About PTA, Indian PTA, level of economic integration, Pros cons, Unilateral, bilateral and multilateral, indian few PTA, FTA, Chile, Mercosur, Malaysia, AFGHANISTAN, TAHILAND, BANGLADESH, JAPAN.

1. Preferential Trade
Agreement
By
Hardeep Singh
Soumya Chaturvedi
Nikhar Garg

2. We will be covering
What is preferential trade agreement (PTA)
Is it same as Free trade agreement (FTA)
Some Indian Trade Agreements

3. What is Preferential Trade
Agreement (PTA)

4. Preferential Trade Agreement
• A preferential trade area (also preferential trade agreement, PTA) is a trading bloc
that gives preferential access to certain products from the participating countries.
This is done by reducing tariffs but not by abolishing them completely. A PTA can be
established through a trade pact. It is the first stage of economic integration.
• A trade pact between countries that reduces tariffs for certain products to the
countries who sign the agreement. While the tariffs are not necessarily eliminated,
they are lower than countries not party to the agreement.

5. PTA vs FTA

6. Tariff/Dutties
No
Agreement
PTA FTA
Complexity

7. FREE TRADE AGREEMENT
Free trade is the unrestricted purchase and sale of goods and services
between countries without the imposition of constraints such as tariffs,
duties and quotas. Free trade is a win-win proposition because it enables
nations to focus on their core competitive advantage(s), thereby
maximizing economic output and fostering income growth for their
citizens. Formerly insular economies such as China and India have
expanded at much faster growth rates since they adopted free trade
principles in the 1980s and 1990s, respectively.

8. FREE TRADE AREA
A free-trade area is the region
encompassing a tradebloc whose
member countries have signed
a free-trade agreement (FTA). Such
agreements involve cooperation
between at least two countries to
reduce trade barriers – import quotas
and tariffs – and to increase trade of
goods and services with each other.

9. Most Favoured Nation Status
Most Favored Nation status is when a country enjoys
the best trade terms given by its trading partner. That
means it receives the lowest tariffs, the fewest trade
barriers, and the highest import quotas (or none at all).

10. Unilateral, Bilateral and Multilateral
A unilateral trade agreement is a commerce treaty that a nation
imposes without regard to others. It benefits that one country only.
It is unilateral because other nations have no choice in the matter.
It is not open to negotiation.
It occurs when one nation adopts a trade policy that isn't
reciprocated. For example, it happens when a country imposes a
trade restriction, such as a tariff, on all imports.

11. Bilateral Trade Agreement
These are between two countries. Both countries agree to loosen
trade restrictions to expand business opportunities between
them. They lower tariffs and confer preferred trade status with each
other. The sticking point usually centers around key protected or
subsidized domestic industries.
For most countries, these are in the automotive, oil or food
production industries. The United States has 16 bilateral
agreements. It's negotiating the world's largest bilateral agreement
with the European Union.

12. Multilateral Trade Agreement
These are the most difficult to negotiate. These are among three countries or
more. The greater the number of participants, the more difficult the
negotiations are. They are also more complex. That's because each country
has its own needs and requests.
Once negotiated, multilateral agreements are very powerful. That's because
they cover a larger geographic area. That confers a greater competitive
advantage on the signatories. All countries also give each other most favored
nation status. That means they treat each other equally.
The largest multilateral agreement is the North American Free Trade
Agreement. It is between the United States, Canada and Mexico. Their
combined economic output is $20 trillion. NAFTA quadrupled trade to $1.14
trillion in 2015 But it also cost between 500,000 to 750,000 U.S. jobs. Most
were in the manufacturing industry in California, New York, Michigan and
Texas.

13. PROS AND CONS
1. Increased economic growth. The U.S. Trade Representative Office
estimates that NAFTA increased U.S. economic growth by 0.5 percent
a year.
2. 2. More dynamic business climate. Often, businesses were
protected before the agreement. These local industries risked
becoming stagnant and non-competitive on the global market. With
the protection removed, they have the motivation to become true
global competitors.
3. Lower government spending. Many governments subsidize local
industry segments. After the trade agreement removes subsidies, those
funds can be put to better use.

14. 4. Foreign direct investment. Investors will flock to the country. This
adds capital to expand local industries and boost domestic businesses.
It also brings in U.S. dollars to many formerly isolated countries.
5. Expertise. ​Global companies have more expertise than domestic
companies to develop local resources. That's especially true in mining,
oil drilling and manufacturing. Free trade agreements allow the global
firms access to these business opportunities. When the multi-nationals
partner with local firms to develop the resources, they train them on the
best practices.
That gives local firms access to these new methods.
6. Technology transfer. Local companies also receive access to the
latest technologies from their multinational partners. As local
economies grow, so do job opportunities. Multi-national companies
provide job training to local employees.

15. Cons
1. Theft of intellectual property. Many developing countries don't have laws to
protect patents, inventions and new processes. The laws they do have aren't always
strictly enforced. As a result, corporations often have their ideas stolen. They must
then compete with lower-priced domestic knock-offs.
2. Crowd out domestic industries. Many emerging markets are traditional
economies that rely on farming for most employment. These small family farms can't
compete with subsidized agri-businesses in the developed countries. As a result, they
lose their farms and must look for work in the cities. This aggravates unemployment,
crime and poverty.
3. Poor working conditions. Multi-national companies may outsource jobs to
emerging market countries without adequate labor protections.
As a result, women and children are often subjected to grueling factory jobs in sub-
standard conditions.

16. 4. Degradation of natural resources. Emerging market countries often
don’t have many environmental protections. Free trade leads to depletion of
timber, minerals and other natural resources. Deforestation and strip-mining
reduce their jungles and fields to wastelands.
5. Destruction of native cultures. As development moves into isolated
areas, indigenous cultures can be destroyed. Local peoples are uprooted.
Many suffer disease and death when their resources are polluted.
6. Reduced tax revenue. Many smaller countries struggle to replace
revenue lost from import tariffs and fees.

17. Economic Integration Framework
Political union
Complete political & economic integration
Economic union
Harmonization of economic policies
Common market
Common external trade policy
Free trade area
Free trade among members
Preferential Trading Agreement
Tariff concessions on import to select items
IncreasingIntegration

18. Economic Union
• An economic union is a type of trade bloc which is composed of
a common market with a customs union. The participant countries
have both common policies on product regulation, freedom of
movement of goods, services and the factors of
production (capital and labour) and a common external trade policy.
When an economic union involves unifying currency it becomes
a economic and monetary union.
• Purposes for establishing an economic union normally include
increasing economic efficiency and establishing closer political and
cultural ties between the member countries.

19. India’s Participation in PTAs
SAARC Preferential
Trading Agreement
(SAPTA)
South Asian Free Trade
Agreement (SAFTA)
Comprehensive Economic
Cooperation Agreement
(CECA) between India and
Singapore
Framework Agreement on
Comprehensive Economic
Cooperation between the
Association of South East
Asian Nations (ASEAN)
and India
Bay of Bengal Initiative for
Multi-Sectoral Technical
and Economic Co-
operation (BIMSTEC)
Indo-Sri Lanka Free Trade
Agreement (ISLFTA)
Asia-Pacific Trade
Agreement (APTA)
(Bangkok Agreement)
Global System of Trade
Preferences (GSTP)
Generalized System of
Trade Preferences (GSP)

20. Framework
Agreement for
Establishing Free
Trade between India
and Thailand
Bilateral Preferential
Trading Agreement
with Afghanistan
India–MERCOSUR
PTA
India-Chile
Framework
Agreement on
Economic
Cooperation
Indo–Gulf
Cooperation Council
(GCC) FTA
India- Malaysia
Comprehensive
Economic Co-
operation Agreement
(CECA)
India-Korea
Comprehensive
Economic
Partnership
Agreement (CEPA)
India-Japan CEPA
India’s Participation in PTAs

21. India- Chile
• The main result of the India-Chile Preferential Trade Agreement is that 98% of the
Chilean exports and 91% of the Indian exports have an average tariff reduction of
20% since the entry into force of the agreement.
Chile lowered tariffs on 296 export products from India, while India lowered tariffs on
266 export products of the Republic of Chile
Tariff Reduction is between 10% and 50%.
• India’s exports to Chile are diverse which consist of transport equipment, drugs and
pharmaceuticals, yarn of polyester fibres, tyres and tubes, manufacture of metals,
articles of apparel, organic/inorganic and agro chemicals, textiles, readymade
garments, plastic goods.
• Major items of Import from Chile are copper ore and concentrates, iodine, copper
anodes, copper cathodes, molybdenum ores & concentrates, lithium carbonates &
oxide, metal scrap, inorganic chemicals, pulp & waste paper, fruits & nuts excluding
cashews, fertilizers and machinery.

22. The India-Chile Preferential Trade
Agreement came into force in 2007.
A Framework Agreement to promote the
economic cooperation and foreign trade between
India and Chile was signed on 2005.
The objectives of the India-Chile Preferential
Trade Agreement (PTA) are to:
Promote the international trade growth and the
development of the economic relations between
India and Chile
Provide fair conditions of competition for
the international trade between India and Chile

23. India-Mercosur
• A Framework Agreement had been signed between India and MERCOSUR on 17th June
2003at Asuncion, Paraguay. The aim of this Framework Agreement was to create conditions
and mechanisms for negotiations in the first stage, by granting reciprocal tariff preferences
and in the second stage, to negotiate a free trade area between the two parties in conformity
with the rules of the World Trade Organisation.
• As a follow up to the Framework Agreement, a Preferential Trade Agreement (PTA) was
signed in New Delhi on January 25, 2004. The aim of this Preferential Trade Agreement is to
expand and strengthen the existing relations between MERCOSUR and India and promote
the expansion of trade by granting reciprocal fixed tariff preferences with the ultimate
objective of creating a free trade area between the parties.
• The India-MERCOSUR PTA provides for five Annexes. These five Annexes had been finalized
during six rounds of negotiations in order to operationalise the PTA. These have been signed
between the two sides on March 19, 2005, upon the conclusion of G-20 Meeting in New Delhi.

24. • The five finalized Annexes are following.
• Annex I to the PTA - Offer List of MERCOSUR for tariff concession
on Indian products in MERCOSUR. It contains 452 products.
• Annex II to the PTA - Offer List of India for tariff concession on
MERCOSUR’s products in India. It contains 450 products.
• Annex III to the PTA - Rules of Origin
• Annex IV to the PTA - Safeguard Measures
• Annex V to the PTA - Dispute Settlement Procedure (DSP)

25. • The major products covered in Indian offer list are meat and meat
products, organic & inorganic chemicals, dyes & pigments, raw hides
and skins, leather articles, wool, cotton yarn, glass and glassware,
articles of iron and steel, machinery items, electrical machinery and
equipments, optical, photographic & cinematographic apparatus
• The major product groups covered in the offer list of MERCOSUR are
food preparations, organic chemicals, pharmaceuticals, essential oils,
plastics & articles, rubber and rubber products, tools and implements,
machinery items, electrical machinery and equipments
• India – MERCOSUR PTA came into effect from 1st June, 2009.

26. India- Malaysia
• Recognising that our respective officials have concluded the
negotiations towards the India-Malaysia Comprehensive Economic
Cooperation Agreement which includes trade in goods, services and
investment, and economic cooperation;
• Agree as follows:
Trade In Goods
• Under MICECA (Malaysia-India Comprehensive Economic Cooperation
Agreement ), both Malaysia and India will progressively reduce or eliminate
tariffs on their respective industrial and agricultural products. Modality for tariff
liberalisation for good under MICECA is AITIG plus, with fewer product being
exempted from tariff concession (reduction or elimination) and shorter
timeframe for reduction or elimination of tariff.

27. – Major exports to India in 2016:Palm Oil & Palm-Based Products, Electrical and
Electronic Products ,Crude Petroleum
– Manufactures of Metal, Chemicals and Chemical Products.
– Major imports from India in 2016: Petroleum products, Manufacturers of Metal,
others Agricultures; Live animals and Meat, Machinery, Equipments and parts

28. • In 2016, India was Malaysia’s:
• 7th largest trading partner
• 7th largest export destination
• 11th largest import sources

29. • SERVICES
• India has committed to allow Malaysian foreign equity shareholding
ranging from 49 to 100% in 84 services sub-sectors, including in
professional services, healthcare, telecommunications, retail and
environmental services. In return, Malaysia has made commitments to
allow Indian foreign equity shareholding in 91 services sub-sectors.
•

30. • Investment
• The CECA includes commitments leading to progressive liberalisation of investment
regimes in order to promote investments and create a liberal, facilitative, transparent
and competitive investment regime. The CECA would also serve to strengthen
cooperation in investment, improve transparency of investment rules and regulations,
and provide for the protection of investments.
• Areas of Economic Cooperation
• The CECA includes economic cooperation in areas such as infrastructure development,
creative industries, tourism, SMEs, business facilitation, science and technology, and
human resource development.
• Timeframes
• The Parties will sign the CECA by 31 January 2011 and shall implement the CECA by 1
July 2011.
• IN WITNESS WHEREOF, WE have signed this Agreement towards Implementing
Comprehensive Economic Cooperation Agreement between the Republic of India and
Malaysia on 1st July 2011.

31. India - Afghanistan
• The Government of the Republic of India and The Transitional Islamic State
of Afghanistan, (hereinafter referred to as the "Contracting Parties"),
• CONSIDERING that the expansion of their domestic markets, through
economic integration, is a vital prerequisite for accelerating their processes
of economic development.
• BEARING in mind the desire to promote mutually beneficial bilateral trade.
• CONVINCED of the need to establish and promote free trade for
strengthening intra-regional economic cooperation and the development of
national economies.
•

32. • FURTHER RECOGNISING that progressive reductions and elimination
of obstacles to bilateral trade through a bilateral preferential trading
arrangement (hereinafter referred to as "The Agreement") would
contribute to the expansion of world trade.

33. • Objectives
• The Contracting Parties shall establish a Preferential Trading Arrangement in
accordance with the provisions of this Agreement.
• The objectives of this Agreement are:
• To promote through the expansion of trade the harmonious development of the
economic relations between India and Afghanistan.
• To provide fair conditions of competition for trade between India and Afghanistan.
• In the implementation of this Agreement the Contracting Parties shall pay due regard
to the principle of reciprocity.
• To contribute in this way, by the removal of barriers to trade, to the harmonious
development and expansion of world trade.

34. India-Thailand
• The Joint Working Group held four rounds of meetings between May and
December of 2002, and concluded that a free trade agreement would create
mutual benefits in expanding trade, investment, and economic cooperation in
areas, such as tourism, education, finance and banking, health, aviation, and
international transportation.
• In addition, Thailand would benefit from expanded trade and reduced tariffs
on exports to India, particularly garments, leather products, chemicals,
rubber, plastics, metals, automobile and parts, and electrical goods.
• On October 9, 2003, Ministers of Commerce of both countries (INDIA and
THAILAND) signed the framework agreement.

35. India- Bangladesh PTA- January 2006
• India and Bangladesh have long shared common objectives for closer economic
integration within the South Asia region, and these have recently been re
emphasized by signing on to SAFTA.
• elimination of tariffs and non-tariff barriers on trade between the members, the
harmonization of Customs procedures and documentation, the facilitation of banking
relationships, and cooperation and improvements in the infrastructure for regional
trade and cross-border investments.
• .

36. India- Japan
• India and Japan have been locked in talks over the Comprehensive Economic
Partnership Agreement (CEPA) negotiations to liberalize mutual trade since 2007.
• The newly minted trade pact envisions the scrapping of tariffs in sectors like auto
parts and machinery as well as farm and fisheries products, which will be mutually
beneficial to both economies.
• Japanese auto industry will cheer the planned scrapping of the 10 percent tariff
levied by India on Japanese exports of lithium ion batteries, DVD players and
tractors over the next decade. Likewise Japan will scrap tariffs it imposes on Indian
tea and other farm products.

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