Context:
A Comprehensive Economic Partnership Agreement (CEPA) is a broad-based bilateral trade agreement that expands beyond traditional Free Trade Agreements (FTAs) to include trade in goods, services, investments, intellectual property, and economic cooperation. India has signed CEPAs with countries such as the UAE (2022) and South Korea (2010) to strengthen trade and strategic economic ties.
Key Highlights:
Nature of CEPA
- A Comprehensive Economic Partnership Agreement is an advanced form of Free Trade Agreement (FTA).
- It aims to reduce or eliminate tariffs while also addressing services trade, investment flows, and regulatory cooperation.
Key Components of CEPA
- Trade in Goods:
• Reduction or elimination of import tariffs and customs duties
• Market access for manufactured and agricultural products - Trade in Services:
• Liberalization of sectors like IT services, banking, finance, and professional services - Investment Cooperation:
• Encourages foreign direct investment (FDI) through predictable rules and investor protection - Intellectual Property Rights (IPR):
• Protection of patents, copyrights, and trademarks - Economic and Technical Cooperation:
• Collaboration in technology transfer, innovation, skill development, and digital economy
Examples of India’s CEPAs
- India–UAE CEPA (2022):
- Eliminates tariffs on over 80–90% of traded goods.
- Boosts bilateral trade target to $100 billion.
- India–South Korea CEPA (2010):
- Enhanced trade in goods, services, and investments between the two countries.
Relevant Prelims Points:
- CEPA vs Free Trade Agreement (FTA)
- FTA: Primarily focuses on tariff reduction in goods trade.
- CEPA: Broader scope including services, investments, regulatory cooperation, and economic partnerships.
- Trade Agreements Classification
- PTA (Preferential Trade Agreement) – limited tariff reductions.
- FTA (Free Trade Agreement) – elimination of tariffs on most goods.
- CEPA/CECA (Comprehensive Economic Cooperation Agreement) – deep economic integration covering multiple sectors.
- India’s Trade Policy Goal
- Increase exports, global value chain integration, and strategic economic partnerships.
Relevant Mains Points:
Advantages of CEPAs
- Expands market access for goods and services.
- Strengthens global supply chain integration.
- Encourages foreign investment and technology transfer.
- Enhances strategic geopolitical partnerships.
Challenges
- Risk of trade imbalances if imports increase faster than exports.
- Domestic industries may face competition from cheaper imports.
- Need for standards compliance and competitiveness improvements.
Way Forward
- Strengthen export competitiveness through manufacturing and innovation.
- Support MSMEs to access global markets.
- Align trade agreements with India’s long-term economic and strategic interests.
UPSC Relevance:
• Prelims: CEPA, FTA vs CEPA, India–UAE CEPA, trade agreement types.
• Mains: GS III – International Trade, Economic Diplomacy, Global Value Chains.