Initiatives for forming FTAs among countries rising to counter US's tariff threat

India and the United Kingdom signed a landmark Free Trade Agreement (FTA) on May 6.

- Kishore Kumar Biswas

The deal was jointly announced by Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer. At a time when global trade is being strained by rising protectionism and retaliatory tariffs-many of which were initiated by the United States- bilateral FTAs like this one are being viewed as potential stabilizers for the world economy.

How do FTAs help?

India has historically been slow in entering FTAs, whether at regional or broader levels. Several prominent economists have pointed out that India's economic growth has lagged behind its potential partly due to its limited participation in such agreements. In contrast, smaller economies like Vietnam have reaped significant benefits from actively engaging in FTAs.

In today's globalized world, participation in FTAs is key to tapping into global supply chains. These agreements allow countries to access the lowest-cost inputs for production and then export the final products competitively. This integration enhances efficiency, reduces costs, and increases market reach.