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Decoding India-UAE CEPA: Can it provide the roadmap for $100 billion in trade over the next 5 years?

Krishna Barad, Partner
Indirect Tax
|
Abhishek Singhania, Director
Indirect Tax
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02 May 2022

The Comprehensive Economic Partnership Agreement (CEPA) with UAE was inked on 18 February 2022 and is India’s first complete free trade agreement to be signed with any country in a decade. The negotiations between India and UAE were concluded in a record span of 88 days, and the CEPA was operationalised on 1 May 2022.

The CEPA with UAE covers trade in goods, trade in services, rules of origin, technical barriers to trade, sanitary and phytosanitary measures, dispute settlement, movement of natural persons, telecom, customs procedures, pharmaceutical products, government procurement, IPR, investment, digital trade and cooperation in other areas. It is presumed to act as a catalyst to bolster economic ties between the countries, which have a history of completing each other’s vision toward economic prosperity. Through this, both the countries are projected to achieve significant economic benefits in access to quality education, liberalisation of customs tariffs, ease of facilitating access to respective markets and ease of movement of skilled labour to support these economic initiatives.

In terms of the CEPA, the Tariff Commitments of India for trade in goods cover 11,908 items, whereas the UAE covers 7,581 items. India is expected to benefit from preferential market access provided by the UAE, covering over 97% of its tariff lines which account for 99% of Indian exports to the UAE in value terms, especially for sectors such as gems and jewellery, textiles, leather, footwear, sports goods, plastics, furniture, agricultural and wood products, engineering products, medical devices, and automobiles. India will also be offering preferential access to the UAE on over 90% of its tariff lines, including lines of export interest to the UAE.

India has provided market access to approximately 100 sub-sectors of the UAE regarding trade in services. In comparison, Indian service providers will have access to about 111 UAE sub-sectors from the 11 broad service categories such as business services, communication services, construction and related engineering services, distribution services, educational services, environmental services, financial services, health-related and social services, tourism and travel-related services, recreational cultural and sporting services and transport services.

The CEPA also focuses on digital trade and provides that India and UAE shall endeavour to maintain a legal framework governing electronic transactions consistent with the UNCITRAL Model Law on Electronic Commerce (1996) and avoid any unnecessary burden on digital trade, which includes that India and UAE shall not adopt any measure regarding authentication that would prohibit an electronic transaction and shall not deny digital signature validity except under the circumstances provided for under its law.

The CEPA specifies the Rules of Origin and origin criteria for obtaining a Certificate of Origin (COO) of Goods to curb the misuse of CEPA, which stipulates those goods are deemed to be originated in a country if it is wholly obtained or produced in the country’s territory or has undergone sufficient working or production as per the product-specific rules. COO must be issued before or within five working days of the date of exportation as per the format set out in the CEPA, and this can also be issued retrospectively. COO shall be valid for twelve months from the date of issue. A paper COO in electronic or hard copy format or an entirely digitised COO (E-Certificate) issued by a competent authority will be treated as a COO under CEPA. Also, an origin declaration made out by an approved exporter can be considered a COO under the CEPA.

The CEPA also provides the Sanitary and Phytosanitary Measures to protect human, animal, plant life or health in both India and the UAE, to strengthen communication, consultation, and cooperation between the parties, and particularly between the parties' competent authorities, to prevent any unjustified trade barriers, enhance transparency and to encourage the development and adoption of science-based international standards, guidelines, and recommendations, and promote their implementation.

The Indian Government’s emphasis is on export promotion in this agreement, and it is expected to be a valuable tool in the hands of the Indian industry to make inroads. UAE is currently India’s third-largest trading partner and second-largest export destination after the USA. The CEPA is expected to enhance this robust trade relationship between the two countries and could boost merchandise trade to $100 billion over the next five years, against $29 billion in 2019-20. It is also expected that the CEPA would generate 1 million jobs across multiple labour-intensive sectors, inter alia gems and jewellery, textiles, leather, footwear, furniture, agriculture and food products, plastics, engineering goods, and pharmaceuticals, medical devices, and sports goods.
 

Source: Economic Times