With India and the EU focussed on lending pace to the ongoing free trade agreement (FTA) negotiations, the Commerce Department has reached out to the domestic industry to ensure that it gets the best possible flexibility under rules of origin–the criteria that determine the national source of a product and its eligibility for tariff cuts and elimination. 

The industry has been tasked with studying sectorally the rules of origin under existing pacts that the EU has with countries such as Vietnam, Canada, Singapore and the UK and compare them with the one proposed by the bloc for its FTA with India before coming up with its own proposals, a source tracking the matter told businessline.

“The ROOs that the EU has in its existing FTAs with various countries are very nuanced and have product specific rules that offer relaxations and flexibilities to numerous products. The Commerce Department wants the Indian industry to study these while weighing the EU’s proposal for India,” the source said.

ROO are crucial for any trade pact as they determine the country of origin for a product and ascertain whether sufficient transformation of the products (imported from other countries) have taken place in the partner countries for it to qualify as originating from there. 

Greater flexibilities

While in many of the older FTAs entered into by India, the ROO were relatively simple and linked mostly to the wholly obtained (from the partner country) criteria, value added criteria (minimum percentage of value addition taking place in the partner country) or change in tariff heading criteria (transformation of a product leading to a change in its tariff classification), the rules are increasingly getting more refined to offer greater flexibilities to particular items.

“The ROO in the EU’s existing FTAs reveal that flexibilities for numerous products can be woven into trade pacts depending on the negotiating power of countries,” a source tracking the India-EU . Various industry bodies have been asked to give their input and feedback on product specific rules by this week so that the Commerce Department could incorporate the suggestions in its list of demand in the next round of negotiations,” the source said.

While both India and the EU have been trying to speed up the negotiations for the FTA, both are not satisfied by the progress made so far. EU Ambassador to India Hervé Delphin recently said that the progress in the FTA talks so far has been marginal and both sides needed to re-calibrate and overcome the fundamental differences.

Commerce & Industry Minister Piyush Goyal said that the EU will have to decide whether it was looking at expanding trade, expanding business between the two sides, or whether it was looking at issues which are dealt with by other international organisations.

Indian companies are worried about the consequences of regulations like the carbon tax, deforestation regulation, and supply chain regulation that could take away the potential gains of a FTA in many sectors.

Both leaders called for mutual cooperation to take the negotiations forward.

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