UAE-India Comprehensive Economic Partnership Agreement
To mark the successful one-year anniversary of the Comprehensive Economic Partnership Agreement (CEPA) signing, the Embassy of India in Abu Dhabi, in collaboration with the Federation of Indian Chambers of Commerce & Industry (FICCI) and Dubai Chambers, organized a Special Business Event in Dubai. Over 200 leading businesses from India and the UAE participated in the event. The virtual summit held on February 18, 2022, was attended by Indian Prime Minister Narendra Modi and the President of the UAE Sheikh Mohamed bin Zayed Al Nahyan, where they signed the India-UAE Comprehensive Economic Partnership Agreement (CEPA). The CEPA has been operating smoothly since its implementation on May 1, 2022
On February 18, 2022, the India-UAE Comprehensive Economic Partnership Agreement (CEPA) was signed during a virtual summit attended by Indian Prime Minister Narendra Modi and the President of the UAE Sheikh Mohamed bin Zayed Al Nahyan. The agreement, which entered into force on May 1, 2022, aims to boost bilateral trade between the two countries from USD 60 billion to USD 100 billion within five years. Essential products that will benefit from the agreement include oil and gas, petrochemicals, minerals, textiles, agriculture, jewellery, gems, and metals. The CEPA aims to eliminate tariffs on over 10,000 tariff lines within a 10-year period and is expected to have a significant impact on trading between India, the UAE, and the wider Gulf Cooperation Council (GCC) region.
Although the CEPA was based on the India-GCC Framework Agreement on Economic Cooperation signed in 2004, it has become a bilateral free trade agreement (FTA) between the UAE and India. It's important to note that none of the other GCC countries is part of the CEPA. The CEPA includes commitments in various areas such as trade in goods, rules of origin, trade in services, customs procedures, trade facilitation, trade remedies, digital commerce, economic cooperation, government procurement, intellectual property rights (IPR), investment, and trade.
The Highlights of India-UAE CEPA
The India-UAE CEPA is a comprehensive agreement that covers various areas of trade and cooperation, including 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 more. It is expected to enhance economic ties between the countries and drive economic growth by providing improved access to education, liberalizing customs tariffs, facilitating market access, and supporting the movement of skilled labour.
Under the CEPA, India has granted market access to approximately 100 sub-sectors of the UAE's service industry, while UAE service providers will have access to about 111 sub-sectors from 11 broad service categories, including 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 recognizes the importance of digital trade and aims to maintain a legal framework for electronic transactions in line with the UNCITRAL Model Law on Electronic Commerce (1996). To ensure smooth digital trade, India and the UAE have agreed not to adopt any measure related to authentication that would hinder electronic transactions and to recognize the validity of digital signatures, except under certain circumstances specified by their respective laws.
Furthermore, the CEPA addresses Sanitary and Phytosanitary Measures (SPS) to protect human, animal, and plant life, or health in both India and the UAE. The agreement aims to strengthen communication, consultation, and cooperation between the parties' competent authorities to prevent unjustified trade barriers and enhance transparency. It also encourages the development and adoption of science-based international standards, guidelines, and recommendations and promotes their implementation.
India-UAE CEPA: What Do Trade Benefits Include?
Tariff Reduction
The India-UAE CEPA has facilitated greater market access for both countries through preferential tariff rates, allowing for reduced or eliminated customs duties on originating goods. The CEPA provides for the eventual reduction of customs duties on a significant number of originating goods to 0%. While some goods will be subject to complete customs duty elimination immediately upon entry into force, others will be eliminated over a period of up to five, seven, or ten years, and some will be reduced compared to the existing customs duty rates. The elimination or reduction of tariffs is subject to varying schedules and timelines depending on the nature of the goods. As per the India-UAE CEPA, 80% of tariffs on Indian and Emirati goods will be eliminated, and all tariffs will be eliminated within 10 years. The agreement also provides the UAE with zero-duty access to 90% of India's exports to the UAE. UAE commodities such as aluminium, copper, and petrochemicals will benefit from the removal of tariffs. Goods from the UAE that comply with the Rules of Origin (RoO) will be granted one of three statuses: Tariff Elimination Immediate (TEI), Tariff Reduction (TR), or Tariff Elimination Phased (TEP).
The India-UAE CEPA reduces the import duty by five per cent on major export segments, including Indian readymade garments. The current apparel exports from India to the UAE amount to US$1.51 billion, accounting for 43 per cent of the total US$3.51 billion worth of imports in the Emirate.
Furthermore, Indian jewellery exporters can now access duty-free trade with the UAE, which previously imposed a five per cent customs duty on such products. The elimination of tariffs through the CEPA will expand the export reach of Indian-designed jewellery, which already enjoys a good market reputation. The gems and jewellery sector in India aims to increase its exports to US$10 billion by 2023.
Simplified Trade Facilitation and Custom Procedures
The CEPA aims to simplify customs procedures and facilitate trade in accordance with the WTO’s TFA. It includes measures such as pre-import customs rulings, streamlined cross-border clearance for businesses, reduced unnecessary customs procedures, and adoption of best practices in customs management.
Apart from the standard certificate of origin, the CEPA allows for the use of invoice declaration of origin for authorized exporters. Both countries have also committed to negotiating and implementing future provisions for customs authorities to recognise the invoice declaration of origin, eliminating the need for a traditional certificate of origin.
Trade in Services
The India-UAE CEPA creates an open and non-discriminatory environment for cross-border trade in services, ensuring that service providers from both countries can operate in each other’s territories. The agreement prohibits any measures that limit the services provided by the other party and aims to achieve mutual recognition of professional licenses and certifications in various fields, including architecture, engineering, accounting, medical, and nursing. Both India and the UAE have granted each other market access to a wide range of service sectors, including business services, telecommunication services, construction and related services, and educational services.
Bilateral Cooperation on Pharmaceutical Products
The CEPA also promotes bilateral cooperation in the pharmaceutical sector by facilitating access to finished pharmaceutical products. Products manufactured in one party's territory will be accepted without the need for previous inspection and will receive fast-track approval for product registration if they have already been approved by the regulatory authorities of Australia, Canada, the United Kingdom, Japan, the United States, or the European Union.
Additional Provisions
Apart from the removal and reduction of tariffs, the CEPA encompasses several significant provisions that will be advantageous for both Indian and UAE exporters, importers, and service providers. These benefits include enhanced cooperation regarding the Agreement on Technical Barriers to Trade, collaboration on information exchange between the two tax authorities, commitments to achieve the implementation of the AEO mutual recognition agreement, providing temporary admission for specific goods in certain situations (such as goods intended for fairs, exhibitions or sports purposes), encouragement of trade opportunities for small and medium-sized enterprises, and an agreement on government procurement transparency and impartiality.
Current Status: Bilateral Trade and Investment
The India-UAE CEPA is a significant milestone as it marks the first-ever bilateral trade agreement between the UAE and India in the MENA region. This comprehensive agreement covers various aspects of India's economic engagement with the UAE, including trade, investments, healthcare, digital trade, government procurement, and intellectual property rights.
Since its implementation, the CEPA has created new opportunities in bilateral trade, and it is expected to boost the business in goods to $100 billion and the trade in services to $15 billion within five years.
The remarkable growth in bilateral trade is a testament to the early benefits derived from the agreement. In the first eight months of the current financial year (April-November 2022), the bilateral trade between the two countries has surged to $57.8 billion from $45.3 billion in the same period last year, demonstrating a substantial growth of 27.5% in percentage terms and an impressive increase of $12.5 billion in value terms.
During the same period, India witnessed a remarkable growth of 19.32% in its exports to the UAE, which increased from $17.45 billion to $20.8 billion, representing a rise of $3.35 billion in value terms. Additionally, several significant partnerships have been established since May 2022 in the areas of energy, food security, education, and healthcare.
India is the UAE's second-largest trading partner, accounting for 9% of the UAE's total foreign trade and 13% of its non-oil exports. On the other hand, the UAE is India's third-largest bilateral trade partner. The India-UAE bilateral trade is expected to surpass US$60 billion in the current financial year. The UAE is also India's eighth-largest foreign investor, with cumulative foreign direct investment (FDI) worth nearly US$11 billion. Furthermore, the UAE has pledged to invest US$100 billion in India in various sectors such as manufacturing, infrastructure, and services.
For instance, in June 2020, UAE's Mubadala invested a significant amount of US$1.2 billion in India's telecommunication provider, Jio Platforms. Furthermore, in 2019, UAE entities committed US$7 billion to establish a food corridor between the UAE and India. This aimed to provide a stable market for Indian farmers in Madhya Pradesh, Punjab, Uttar Pradesh, and Gujarat.
In terms of future investments, the UAE is expected to focus on the healthcare, infrastructure, agriculture, and renewable energy sectors in India. Specifically, the projects will focus on areas such as green hydrogen, climate action, start-ups, skilling, food processing, fintech, and health tech. Similarly, India's Reliance conglomerate announced an investment of US$2 billion in Abu Dhabi's TA'ZIZ Industrial Chemical Zone in April 2022.
Apart from these mega investment deals, numerous Indian businesses operate in the Emirates due to India's substantial population in the UAE. For women entrepreneurs, the SAIF Zone provides tailored incentives for setting up operations. Established in 1995, SAIF Zone claims to be the first ISO 9001-certified airport-free zone globally, as per its website.
Marking One Year of India-UAE Comprehensive Economic Partnership Agreement
A Special Business Event was organized in Dubai by the Embassy of India in Abu Dhabi in association with the Federation of Indian Chambers of Commerce & Industry (FICCI) and Dubai Chambers, to commemorate the successful one-year anniversary of the Comprehensive Economic Partnership Agreement (CEPA) signing. The event was attended by over 200 leading businesses from India and the UAE.
Dr. Thani Al Zeyoudi, the UAE Minister of State for Foreign Trade, addressed the gathering and highlighted the enormous opportunities and benefits provided by the CEPA. Ambassador Sunjay Sudhir also spoke at the event and noted that businesses from both countries have already started taking advantage of the duty waivers and enhanced market access provided by the CEPA.
The CEPA has been in force since May 1, 2022, and has been operating smoothly for over 10 months now. The impressive growth in bilateral trade during the first eight months of the current financial year, from April to November 2022, is a true reflection of the early gains accruing from the agreement. Bilateral trade between the two countries has grown to US$ 57.8 bn, an increase of 27.5% in percentage terms and US$ 12.5 bn in value terms, compared to the same period last year.
During the same period, India's exports to the UAE have seen a remarkable growth of 19.32%, reaching US$ 20.8 bn from US$ 17.45 bn, an increase of US$ 3.35 bn in value terms. Besides, several other significant partnerships related to energy, food security, education, and healthcare have been launched since May 2022.
References
- All India Radio (2023). One Year of India-UAE CEPA Commemorated at Dubai. [online] Newsonair.gov.in. Available at: https://newsonair.gov.in/News?title=One-Year-of--India-UAE-CEPA-Commemorated-at-Dubai&id=455998#:~:text=The%20historical%20India%2DUAE%20Comprehensive.
- India Briefing (2022). India-UAE CEPA in Action: Huge Prospects for Bilateral Trade and Investment. [online] India Briefing News. Available at: https://www.india-briefing.com/news/india-uae-cepa-signed-at-virtual-summit-prospects-for-us100-billion-annual-bilateral-non-oil-trade-24348.html/.
- Ministry of Commerce and Industry (2022). Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE). [online] Mcommerce. Available at: https://commerce.gov.in/international-trade/trade-agreements/comprehensive-economic-partnership-agreement-between-the-government-of-the-republic-of-india-and-the-government-of-the-united-arab-emirates-uae/.
- Ministry of Economy (2022). UAE-India Comprehensive Economic Partnership Agreement - Ministry of Economy UAE. [online] Ministry of Economy UAE. Available at: https://www.moec.gov.ae/en/cepa_india.
- PBNS (2023). India – UAE CEPA resulting a growth of 27.5 % in bilateral trade. [online] https://newsonair.com/2023/02/19/uae-cepa-resulting-a-growth-of-27-5-in-bilateral-trade/. Available at: https://newsonair.com/2023/02/19/uae-cepa-resulting-a-growth-of-27-5-in-bilateral-trade/ [Accessed 11 Mar. 2023].
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- PricewaterhouseCoopers (2023). The UAE-India Comprehensive Economic Partnership Agreement (CEPA) enters into force. [online] PwC. Available at: https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2022/the-uae-india-comprehensive-economic-partnership-agreement-enters-into-force.html [Accessed 11 Mar. 2023].
- Singhania, K.B. & A. (2022). Decoding India-UAE CEPA: Can it provide the roadmap for $100 billion in trade over the next 5 years? The Economic Times. [online] 2 May. Available at: https://economictimes.indiatimes.com/small-biz/trade/exports/insights/decoding-india-uae-cepa-can-it-provide-the-roadmap-for-100-billion-in-trade-over-the-next-5-years/articleshow/91249354.cms?from=mdr [Accessed 11 Mar. 2023].
- The Economic Times (2023). A year after signing India-UAE Comprehensive Economic Partnership Agreement, bilateral trade grew by 27.5%. The Economic Times. [online] 18 Feb. Available at: https://economictimes.indiatimes.com/news/economy/foreign-trade/a-year-after-signing-india-uae-comprehensive-economic-partnership-agreement-bilateral-trade-grew-by-27-5/articleshow/98041509.cms?from=mdr [Accessed 11 Mar. 2023].
Pic Courtsey-Surya Prakash at unsplash.com
(The views expressed are those of the author and do not represent views of CESCUBE.)
