UNIVERSITY OF PETROLEUM & ENERGY STUDIES,

SCHOOL OF LAW, DEHRADUN

ASSIGNMENT TOPIC

INDIA SINGAPORE FTA

SUBMITTED BY: SUBMITTED TO:

DIVYANSH BHARGAVA Mrs. RUBY YADAV

B.A. LLB (Constitutional Law) B2 Asst. Professor

500052812

R154216042
What is Trade?

“Trade occurs between two parties when they exchange goods and services at a price determined
before the trade occurs. E.g. A manufacturer sells its product to a buyer at a pre-determined
price. Trade can happen between countries, states and people.”

“International trade occurs when two or more countries get into an agreement to exchange goods
and services. The countries who are trading with each other generally apply tariffs and non-tariff
barriers. But there are trade agreements between the countries where they exempt the tariffs or
give concession on the trade. This is generally done to enhance the country’s Balance of
Payment and also enhance relations with the country with whom the trading takes place.”

Trade agreements are of different types:

“Global Agreement: In this type of an agreement the countries come together for trade in order
to promote public welfare. e.g. WTO(World Trade Organization)”

“Regional Agreement: It is an agreement between governments in order to liberalise and

encourage foreign investments. e.g. NAFTA, APEC, EU, etc.”

“Bilateral Agreement: It is an agreement between two nations that gives both countries favored
trade status to allow concessions, removal of tariffs, etc. e.g. CECA, CERTA, etc.”

What is Free Trade?

“Free trade, in its purest form, refers to the unfettered export and import of goods and services
between one country and another with no government intervention on either country’s side.
However, there are some barriers to free trade such as:”

“Tariff barriers: Tax on imports that are invoked by countries mainly to protect the domestic
industries from the possible consequences of greater competition.”

“Non-tariff barriers: These can be in form of quantitative restrictions on imports/exports

(quotas) or existing government regulations governing technical and safety standards for
products that can have the effect of restricting imports. Another form of non-tariff barrier to free
trade is found in “Domestic Content Requirements” that are regulations wherein importers are
forced to import goods that contain minimum prescribed amounts of domestically produced
components. Such restrictions are commonly imposed on the domestic operations of foreign
firms that engage in foreign direct investment in production facilities in the regulating country.”

AIFTA (ASEAN-INDIA Free Trade Agreement)

“India announced its “Look East” policy in 1991 in an attempt to increase its engagement with
the East Asian countries. Consequently, in 1992, it became a sectoral dialogue partner of the
Association of Southeast Asian Nations (ASEAN). ASEAN, which is a geo-political and
economic organization with 10 member countries, was formed in August 1967 by Indonesia,
Malaysia, Philippines, Singapore and Thailand. Since then, the membership has expanded to
include Brunei Darussalam, Cambodia, the Lao People’s Democratic Republic, Myanmar and
Vietnam. ASEAN’s objectives are to accelerate economic growth, social progress and cultural
development among its members, protect the peace and stability of the region, and provide
opportunities for the member countries to discuss their differences peacefully.”

“India became a Full Dialogue Partner of ASEAN in 1995 and the India-ASEAN Free Trade
Agreement (AIFTA) was signed on 13 August 2009. The agreement, which only covers trade in
goods between India and the ASEAN members, came into effect on 1 January 2010. India’s
trade with ASEAN is mainly concentrated in Indonesia, Malaysia, Singapore and Thailand.
These four countries remain the largest markets for Indian trade in the ASEAN region.”

“Among the ASEAN, Singapore is the largest destination for Indian goods (45.3% of total
exports to ASEAN in 2011) and 3rd largest source of imports for India (20.2% of total imports
from ASEAN in 2011). The Union Minister for Commerce, Industry & Textiles Shri Anand
Sharma has expressed confidence that the two-way trade between India and the ASEAN
countries will increase from USD 75 billion to USD 100 billion by 2015.”

India-Singapore CECA Agreement

“India has signed the Comprehensive Economic Cooperation Agreement (CECA) with
Singapore on 29th June 2005. A JSG (Joint Study Group) was formed to study the benefits of the
agreement. The JSG concluded that the CECA agreement would be beneficial for both the
countries in terms of increased trade and investment by economic cooperation. This free trade
agreement has been signed to shape up the trade of goods and services of the two nations. It also
comprises of a bilateral agreement on investment cooperation, protection and promotion. An
integral part of the CECA was the double taxation avoidance agreement which ensures that the
companies should be taxed in those countries from where they have been originated. It also
included Mutual Recognition Agreements on quality of goods and services, liberalized visa rules,
and undertakings to cooperate on different areas of dispute settlement, education, etc.”

“CECA has been penned by both the countries to bring mutual benefits. From Indian prospective
it brought a gateway pass for trading with Southeast Asian countries. Also India looked upon this
opportunity to bring in more FDI’s and portfolio investments which helped her to develop crucial
sectors of the economy like telecommunication, SEZs, infrastructure, etc. India also saw the
option of rendering its services in which it has a comparative advantage because of cheap and
skilled labour especially in area of IT. Moreover, the transfer of Human Resource practices were
seen as an again for Indian businesses.”

“From Singapore’s point of view it has gained mainly from the removal of tariffs on goods
because India had high tariffs on more goods than Singapore. So, the reduction on the tariffs has
been done from India’s side. This agreement has acted as a catalyzing factor to enhance the
bilateral ties between the counties in terms of the trade, investments, ideas and people.”

Benefits of CECA between India and Singapore

 Trade in Goods
 Eligible goods are being offered at ‘discounted ‘rates instead of MFN rates (given to all
members countries of WTO)

Tariff Savings= (MFN rate- Discounted rate) *Export value

 Lower import costs help to keep a check on trade balance

 Trade in Services
 Improved and preferential Market Access for both countries

Investment
  Singapore has become India’s 2nd largest source of FDI Inflow
 India offers national treatment to Singaporean investors in some committed sectors, so
they do not need approval for investing

Intellectual property Protection

Mutual Recognition of IP registration in both countries

Movement of Business persons

Free movement of professionals and workers across borders

Mutual Recognition of Standards and Qualifications

Recognition of testing standards of exporting country (negate the need for exporters to test
products in partner country, reduce costs)

Double Tax Avoidance Agreement

Singaporean investors face no tax for their investments in securities in India which has
contributed to rising FDI from Singapore

Impact of CECA on the Trade Basket

“On % share of total imports to India from Singapore (Year-wise)

2003 & 2004: Before CECA between India and Singapore

2005: CECA was signed

2006-2007: Post CECA between India and Singapore”

“When it comes to goods imported by India from Singapore, the most notable change is that
import of mineral oil had gone up considerably, while shares of other goods such as printing
products and electrical machinery that previously formed a larger chunk of imports have
declined. Mineral oil imports constitute 25.9% of total imports in 2007, up from just 0.30% in
2005. Superior kerosene oil is a major part of this group of imports. Other goods imported in
large amounts include personal computers, payments for IT software rights documents, cellular
phones, styrene, airplane parts and integrated circuits.”

“On Growth rates of export from India to Singapore (Year on Year)”