The UAE: India’s Third-Largest Trading Partner and the Challenges Ahead

As of 2023-24, the United Arab Emirates (UAE) has solidified its position as India’s third-largest trading partner, with bilateral trade reaching an impressive $83.65 billion. This robust economic relationship, bolstered by the Comprehensive Economic Partnership Agreement (CEPA) that took effect on May 1, 2022, has opened new avenues for trade and investment between the two nations. However, recent developments have raised concerns that could impact this flourishing partnership.

Rising Imports and Compliance Concerns

In a recent meeting of the joint committee under the India-UAE CEPA, India expressed its apprehensions regarding a significant surge in imports of silver products, platinum alloy, and dry dates from the UAE. The Indian delegation, led by Additional Secretary in the Department of Commerce Ajay Bhadoo, urged the UAE to ensure compliance with the rules of origin norms established under the FTA. The Indian government is particularly concerned that some imports may not meet these conditions, potentially circumventing the intended benefits of the trade agreement.

The UAE has acknowledged these concerns and agreed to examine them, indicating a willingness to collaborate on ensuring that trade practices remain fair and transparent. This proactive approach is crucial for maintaining the integrity of the CEPA and fostering trust between the two countries.

The Impact of the CEPA

The CEPA has been a game-changer for trade relations, allowing for unlimited imports of precious metals like gold, silver, and platinum from the UAE into India at zero tariffs. However, the think tank Global Trade Research Initiative (GTRI) has raised alarms about the implications of this arrangement. They argue that the surge in imports—particularly a staggering 210% increase in gold and silver imports from the UAE, amounting to $10.7 billion—could be indicative of non-compliance with the rules of origin.

India currently imposes a 7% customs duty on silver imports and a 1% concession on 160 metric tonnes of gold. The GTRI’s concerns highlight the need for a thorough review of the CEPA to ensure that it does not inadvertently facilitate trade practices that undermine domestic industries.

Strategic Requests and Future Collaborations

In addition to addressing compliance issues, the Indian delegation made several strategic requests during the joint committee meeting. One notable request was to categorize the Indian Jewellery Exposition Centre in Dubai as a Designated Zone. This classification would enable domestic jewellery manufacturers, including non-registered entities, to benefit from concessional duties, thereby enhancing their competitiveness in the UAE market.

The UAE side has expressed a willingness to consider this request after consulting with its internal stakeholders, including federal tax authorities. This collaborative spirit is essential for both nations to navigate the complexities of international trade effectively.

Enhancing Trade Facilitation Measures

The discussions also touched upon sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT). India urged the UAE to recognize the i-CAS (India Conformity Assessment Scheme) Halal scheme, which would simplify the certification process for exporting animal products to the UAE. Such measures are vital for promoting trade in sectors where compliance with health and safety standards is paramount.

Moreover, both countries agreed to expedite discussions on the registration and pricing mechanisms for pharmaceutical products, as well as finalize a Memorandum of Understanding (MoU) on food safety. These initiatives are expected to streamline trade processes and enhance the overall efficiency of bilateral trade.

Professional Services and Mutual Recognition Agreements

Recognizing the importance of professional services in fostering economic ties, the Indian delegation highlighted the need for mutual recognition agreements between professional bodies in both countries. This would allow professionals such as chartered accountants, lawyers, and nurses to provide their services without the need for additional certification, thereby facilitating smoother cross-border operations.

Both sides have committed to developing an actionable plan to address these issues, signaling a shared commitment to enhancing cooperation in various sectors.

Conclusion

The UAE’s position as India’s third-largest trading partner is a testament to the strong economic ties that have developed over the years. However, the recent surge in imports and compliance concerns underscore the need for ongoing dialogue and collaboration to ensure that the benefits of the CEPA are realized without compromising the interests of either nation. As both countries work together to address these challenges, the future of their economic partnership looks promising, with the potential for even greater collaboration in the years to come.