Free Trade Agreements (FTA) are selective international trade agreements that except non-members provide preference tariff concession to member nations. FTAs do not perfectly eliminate business protectionism, but natural opportunities are eliminated naturally according to the economic needs of the participating countries. Successful examples such as NAFTA and Vietnam-UK FTA (UKVFTA) suggest that the business construction and turn between business constructions and turns, complementary trade profiles and efficient domestic supply chains to combat import competition are the essential features of a mutually beneficial FTA.
Agriculture and allied sectors employ about half of the Indian population and contribute 16–18% to the national GDP, making them economic and politically important. The vulnerability of agricultural laborers and adequate political hesitation of farming organizations face policy reforms complications. Historical examples demonstrate this challenge: India’s return from the Regional Comprehensive Economic Partnership (RCEP) in 2020 was held responsible for protecting its 100 million dairy farmers, and canceling the notorious farm bills after widespread protests in 2020-2021 shows how agricultural interests can oppose the sudden policy change and show against potentially beneficial reforms.
After a change in tariff-focused global trade during the current Trump era, countries have scrambled to finalize the FTA to protect their economic interests. 13 With more active FTAs and more in conversation, India faces criticism from business partners about its highly protective stance in specific areas such as its agricultural market. The attitude of India’s largest business partner is a case. US Commerce Secretary Howard Lutnik has called India to liberalize its agricultural markets, highlighting the high tariff margin between the two countries, which is 32.4%. One of the agricultural sector, the Indian dairy market also gives an example of this protectionism, 39.78% tariffs on US dairy products in India (compared to only 1.54% US tariffs on Indian dairy) and a weighted average tariff in 30–60% range in all business partners. Despite the pressure of countries like Chile and New Zealand, India has strongly pushed back with dairy in its FTA framework to protect its small and weak agricultural community. Keeping in mind the standalone national economic contribution of the dairy sector in the 4–5%range, such a decision is based on various obstacles, some of which are beyond the standard economic logic of free trade. For example, India’s pushback on US dairy imports comes out of India’s religious sentiments, which prevents imports on the basis of feeding cattle on non-vegetarian/ blood food field. Indian food laws do not consider milk and milk products as non-vegetarians. If India cites such international pressure and allows such products to enter the Indian market, then there is a strong possibility that the Government of India will need to amend food laws, including changing the statutory definition of non-vegetarian food to include milk and milk products, and to preserve the interests of the vegetarian section of India to harmonize its labeling rules.
India’s prevalent agricultural conservationism should be seen from the context of its historical discovery of self -reliance. State initiatives such as the Green Revolution and Operation Flood successfully transformed the country from the production deficit to the surplus, making India the world’s largest milk producer (estimated production in FY 2023-24, 240 million tonnes, about 25% global production) and in the world leaders in the production of food grains. However, at this turn of growing international trade faction in the current 21st century, India finds itself at a policy intersection: continue with its untouched agricultural sector or embrace market liberalization that can address structural weaknesses and can potentially increase production and increase the welfare of the Indian agricultural community.
India’s agricultural market is plagued by systemic issues and an incompetent domestic demand, which cannot prevent simple reforms. Problems ranging from low productivity, fragmented small producers and deformed supply chains (which fail to provide sufficient price to farmers). In addition, there is a sub -production level due to lack of technological progress in agricultural practices. Another level of complexity is the issue of agriculture which is closely linked to the livelihood of most population. Hypotically, India were to choose to liberalize agriculture and allied sectors, an increase in competition and the surplus of imported varieties of agriculture and dairy products. Small farmers will lift brunt as they adversely affect market weaknesses, infrastructure deficiency and inadequate production facilities. An all-out effort to reduce business obstacles may not be the most favorable route for the Indian agriculture sector. However, progressive liberalization can be a good step such as gradually reducing non-tariff barriers, such as importing imports and certification restrictions at genetically modified feeds for cattle, with a stable attention to removing sick effects of redistribution through calibrated state intervention. While opening the markets continuously, the policy -making may aid in advancing central support to adversely affect the losing farming groups due to the import competition, while taking advantage of the technical and management skills of developed countries, which are at the forefront of the production of some goods.
The point will be a case of India and New Zealand. He has reopen the FTA dialogue after a decade. New Zealand currently approximately NZ $ 57 million (exports (~ ~ 287 crores) worth dairy products for India, which ranks its 12th two-way trading partner. As the two sides try to reach an understanding in the interaction for the FTA, steps are being taken to promote a strong relationship between countries, such as New Zealand sponsorship and education, defense cooperation, hortelikers and cooperation for India’s permanent candidature in the United Nations Security Council. Indian regulators can take a lesson from New Zealand’s dairy industry, one of the strongest in the world, leading to milk exports (with a market share of about 95% market share in the export of entire milk powder). The leading milk producer in New Zealand is an expert and efficient supply chain in a fully farmer -owned dairy cooperative and dairy management systems (similar to the brand Amul, owned by the Gujarat Cooperative Milk Marketing Federation). Recently, the New Zealand government has introduced an amendment bill to reorganize its existing dairy export licensing regime to provide extensive grants to indigenous farmers for export engagement.
In addition, using its world -class information technology and service sector as a bargaining chip, India can interact and protect the binding commitments for the transfer of technology to highlight small dairy farmers in India and increase milk production, which can streamline operations, resulting in streamlining operations and resulting in increase in better value search and profitability. Another solution may be to promote FDIs in these areas and provide limited market access to local agricultural communities ensuring participation. An important initiative of GOI, joint venture with farmers’ organizations (FPOS), which has increased the collective bargaining power of weak small farmers, and dairy cooperatives can also be indicated to create other homegron brands with international positions like Amul with rules regarding long -term capital formation in the dairy sector. Such initiatives can also be cured to promote domestic employment in India. The last, the revised national program for dairy development, continuation of major central policies like Prime Minister Dhan-Dharmya Krishi Yojana, should be complemented by regular inspection. The major input can be included through a multi-interest platform that includes international partners. In addition, steps such as widening coverage of increase in credit features and ensuring priority access to funds, which have helped small farming groups, should stay in place.
The heart of this case is that India should take advantage of its position and take advantage of international trade mobility to improve its internal markets. While considering the unique situations of India, free markets in the agriculture sector cannot be an embrace, it is relevant that New Delhi takes steps to advance its image as a liberal trading partner and keep themselves for favorable business talks.
This article has been written by Shivpriya Nanda and Zain Pandit, Partners, JSA Advocates and Solicitor.
