MRAI: Free but sometimes costly

Free trade agreements (FTAs) have bolstered international trade around the world, and India is more likely to see them become a bigger part of its future.

That was the message delivered to attendees of the 2015 Metals Recycling Association of India (MRAI) meeting, held in Mumbai in February, by economist Dr. Ram Upendra Das.

Das, a professor at the New Delhi-based Research and Information System for Developing Countries (RIS), declared that “FTAs are here to stay [and] are part of the future of India.”

He said the European Union (EU) trading zone now represents 70 percent of the cross-border commerce in that region, while the three nations in the North American Free Trade Agreement (NAFTA) region conduct 60 percent of their international trade with each other. Not all such blocs are as successful, said Das, pointing out that members of the Mercosur zone in South America only conduct 12 percent of their international trade with each other.

In India, FTAs have been cited for allowing low-cost semi-finished and finished steel to pour into the country to the detriment of the nation’s own steel and foundry sector, which may be running at a capacity of as low as 50 percent.

Das acknowledged that FTAs can cause such problems, “but problems can be resolved,” he added. India’s tax structure may need to be adjusted in the era of FTAs, with attendees and presenters throughout the MRAI pointing in particular to its 2.5 to 5 percent import duty on scrap metals.

“Indian businesses in general have not been able to take advantage of the advantages offered by FTAs,” said Das, in part because the country is not yet part of a strong FTA such as the EU or NAFTA.

Whether India joins the Regional Comprehensive Economic Partnership (RCEP) or one of the “mega-FTAs” being proposed by the United States, such as the Trans-Pacific Partnership (TPP), such an agreement will greatly boost foreign direct investment in India, said Das.

Countries that remain outside of FTAs, stated Das, “are immediately made uncompetitive. This is the dynamic.”

The 2015 MRAI International Conference was February 5-6 at the Renaissance Mumbai Convention Centre and Hotel.