Introduction
India-UAE CEPA was signed on February 18 in New Delhi during the India-UAE Virtual Summit. The CEPA holds strategic importance to both countries as the UAE is currently India’s third-largest trade partner and second-largest export destination after the USA. UAE has also made considerable investments in company formation in India with an estimated investment of $ 18 billion. India and the UAE have recently entered into a Memorandum of Understanding (MoU) whereby the UAE has committed $ 75 billion towards infrastructure development in India.
Bilateral trade between India and the UAE stood at USD 43.3 billion in 2020-21 Exports were worth USD 16.7 billion and imports aggregated at USD 26.7 billion in 2020-21.
It is expected that CEPA would increase the bilateral trade between the two countries from the current USD 60 billion to USD 100 billion over the next 5 years.
The Key Impacts and Benefits
Commerce and Industry Minister Piyush Goyal on 27th March 2022 unveiled the negotiations for India-UAE CEPA during his visit to the UAE. The India-UAE CEPA document is now available in the public domain.
Tariff Elimination
The pact, which is expected to come into force on the 1st of May 2022, will eliminate duties for 90% of India’s exports in value terms to the UAE across several sectors including gems and jewellery, textiles, leather, and engineering goods.
Rules of Origin
Stringent rules of origin have been provided in CEPA to prevent the routing of products manufactured in third countries to India and to ensure that preferential tariffs can only be claimed during clearance only after the production of the certificate of origin issued by a government agency of the relevant country.
The agreement mandates up to 40% value addition on most goods and wholly-obtained criteria for Agri products to prevent misuse of the CEPA and take advantage of lower tariffs. The steel needs to be melted and cast before being shipped.
Establishing Investment Council
The two countries agreed to set up a technical council on Trade promotion, Investment and Facilitation
Tariff Elimination on Pharma Products
India and the U.A.E. will accept the pharmaceutical products manufactured in either country, requiring no prior inspection, subject to approval by the regulatory authorities of Australia, Canada, the European Union, Japan, the U.S. or the U.K. Indian pharmaceutical products and medical products will get regulatory approval within 3 months.
India’s free-trade pact with the United Arab Emirates eliminated tariffs on finished pharmaceutical products and tariffs on other items including enzymes for pharmaceutical use & pharmaceutical glassware have also been done away with.
Permanent Safeguard Mechanism
The agreement also has in place a permanent safeguard mechanism for certain goods. It covers government procurement and intellectual property and dispute mechanisms.
Trade in Services
Regarding trade in services, India has given market access to the UAE in almost 100 sub-sectors, while Indian service providers will have access to about 111 sub-sectors from the 11 broad service sectors such as business services, communication services, construction and related engineering services, distribution services, educational services, recreational services, financial services, environmental services, health-related and social services and tourism & travel services.
The wide market access across these attractive services sectors in the UAE is all set to lure Indian investors and promote Indian investment in the UAE through company formation in Dubai.
Trade in Goods
India has offered a 1% duty concession for gold imports from the UAE for up to 200 tonnes of inbound shipments. It has also given significant tariff concessions to the USE on dates, petroleum products, petrochemicals, metals, and minerals.
Preferential market access is given by the UAE on over 97 % of its tariff lines which account for 99% of Indian exports to the UAE in value terms, especially for all labour-intensive sectors such as Gems and Jewellery, Textiles, leather, footwear, sports goods, plastics, furniture, agricultural and wood products, engineering products, medical devices, and Automobiles. India reciprocated by providing preferential access to the UAE on over 90% of its tariff lines.
Seventeen agencies from the Indian side have been listed, besides the export inspection council, to issue certificates of origin to exporters digitally which would enable speedy clearances and trade.
Mutual Recognition of Professional Degrees
CEPA would facilitate mutual recognition of professional degrees in various fields including architecture, engineering, medical, nursing, accountancy, and company secretaries and allow easier mobility of skilled professionals across the two nations.
Digital Trade
CEPA is a bilateral trade agreement with a dedicated chapter on digital trade. The chapter focuses on aligning regulatory standards on how digital trade between India and UAE is handled.
Conclusion
As CEPA classifies the subjects chapter-wise with minimum interpretation hassles, the adaptation of this trade pact is expected to be easier as vowed by Industry experts.
Additionally, the inclusion of a few government agencies for issuing certificates of origin will help streamline the process for effective implementation.
