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India-UAE Trade Agreement: A Path to Prosperity

India-UAE Trade Agreement: A Path to Prosperity

India close to starting free trade talks with GCC

Qatar is in the news not only for its billion-dollar investment to showcase and host one of the biggest sporting events ever, the FIFA World Cup, but also for a supply deal of its kind with China. Qatar has signed a 27-year gas supply deal with China, which is being touted as one of the longest in hydrocarbon history.

According to Chinese government officials, the agreement will also provide access to Qatar’s (NFS) strategic North Field South project. The NFS expansion project is a massive liquefied natural gas train that is expected to make Qatar one of the world’s largest gas traders within a decade. The expansion project allows international companies to participate. At present, major Western companies such as Total, Shell, and ExxonMobil are all partners to help Qatar achieve its set goals. China came in and had a long-term agreement with Qatar, and it also wanted to fully participate and share in the hydrocarbon-dominated geopolitical rules. The deal with China comes as the EU scrambles to secure gas supplies from sources other than Russia.

Europe’s traditional reluctance to enter into long-term, binding contracts is one of the other reasons why such an agreement between the West and Qatar is not yet ripe. Amid all this, India is about to start free trade talks with the Gulf Cooperation Council (GCC), of which Qatar is a key member. The Gulf Cooperation Council is an intergovernmental political and economic alliance of six Arab countries. Since 2004, India has a Framework Agreement with the GCC. According to the Ministry of Commerce, the framework provides for exploring ways and means to expand and liberalize trade relations and initiate dialogue on free trade agreements.

However, according to the Indian government, despite two formal dialogues in 2006 and 2008, the GCC has not been able to persuade its members to move forward with negotiations at the FTA level. Regional economic issues among the Arab countries have played a major drag on their bilateral relations with India.

The recent pandemic has made the Gulf countries willing to extend their economic influence beyond hydrocarbons; this has led to a change in mindset. Earlier this year, India signed CEPA (Comprehensive Economic Partnership Agreement) with UAE, one of the most influential GCC countries. The CEPA allows Indian goods to enter preferentially in 97% of tariff lines, accounting for 99% of India’s exports to the UAE. India mainly exports gems and jewellery, textiles, leather shoes, sporting goods, plastics, furniture, wood products, engineering products, pharmaceuticals and medical equipment to the UAE.

India’s main import from the UAE is energy. CEPA, one of India’s first deals after more than a decade of delays in signing a binding trade pact, aims to achieve $115 billion in bilateral trade in goods and services in just five years. India had earlier pulled out of the Regional Comprehensive Economic Partnership, one of the largest economic partnerships, citing the China-specified framework.

India now realizes the importance of trade as a significant contributor to the country’s GDP. India recognizes that trade in goods and services will be a key factor in its $40 trillion economy over the next two decades. India earlier signed a free trade agreement with Australia. Likewise, negotiations on a free trade agreement with the UK have been under way for more than six months. Negotiations of a free trade agreement with the Gulf Cooperation Council, if successful, could be another milestone on India’s multi-trillion dollar economic path.

(The author is a foreign affairs commentator)

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