Negotiating trade agreements with India: The reality below the water line

This trade policy brief discusses India’s attitude towards international trade, her seeming inability to view trade as driving economic development, and her apparent aim to reduce trade commitments. Reasons for this are that trade agreements are not policy priorities for India because the process is government and not business driven. This consensus requires that economic policy serve political objectives. India finds it difficult to manage the divide between domestic and international relations, which constrains effective negotiating positions, and carries over to the consultative process. Trade and business associations are not initiators for generating ideas or negotiating options. India’s NGO community and media did most of the work on trade policy. Until recently, India’s strategy was to ensure domestic production and reduce reliance on the outside world. However, international developments caused efforts to create a regional trade agreement for South Asia. India’s motivation to improve relations with the world is less focused on economics than on creating political networks to provide support and stability. Concerning the prospects of an India-South Africa FTA, India will accord more importance to the political implications of an agreement than its trade particulars. India has no practical experience of operating a bilateral agreement and lacks the institutional arrangements needed to support it. The Indian government would probably negotiate a politically-weighted bilateral trade agreement that is commercially shallow and lacks binding commitments. Trade and industry interests would be of limited concern to the negotiators, reflecting the dominant role of the state in these matters.