15. Economic Integration

1

Preferential Trade Area (PTA)

Lower tariffs on selected goods among members. Example: APTA (Asia-Pacific Trade Agreement)

2

Free Trade Area (FTA)

Tariffs removed on most trade among members, but each member keeps its own tariffs on outsiders. Examples: SAFTA, USMCA

3

Customs Union

FTA plus a common external tariff against non-members. Example: the EU's customs union

4

Common Market

Customs union plus free movement of labour and capital

5

Economic (and Monetary) Union

Common market plus a common economic policy and, often, a common currency. Example: the Eurozone

6

Political Union

Common government and policies; the highest stage

Trade creation

Trade shifts to a more efficient member producer, a gain

Trade diversion

Trade shifts from a cheaper outside producer to a costlier member, a loss; ideas from Jacob Viner

Rules of origin

Rules deciding whether a good was made in a member country and so qualifies for tariff benefits

Spaghetti bowl effect

Overlapping trade agreements with different rules create confusion; a term linked to Jagdish Bhagwati

MFN exception

Under WTO rules, FTAs and customs unions are allowed as an exception to the Most Favoured Nation principle if they cover substantially all trade

FTA

Mainly reduces tariffs on trade in goods

CECA / CEPA

Comprehensive Economic Cooperation / Partnership Agreement: goods, services, investment and other cooperation

CETA

Comprehensive Economic and Trade Agreement: similar breadth

TEPA

Trade and Economic Partnership Agreement: includes investment commitments, as in the EFTA agreement

ECTA

Economic Cooperation and Trade Agreement, as with Australia

India-Sri Lanka FTA

Signed 1998; in operation from 2000

SAFTA

South Asian Free Trade Area; in force from 1 January 2006

India-Singapore CECA (2005)

India's first comprehensive agreement

India-South Korea CEPA (2010) and India-Japan CEPA (2011)

In force; both are being renegotiated or reviewed

ASEAN-India FTA (goods, 2010)

In force; under review to update and balance it

India-Mauritius CECPA (2021)

India's first trade agreement with an African country

India-UAE CEPA

In force from 1 May 2022; India's first full FTA in about a decade

India-Australia ECTA

In force from 29 December 2022

India-EFTA TEPA

Signed 10 March 2024; in force 1 October 2025. EFTA is Switzerland, Norway, Iceland and Liechtenstein; it includes an investment commitment of US$100 billion over 15 years

India-UK CETA

Signed 24 July 2025; in force from 15 July 2026

India-Oman CEPA

Signed December 2025; in force from 1 June 2026

India-New Zealand FTA

Concluded in December 2025; signed 27 April 2026

India-EU FTA

Negotiations concluded on 27 January 2026; legal scrubbing and ratification pending, with entry into force expected in about 2027

India-US

An Interim Trade Framework was announced in February 2026

Remember

• India withdrew from RCEP (Regional Comprehensive Economic Partnership) in November 2019, citing concerns on trade deficits and market access. RCEP came into force on 1 January 2022 without India.

• Negotiations are also under way with Israel, the Gulf Cooperation Council and Canada (CEPA talks launched in March 2026).

• The EU's Carbon Border Adjustment Mechanism (CBAM), with its charges due from 2026, is an issue for India's exports of steel, aluminium and similar goods.

European Union (EU)

Formed by the Maastricht Treaty (1993). A single market with a common currency, the euro (introduced 1999; notes and coins in 2002), used by many but not all members. The UK left in January 2020 (Brexit)

ASEAN

Set up in 1967 (Bangkok Declaration) by Indonesia, Malaysia, the Philippines, Singapore and Thailand; secretariat in Jakarta. India's Act East Policy (2014) builds on its earlier Look East policy

USMCA

Replaced NAFTA in 2020; covers the US, Canada and Mexico

SAARC

Founded 1985; eight members; secretariat in Kathmandu. Largely inactive since 2016

BIMSTEC

Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (1997): Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand; secretariat in Dhaka. It links South and Southeast Asia and has become important as SAARC has stalled

SCO

Shanghai Cooperation Organisation (2001); India became a full member in 2017

AfCFTA

African Continental Free Trade Area; trading began on 1 January 2021

APEC

Asia-Pacific Economic Cooperation (1989); India is not a member

Quad

India, the US, Japan and Australia; a strategic grouping for a free and open Indo-Pacific

G20

Forum of major economies. India held the G20 Presidency in 2023, and the African Union became a permanent member at the New Delhi Summit

India-Middle East-Europe Economic Corridor (IMEC)

Announced at the G20 New Delhi Summit (September 2023); links India, the Gulf, Israel and Europe by rail and shipping

International North-South Transport Corridor (INSTC)

Shortens routes between India, Iran, Russia and Central Asia

Chabahar Port

An Iranian port developed with Indian help to give access to Afghanistan and Central Asia, bypassing Pakistan

India-Myanmar-Thailand Trilateral Highway

A road link between India's Northeast and Southeast Asia

Quick Recall

• Stages: PTA, FTA, customs union, common market, economic union, political union.

• EFTA = Switzerland, Norway, Iceland and Liechtenstein; TEPA in force 1 October 2025.

• UK CETA in force 15 July 2026; Oman CEPA in force 1 June 2026; EU FTA concluded 27 January 2026.

• India left RCEP in November 2019; RCEP in force from 1 January 2022.

• BRICS: 11 full members and 10 partners; India chairs in 2026; NDB is in Shanghai.

• SAARC (1985) is stalled; BIMSTEC (1997) is active.

• India is not a member of APEC; it joined the SCO in 2017.

• G20 Presidency of India: 2023; the African Union was made a permanent member.