Duty-free access for jewellery sector to get huge export boost under India-UAE trade pact: Comm secy

New Delhi: The domestic jewellery sector will get a huge export boost in the United Arab Emirates (UAE) market as it would get duty-free access there, while the gulf nation will get greater access to the gold market here as India will give duty concessions on import of up to 200 tonnes, Commerce Secretary B V R Subrahmanyam said on Saturday.

India has agreed to concessional import duties on gold imports of up to 200 tonnes per year. India imported about 70 tonnes of gold from the UAE in 2020-21.

"We are a major importer of gold. India imports about 800 tonnes of gold every year. In this particular agreement, we have given them (UAE) a TRQ (tariff rate quota) of 200 tonnes where the tariff (or import duty) in perpetuity will be one per cent less than whatever is the tariff charged for the rest of the world.

"Therefore, the UAE has a one per cent price advantage in gold bars. That one per cent tariff difference means those 200 tonnes will be diverted to the UAE," the secretary told reporters here.

He said the biggest gain for India is "that we get zero duty access" to the UAE market for domestic jewellery.

There was a five per cent duty on Indian jewellery and now, "it's gone to zero", so the gem and jewellery sector is "gung-ho", he added.

TRQ is a quota for a volume of imports that enter India at specified tariffs. After the quota is reached, a higher tariff applies on additional imports. TRQ would also be there for copper, polyethylene and polypropylene.

India and the UAE on Friday signed a comprehensive economic partnership agreement (CEPA), under which a number of domestic goods will get zero duty access to the UAE market. The pact may come into force in April or May.

When asked about the inclusion of the digital trade chapter in the agreement, the secretary said that for the first time, this sector is there in the trade agreement signed by India and it shows that India is ready to talk on this bilaterally.

"There will be a lot of harmonisation in regulatory standards on how you manage digital trade between India and UAE... We (India) are discussing digital trade or e-commerce with the European Union, Australia, UK and Canada," he said.

Explaining the chapter, Joint Secretary in the department of commerce Srikar Reddy said that this is a "best endeavour" chapter where the dispute settlement mechanism will not apply.

"We are focusing on how to harness the future economic growth opportunity that digital trade provides.
"We have provisions in the chapter regarding paperless trading, consumer protection, unsolicited commercial electronic messages, personal data protection, cross border flow of information and cooperation of digital products and electronic payments," Reddy said.

Norms for customs duties on electronic transmission are linked with the current moratorium, which is there in the World Trade Organization (WTO).

Talking about the safeguard mechanism present in the India-UAE agreement, the secretary said there is a permanent safeguard mechanism that will kick in if there is any sudden surge in imports.

He added that the agreement also has the "most stringent" rules of origin (ROO) and value addition norms.

Generally, value addition is in the range of 30-35 per cent. But, in this pact, it is broadly 40 per cent barring gold and a couple of other high-value items.

"Trade diversion is not going to happen because of these stringent value addition norms," he added.

The "rules of origin" provision prescribes for the minimal processing that should happen in the FTA country so that the final manufactured product may be called originating goods in that country. Under this provision, a country that has inked an FTA with India cannot dump goods from some third country in the Indian market by just putting a label on it. It has to undertake a prescribed value addition in that product to export to India. Rules of origin norms help contain the dumping of goods.

To protect sensitive sectors, India has kept certain segments out of the ambit of this agreement. 

These include dairy, fruits, vegetables, cereals, tea, coffee, sugar, food preparation, tobacco, petroleum waxes, coke, dyes, soaps, natural rubber, tyres, footwears, processed marbles, toys, plastics, scrap of aluminium and copper, medical devices, TV pictures, auto and auto components and sectors under the production-linked incentive scheme.

It is a comprehensive agreement. It covers goods, services, ROO, SPS (sanitary and phytosanitary), TBT (technical barriers to trade), dispute settlement and trade facilitation.

"These are standard parts of an FTA but we are now into a new age FTAs. This is the first time that we are getting into digital trade, government procurement, IPRs (intellectual property rights).

"These are the areas where India was traditionally diffident upon engaging with multilateral or bilaterally. I think (now) it shows maturity and the confidence that we are going ahead and signing (agreements with these chapters)," he said.

These chapters, he said, might be small but they set the path, trend and tone, and it conveys the sense of India's desire to be a large global player in many fields, he said.

The comprehensive free-trade agreement signed between India and the UAE will help the two-way commerce reach the USD 100-billion mark in over five years and create about 10 lakh jobs in sectors such as apparel, plastic, leather and pharma.

Under the pact, the UAE is opening the market for 90 per cent of Indian goods at zero duty and in five years time, it would reach 99 per cent. Similarly, India would give zero duty market access to 80 per cent of their exports and in ten years time, it would go up to 90 per cent.