Jan-01
New Zealand-Singapore 1-Jan-01
2000 SADC 1-Sep-00
Turkey-FYROM 1-Sep-00
EC-Mexico 1-Jul-00
Israel-Mexico 1-Jul-00
EC-Israel 1-Jun-00
EC-Morocco 1-Mar-00
EC-South Africa 1-Jan-00
Georgia-Turkmenistan 1-Jan-00
SOURCE: WTO

Table A2:
MERCHANDISE EXPORTS BY BLOCS (AS % OF GLOBAL EXPORTS) IN
LATIN AMERICA & THE CARIBBEAN
BLOC 1999 2000 2001 2002 2003 2004 2005
CACM 0.3 0.2 0.2 0.2 0.2 0.2 0.2
Andean Group 0.8 0.9 0.9 0.8 0.8 0.9 1.1
CARICOM 0.1 0.1 0.1 0.1 0.2 0.2 0.2
LAIA (ALADI) 4.8 5.3 5.2 5.0 4.7 4.8 5.1
MERCOSUR 1.3 1.4 1.4 1.4 1.4 1.5 1.6
FTAA 21.7 22.1 21.8 20.2 18.4 17.7 17.8
NAFTA 18.8 19.0 18.7 17.2 15.5 14.5 14.3
SOURCE: World Development Indicators 2007, World Bank

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Table A3:
MERCHANDISE EXPORTS BY BLOCS
(AS % OF GLOBAL EXPORTS) IN AFRICA
BLOC 1999 2000 2001 2002 2003 2004 2005
COMESA 0.3 0.4 0.4 0.4 0.4 0.5 0.5
EAC 0.1 0.0 0.1 0.1 0.1 0.0 0.1
ECOWAS 0.4 0.6 0.5 0.5 0.5 0.5 0.6
SADC 0.6 0.7 0.7 0.7 0.7 0.7 0.8
UEMOA 0.1 0.1 0.1 0.1 0.1 0.1 0.1
SOURCE: World Development Indicators 2007, World Bank

Table A4:
MERCHANDISE EXPORTS BY BLOCS
(AS % OF GLOBAL EXPORTS) IN ASIA
BLOC 1999 2000 2001 2002 2003 2004 2005
APEC 46.6 48.5 46.5 46.0 44.5 44.2 45.0
ASEAN 6.3 6.7 6.3 6.3 6.1 6.0 6.1
Bangkok agreement 5.0 5.2 4.9 5.1 5.1 5.3 5.3
EAEC 24.7 26.0 24.4 25.2 25.4 25.9 26.2
SAARC 1.0 1.0 1.1 1.1 1.1 1.1 1.3
SOURCE: World Development Indicators 2007, World Bank

Table A5:
MERCHANDISE EXPORTS BY BLOCS
(AS % OF GLOBAL EXPORTS) IN WEST ASIA
BLOC 1999 2000 2001 2002 2003 2004 2005
Arab Common Market 0.5 0.7 0.6 0.6 0.6 0.9 0.8
GAFTA 2.7 3.5 3.4 3.2 3.4 3.9 4.4
GCC 1.9 2.6 2.5 2.3 2.5 2.7 3.3
SOURCE: World Development Indicators 2007, World Bank

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Table A6:
MERCHANDISE EXPORTS BY BLOC
(AS % OF GLOBAL EXPORTS) IN EUROPE
BLOC 1999 2000 2001 2002 2003 2004 2005
CEFTA 1.9 1.9 2.2 2.4 2.7 2.9 3.1
EMFTA 42.7 39.4 41.4 42.2 43.3 42.9 40.8
EU 41.1 37.7 39.7 40.4 41.5 40.8 38.7
SOURCE: World Development Indicators 2007, World Bank

Table A7:
TOTAL TRADE PATTERN BETWEEN US AND AGOA COUNTRIES
(BASED ON 37 AGOA ELIGIBLE COUNTRIES)
(US$ BN)
Year US Exports US Imports Trade Balance
2000 5.31 21.87 -16.57
2001 6.53 20.50 -13.97
2002 5.62 17.48 -11.85
2003 6.10 24.40 -18.30
2004 7.60 33.69 -26.09
2005 9.16 47.01 -37.84
2006 10.64 56.15 -45.51
SOURCE: US Department of Commerce (2007)

Table A8:
TRADE PATTERN BETWEEN US AND ATPDEA COUNTRIES
Year U.S. Exports ATPA/ATPDEA U.S. Imports ATPA/ATPDEA U.S. Trade
(US$ bn) Countries’ (US$ bn) Countries’ Balance
Share of Share of (US$ bn)
US Exports US Imports
to the World from the
World
2000 6.30 0.9 11.12 0.9 -4.82
2001 6.36 1.0 9.57 0.8 -3.21
2002 6.46 1.0 9.61 0.8 -3.15
2003 6.53 1.0 11.64 0.9 -5.11
2004 7.66 1.1 15.49 1.1 -7.83
2005 8.92 1.1 20.06 1.2 -11.14
2006 11.64 1.3 22.51 1.2 -10.87

SOURCE: U.S. Department of Commerce

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KEY SOURCES OF INFORMATION

1. Ministry of Commerce and Industry, Government of India

2. World Trade Organisation
3. Direction of Trade Statistics, International Monetary Fund
4. World Development Indicators, World Bank
5. Economist Intelligence Unit
6. Foreign Trade and Balance of Payments, Centre for Monitoring Indian
Economy (CMIE)
7. Institute of South East Asian Studies, Singapore
8. ASEAN Secretariat
9. Office of the United States Trade Representative, Government of United
States
10. United States Department of Commerce, Government of United States
11. European Commission

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EXPORT-IMPORT BANK OF INDIA

HEADQUARTERS
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