Prime Minister Narendra Modi announced on Tuesday that India and the United Kingdom have successfully concluded the Free Trade Agreement talks and said that the FTA between the two nations will be ‘mutually beneficial’. The announcement was greeted with glee by economic experts at a time when global markets are feeling the heat of tariff wars. What is there to be happy about?

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What is a Free Trade Agreement (FTA)? 

A Free Trade Agreement (FTA) is a pact between two or more countries or blocs to reduce or eliminate trade barriers like tariffs and quotas for promoting trade and investment amongst them. 

FTAs are inked by countries and blocs to eliminate or reduce import duties on a maximum number (90-95 per cent) of goods traded between them. The agreement also minimises non-trade barriers on imports from partner nations while easing regulations to boost service exports and bilateral investments.

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This agreement makes it easier and cheaper for businesses to trade across borders, leading to higher economic growth and better as well as easy access to an array of goods and services.

Also Read | 'Historic milestone': India, UK successfully conclude Free Trade Agreement after years of negotiations

FTAs mostly reduce or eliminate barriers, both tariff and non-tariff, that make it difficult for businesses to trade internationally. These agreements are negotiated for mutual benefit by creating a more level playing field for businesses in the participating countries.

Not just tariffs, FTAs can also cover a wide range of topics like trade in services, investment, intellectual property rights, and more. 
FTAs also include provisions for intellectual property rights and investment protections.
India has been actively pursuing FTAs to boost exports and attract foreign investment, with agreements already in place with countries like Mauritius, the UAE, and Australia.

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Also read: 'We are promoters of free trade' says German Amb Dr Ackermann as he pushes for India, EU FTA

India's various trade agreements 

India already has 13 active Free Trade Agreements (FTAs), while negotiations are ongoing with more countries.
India is also re-evaluating its investment treaties and preferential trade agreements to ensure a balanced approach between global investor protection and national interests.

Besides the UK, India has been in talks with the US, the EU, and ASEAN and is also exploring new agreements with Africa, Latin America, and the Arab Gulf. 

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Besides FTAs, India has other trade agreements with nations and blocs, like Preferential Trade Agreements (PTAs) that offer selective tariff reductions on specific goods; Bilateral Investment Treaties (BITs) that focus on protecting and promoting investments by ensuring fair treatment and dispute resolution mechanisms; and Regional Trade Agreements (RTAs) that aim for economic integration among multiple countries.