Context: 

• India and the UK are currently in negotiations to address contentious issues in the ongoing talks for the India-UK Free Trade Agreement (FTA).

Key Points: 

• The India-UK FTA is regarded as the most extensive trade deal undertaken by India. The agreement will set a precedent for future trade pacts, including those with the EU and the EFTA countries (Iceland, Liechtenstein, Norway, and Switzerland).

What is a free trade agreement (FTA)?

• A FTA is a treaty between two or more countries that aims at eliminating trade tariffs. 
• These agreements are developed between countries as per international trade laws. 
• They help to create an open yet competitive international marketplace by reducing the barriers to imports and exports between countries.

What Are the Types of Trade Agreements?

• Free Trade Agreement: Two countries may agree to enter into a partnership whereby they can freely trade with each other.  For example, a free trade agreement in India with Sri Lanka and strategic conglomerates like ASEAN ensures zero trade barriers.
• Preferential Trade Agreement: When two or more partners allow preferential entry of certain products, it is a preferential trade agreement. In such agreements, the partners generally lift any duties on such products. It is crucial to note that all interested parties must agree to preferential access. For example, India maintains a preferential trade agreement with Afghanistan.
• Comprehensive Economic Partnership Agreement: It deals with the regulatory aspects of trade and have many inclusions concerning trade negotiations. It also includes trade negotiations on investment, service provisioning, and other areas of potential economic partnership. India maintains CEPA with Japan and South Korea.
• Framework Agreement: True to its name, this form of agreement lays the framework and scope of potential agreements between partner nations. This provides scope for future liberalization. India follows signed framework agreements with Japan and the ASEAN countries.  

Rules of origin: 

• These are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.

Rules of origin (ROO) are used:

• To implement measures and instruments of commercial policy such as anti-dumping duties and safeguard measures.
• To determine whether imported products shall receive most-favoured-nation (MFN) treatment or preferential treatment.
• For the purpose of trade statistics.
• For the application of labelling and marking requirements.
• For government procurement.

Provision of RO in GATT:

• Lack of specific rules: GATT has no specific rules governing the determination of the country of origin of goods in international commerce. 
  • Each contracting party is free to determine its own origin rules, and could even maintain several different rules of origin depending on the purpose of the particular regulation. 

Concept of Most-Favoured-Nation (MFN): 

The MFN concept requires countries that are part of the World Trade Organisation to accord the most favourable tariff and regulatory treatment given to the products or services of any one member at the time of import or export of “like products” to all other members.

News Source: Indian Express

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