India signs 'pathbreaking' India-UAE CEPA : Daily Current Affairs

Relevance: GS-2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

Key Phrases: CEPA, FTA, CECA, India UAE Trade Deal, Tariffs, Duty, Significance of CEPA for India,

Recently, India and the United Arab Emirates signed a Comprehensive Economic Partnership Agreement (CEPA)
The accord was signed by Commerce and Industry Minister Piyush Goyal and UAE’s Minister of Economy Abdulla bin Touq Al Marri.
The bilateral trade pact is India's first in the region and the first comprehensive trade agreement with any country in a decade.

Reduced Tariff
- Under the pact, India agreed to provide tariff concessions on gold imports, while the UAE eliminated tariffs on jewellery imports into that country.
- It will allow 90% of the country's exports duty-free access to the Emirates.
  - The CEPA is likely to benefit about $26 billion worth of Indian products that are currently subjected to 5% import duty by the UAE.
- It is set to reduce tariffs for 80 percent of goods.
  - The remaining 20% includes goods that are “sensitive" for domestic businesses and would require more time to reach a state when tariffs can be lowered.
- Further tariff concessions were expected on both sides over 5 years that would lead to lower tariffs for 98 per cent of exports and 90 percent of imports from the UAE.
- Indian exports are set to get zero duty access within a further 5 to 10 years, including electronic goods, chemicals and petrochemicals cement, ceramics and machinery accounting for about 9 percent of the value of current exports to the UAE.

A tariff is a direct tax imposed by the government paid on a particular class of imports or exports.
When the government imposes tariffs on imported goods, their price will increase in the domestic market.

Duties are an indirect tax imposed by the government on the consumer.
Duties are applied to financial transactions and commodities.
Duties are considered to be an indirect tax because it is similar to a consumer tax.
Duties are imposed on both goods that are imported and goods manufactured locally.
This includes excise duties and Customs duties.
- Duties imposed on goods manufactured domestically are known as excise duties.
- Customs duties are collected by the government to protect local industries by raising state revenue to offset cheaper manufacturing done abroad.
It is sometimes used as a tool to penalize a particular nation by charging high import duties on its products.

Expedite Market Access
- Further, in a major boost for pharma companies, UAE has agreed to allow market access for medicines from Indian companies within 90 days of approval in the US and UK.
Investments
- It also focuses on expediting work on a dedicated investment zone for UAE companies and joint ventures, focusing on setting up a food corridor and establishing a dedicated India Mart in the Jebel Ali Free Zone.
Safeguard Mechanism
- Along with trade remedies, the deal provides a safeguard mechanism for both countries’ businesses against an unnecessary surge in the flow of products.
Enactment of the Deal
- The deal is expected to come into effect within the next 60 days, by the first week of May.

It is expected to boost bilateral trade to $100 billion in the next five years from $60 billion now.
It will help in realizing the ambitious target of U.S.$1 trillion of merchandise exports and U.S.$1 trillion of services exports by the year 2030.
Through the pact, Indian exporters will also get access to the much larger Arab and African markets.
India's labour-intensive and employment-generating industries such as gems and jewelry, textiles, leather, footwear, sports goods, furniture, pharmaceuticals, medical devices and automobiles are expected to gain the most from the pact.
The pact will create investment opportunities for Indian investors in establishing specialized industrial advanced technology zones in Abu Dhabi, focusing on logistics and services, pharmaceuticals agriculture, steel and aluminum.

CEPA is a type of trade agreement that covers services and investment, and other areas of economic partnership.
It may even cover areas such as trade facilitation and customs cooperation, competition, and Intellectual Property Rights.
CEPA also looks into the regulatory aspect of trade and encompasses an agreement covering the regulatory issues.
CEPA and FTA
- CEPA is a more comprehensive agreement than a Free Trade Agreement (FTA) - an agreement to form a free-trade area between the cooperating states, as CEPA is a partnership.
CEPA and CECA
- India also signs Comprehensive Economic Cooperation Agreements (CECA) with various countries.
- While CECA is synonymous with CEPA, the big difference is that CECA involves only tariff reduction or elimination in a phased manner on listed or all items.
- CEPA, on the other hand, also covers the trade in services and investment and other areas of economic partnership.
- This makes CEPA a wider agreement than CECA.
- CECAs could also be a precursor to negotiations for a CEPA.
India’s CEPA
- Apart from negotiations with UAE, India has long-standing negotiations underway with Canada while CEPAs with South Korea and Japan are in place.
- Additionally, in late November 2021, Commerce and Industry Minister Piyush Goyal said India was looking to advance a CEPA with Bangladesh.

Trade and Investment
- UAE is India's third-biggest trading partner behind the US and China.
- India was the UAE's largest export destination and second-largest trade partner in 2019 and the eighth biggest investor with a cumulative foreign direct investment of nearly $11 billion so far.
- Bilateral trade between both nations stood at $43.3 billion as of 2020-21 and is spread across thousands of traded items.
- In 2019-20, the pre-pandemic year, trade between the two countries was estimated at $59 billion.
- India’s exports to UAE grew by 77% year-on-year in April-December 2021 to $20 billion, accounting for 6.6% of India’s total outbound shipments.
Remittance
- The UAE is also home to 35 lakh Indian-origin persons.
- According to the Pew Research Center, the remittance to India from UAE stood at 13.826 Billion Dollar (highest among the all Gulf Countries)
India’s major exports to the UAE
- It includes petroleum products, precious metals, stones, gems and jewelry, minerals, food items such as cereals, sugar, fruits and vegetables, tea, meat, and seafood, textiles, engineering and machinery products, and chemicals.
India’s top imports from the UAE
- It includes petroleum and petroleum products, precious metals, stones, gems and jewellery, minerals, chemicals and wood and wood products.
India’s Oil Import
- India imported $10.9 billion of crude oil from the UAE in 2019-2020.

This CEPA with the UAE will pave the way for India to enter the UAE’s strategic location, and have relatively easy access to the Africa market and its various trade partners which can help India to become a part of that supply chain, especially in handlooms, handicrafts, textiles and pharma.

Source: Live Mint, Economic Times, Indian Express, The Hindu

Mains Question

Q. “India and UAE are entering a golden era of economic & trade cooperation with the signing of India-UAE CEPA “ Critically Analyse.