India, U.S. trade pact to be operationalised once India gets competitive advantage: Goyal
Piyush Goyal said that the free trade agreement between India and the European Union will be inked in December and will come into force from February or March next year.
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Context
Union Commerce and Industry Minister Piyush Goyal announced that the first phase of an India-U.S. trade pact has been finalised and is currently undergoing legal drafting. However, he emphasized that it will only be operationalised once India secures a competitive advantage over peer nations. Furthermore, a Free Trade Agreement (FTA) between India and the European Union is expected to be signed in December and implemented by February or March of the following year.
UPSC Perspectives
Economic
This development highlights India's strategic approach to Free Trade Agreements (FTAs), a core topic in GS Paper 3 under the Indian Economy syllabus. The conditionality of operationalising the India-U.S. pact only after securing a 'competitive advantage' reflects a protective stance towards domestic industries. In international trade theory, competitive advantage refers to conditions that allow a company or country to produce a good or service of equal value at a lower price or in a more desirable fashion. For India, this likely means ensuring domestic manufacturing, especially under initiatives like and , is robust enough to withstand increased competition from U.S. imports without suffering widespread job losses or industrial decline. The ongoing negotiations for an India-EU FTA are equally significant, as the EU is one of India's largest trading partners. These agreements are crucial for boosting exports, a key driver for achieving a $5 trillion economy, but require careful navigation of issues like intellectual property rights, labor standards, and environmental regulations.
Polity
From a governance perspective, the negotiation of international treaties falls under the executive power of the Union government. According to of the Indian Constitution, the executive power of the Union extends to matters concerning which the Parliament has power to make laws, which includes foreign affairs and treaties. Furthermore, under , the Parliament has the power to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries. The process described by the Minister—finalizing contours followed by legal drafting—is standard administrative procedure in treaty negotiation. However, unlike in some jurisdictions like the U.S., where treaties require ratification by the Senate, in India, the executive can sign and ratify treaties without prior parliamentary approval, though Parliament must pass legislation if the treaty's implementation requires changes to domestic law or involves financial commitments from the Consolidated Fund of India.
Geographical
The shifting focus of India's trade policy can be analyzed through a geopolitical lens. India's engagement in bilateral trade pacts with Western powers like the U.S. and the EU represents a strategic pivot, particularly after India's withdrawal from the in 2019 due to concerns over large trade deficits with China. By seeking deeper economic integration with the U.S. and EU, India aims to diversify its supply chains away from China, a strategy often termed 'China Plus One.' This approach aligns with broader geopolitical alignments, such as the , where economic security is increasingly viewed as integral to national security. The success of these FTAs could significantly alter global trade flows, potentially boosting India's role as a manufacturing hub and reshaping economic geography in the Indo-Pacific and beyond.