World economies race to sign FTAs, but are they enough to deliver results?

In recent years, India has been actively pursuing Free Trade Agreements (FTAs) with various countries and trade blocs. So far, it has signed around 13 FTAs, varying widely in their scope and objectives. However, many observers remain skeptical about their effectiveness. Between 2017 and 2022, India’s exports to FTA partners grew by 31%, while imports surged by 82%. Furthermore, India’s FTA utilization rate remains low at just 25%, compared to 70-80% in developed countries (RN Choudhury, East Asia Forum, 19 September 2023). This underlines the importance of critically evaluating the upcoming FTAs India is set to sign.

- Kishore Kumar Biswas

Current Global Trade Landscape

The global trade environment has been undergoing major changes, especially since the administration of former U.S. President Donald Trump imposed a 25% tariff hike on imports from several countries. Trump argued that the U.S., with its traditionally open economy and low import tariffs, had been disadvantaged by other nations imposing higher duties on American goods. As a result, U.S. exports suffered, contributing to a chronic trade deficit and undermining its industrial base. To counter this, the U.S. adopted a policy of reciprocal tariffs.

Countries like China responded with equally high tariffs on American goods, leading to a near-collapse in parts of the global trading system. In this climate, many nations began seeking alternatives to maintain and grow their production and export sectors. One such strategy was forming regional trade blocs and negotiating FTAs to safeguard their economic interests.

India’s motivation behind FTAs