GS Paper 2
Syllabus: Bilateral Relations
Context: The India-UAE Comprehensive Economic Partnership Agreement (CEPA) has had a significant impact on bilateral trade between the two countries since its implementation in May 2022.
- It is expected to increase the total value of bilateral trade in goods to over USD 100 billion and trade in services to over USD 15 billion within five years.
India-UAE Trade relations:
United Arab Emirates (UAE) is India’s 3rd largest trading partner, after the United States and China, with a bilateral trade turnover of USD 68 billion in 2021. The UAE is also the 7th largest investor in India.
What is a CEPA?
A Comprehensive Economic Partnership Agreement (CEPA) is a bilateral or multilateral trade agreement between countries aimed at promoting economic cooperation and integration by reducing barriers to trade and investment.
Difference between CEPA, CECA, and FTA:
| Aspect | CEPA (Comprehensive Economic Partnership Agreement) | CECA (Comprehensive Economic Cooperation Agreement) | FTA (Free Trade Agreement) |
| Definition | A comprehensive trade agreement that covers goods, services, and investments. | It covers a wide range of areas, such as trade, investment, technology, and cultural exchanges. | A trade agreement that eliminates or reduces tariffs and other barriers to trade in goods between two or more countries. |
| Level of integration | High level of integration as it covers not only trade in goods but also services, investments, and other areas of cooperation. | Medium level of integration as it covers a wide range of areas but not as comprehensive as CEPA. | Low level of integration as it only covers trade in goods and does not include services or investments. |
| Examples | India-Singapore CEPA, Japan-Indonesia CEPA, etc. | India-Korea CECA, India-Malaysia CECA, etc. | India-UK FTA |
For overall India-UAE relations: Click here
Various dimensions of India-UAE CEPA:
| Dimension | Example |
| Trade in Goods | The CEPA provides preferential market access for over 80% of products traded between India and the UAE.
Bilateral trade between India and the UAE reached historic highs during FY 2022-23, increasing from USD 73 billion to USD 84 billion, registering a 16% increase |
| Trade in Services | The CEPA covers 11 broad service sectors and more than 100 sub-sectors, such as business services, communication services, financial services, tourism, and transport services. |
| Investment | The CEPA provides for a liberal and non-discriminatory regime for cross-border investment between India and the UAE. |
| Technical Barriers to Trade (TBT) | TBT aim to ensure that technical regulations, standards, and conformity assessment procedures do not create unnecessary obstacles to trade. |
| Sanitary and Phytosanitary (SPS) Measures | It aims to protect human, animal, and plant health by setting standards for food safety, animal and plant health, and other related issues. |
| Dispute Settlement | The CEPA includes provisions on dispute settlement, which provide for the resolution of disputes between India and the UAE through consultations and negotiations. |
| Movement of Natural Persons | The CEPA includes provisions on the movement of natural persons, which aim to facilitate the temporary entry of businesspersons, investors, and skilled professionals between India and the UAE. |
| Pharmaceutical Products | The CEPA includes provisions on pharmaceutical products, which aim to promote cooperation in the regulation and marketing of pharmaceuticals between India and the UAE. |
| Intellectual Property Rights (IPR) | The CEPA includes provisions on IPR, which aim to protect and enforce intellectual property rights between India and the UAE. |
| Digital Trade | The CEPA includes provisions on digital trade, which aim to promote the development of e-commerce and digital trade between India and the UAE. |
Some of the challenges that the India-UAE CEPA may face are:
- Competition from other existing trade agreements in the region
- Diverse business and cultural practices between the two countries
- The disparity in the level of development and economic size of the two countries
- Possible resistance from domestic industries in both countries
- Differences in regulatory standards and intellectual property protection.
Conclusion:
The trade between India and UAE has strengthened over the years, with the UAE becoming India’s closest geopolitical partner in the Arab world. Despite recent challenges, the bilateral ties between the two nations have proven resilient.
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