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A Free Trade Agreement between India and China will only be a strategic confidence building measure for now
Should India and China sign a bilateral Free Trade Agreement (FTA)? Since the last decade, both countries have been scouting for and connecting to new trade partners. The Asia-Pacific has been the main domain of their search. They have either concluded, or are negotiating, trade agreements with common partners including Australia, New Zealand, Singapore, ASEAN, Japan and South Korea. They are also actively forging formal trade links with the Gulf and Latin America.
While disappointment with the WTO is pushing both into FTAs and Regional Trade Agreements (RTA), the "domino effect" too cannot be overlooked. Anxieties of being deprived of trade space and markets in economically vibrant and resource-rich regions are hastening the rush. So are strategic compulsions.
The rush for FTAs is yet to be reflected in negotiations on a bilateral deal. Both countries are part of a regional agreement ó the Asia Pacific Trade Agreement (APTA) ó since 2002. Bangladesh, South Korea, Laos and Sri Lanka are also members of the APTA making it a cross-regional agreement between South, Southeast and Northeast Asia. The APTA, however, has remained a rather muted and inconspicuous deal in an Asia-Pacific with hundreds of FTAs and RTAs.
A bilateral Indo-China trade deal was first discussed seriously in 2003, when a joint study group (JSG) was set up for examining its feasibility. The JSG report submitted in 2005 did recommend such a deal covering trade in goods, services, investment and trade facilitation. The joint statement issued during Chinese Premier Wen Jiabao's visit to India in 2005 took note of the recommendations. That though was as far as matters went. There has hardly been any move on the FTA since. Subsequent joint statements issued thereafter during visits of heads of states have mentioned phased trade targets and removal of market access barriers on both sides. But they have conspicuously avoided mentioning a trade deal.