India and UAE signed the Comprehensive Economic Partnership Agreement[i](CEPA) in February 2022 in a step towards further consolidating the growing bilateral economic ties through trade liberalisation and free trade agreements (FTAs). The two countries are aware of the rapidly changing global dynamics and aim to establish a transparent legal framework supporting expansion of trade. CEPA provides New Delhi and Abu Dhabi an opportunity to promote transfer of technology and create new employment avenues by providing support to the growth and development of micro, small and medium enterprises (MSMEs). CEPA has the potential to increase the total value of bilateral trade in goods to over US$100 billion and trade in services to above US$15 billion within five years.[ii]
CEPA to strengthen economic ties between India and UAE
The CEPA came into force on 1 May 2022. The first consignment of shipment comprising jewellery products under India-UAE CEPA was flagged off from New Delhi for Dubai. In February 2022, External Affairs Minister S. Jaishankar, announced that the signing of the agreement is a milestone event in the bilateral relations. He added that it will open new opportunities in trade in goods and services and will lead to enhanced investments for the two partners.[iii] Indian Prime Minister Narendra Modi stated that the CEPA with UAE is a game-changer for India-UAE economic ties and said that it will usher in a new era in bilateral economic relations. He added that it will open new avenues for trade and investment and the bilateral trade will grow from US$60 billion to US$100 billion in the next five years.[iv] The Crown Prince of Abu Dhabi Sheikh Mohamed bin Zayed bin Sultan Al Nahyan hailed the India-UAE ties and said that the signing of the CEPA marks the beginning of an exciting new era in the longstanding relationship between the UAE and India. He also said that India is one of the UAE’s closest and most enduring partners.[v]
The UAE Minister of Economy Abdulla bin Touq Al Marri arrived in India on 8 May leading a high-level business delegation to discuss ways to further promote trade and investments between the two countries, and said that the CEPA framework is a crown jewel in the bilateral ties.[vi] He also said that CEPA will lead to a US$ 100 billion trade in non oil sector and has the potential to create 250,000 jobs in the next few years.[vii] The 70-member delegation representing different sectors such as food, Special Economic Zones (SEZs), sovereign wealth funds, and aviation held discussions with the industry leaders.[viii] During the visit, Indo-UAE partnership summit was led by the Confederation of Indian Industry (CII) and the two countries launched the India-UAE Start-up Bridge as part of CEPA.
The bridge would facilitate UAE investments into Indian start-ups as well as enable joint training sessions for incubators of both the countries. It would also provide market access information to the start-ups, enable them to set up businesses in both the countries and evaluate the possibility for expansion of operations at the global level. The UAE Minister had earlier called the agreement a momentous new chapter in the India-UAE shared history underlining that CEPA is a milestone in the bilateral relationship and has been built on decades of enterprise.[ix] Indian Commerce and Industry Minister Piyush Goyal emphasized on robust bilateral partnership during the inaugural session of the summit and stated that CEPA will significantly open the doors to a plethora of markets across the globe and help in building a future ready, more robust and resilient partnership.[x]
Figure 1: Committees and Council under CEPA
CEPA provides for establishment of various committees for effective implementation of the trade agreement. It is to be operationalised and implemented through a Joint Committee headed by the Ministries that is to meet biennially for review. CEPA calls for establishment of a Committee on Trade in Goods (CTG) with a mandate to monitor and review the undertaken measures and present recommendations to the Joint Committee. The Committee is to meet once every two years and will be chaired jointly by both India and the UAE. CEPA also mentions about establishment of UAE-India Technical Council on Investment and Trade Promotion and Facilitation.
Similarly, New Delhi and Abu Dhabi also agreed to establish a Committee on MSMEs that would discuss the best practices in supporting and assisting MSME exporters with respect to training programs, trade education, trade finance and digital trade. India and UAE would also establish a Committee on Economic Cooperation that would support bilateral cooperation in manufacturing, agriculture, trade, human resource, tourism, information and communications technology, electronic commerce, environment, media and energy.
Figure 2: Areas covered under CEPA
Elimination of Custom Duties
As per Article 2.4 of the CEPA, the two countries shall eliminate customs duties on goods related to scientific equipment and materials, sports and theatres.[xi] India and UAE will eliminate customs duties on goods related to scientific equipment and materials, sports and theatres under CEPA. CEPA lists more than 7,000 (Annex 2A) and 11,000 (Annex 2B) items for Specific Tariff Commitments UAE and India respectively. The tariff concessions on goods will be implemented in a phased manner through Tariff Rate Quota.[xii]Products related to agriculture, dairy and petroleum are listed in the exclusion list. UAE has requested India to administer the Tariff Rate Quotas in a transparent, timely, and responsive manner reducing the burden on trade.[xiii] The two countries have agreed to review the product specific rules within two years of the enforcement of this agreement. CEPA also mentions about provision for reducing the technical barriers to trade by enhancing transparency and facilitating information exchange and cooperation. In line with the international standards and recommended practices, the custom procedures will remain simple and consistent and shall maintain a high-level of transparency and fairness. Although the energy sector is excluded from all aspects and provisions of CEPA, India and UAE are planning for establishment of a joint Hydrogen Task Force to help scale up technologies and identification of new collaboration opportunities to support India’s energy requirements.
Cooperation on Pharmaceuticals
The primary focus of CEPA is on the bilateral cooperation on pharmaceuticals and the two countries agree to have a transparent, non-discriminatory and consistent customs laws and regulations. For the first time in any Trade Agreement, a separate Annex 5A on Pharmaceuticals has been incorporated to facilitate access of Indian pharmaceuticals products in the partner country. It provides for automatic registration and marketing authorisation in 90 days for products that are approved by regulators from USA, UK, Japan and European Union. The India-UAE vision joint statement mentions that the two countries agreed to collaborate in research, production and development of reliable supply chains for vaccines. It also mentioned about enhancement of investments by UAE entities in the rapidly growing health infrastructure in India and the bilateral collaboration in providing health care in underprivileged countries.[xiv]
Digital Trade and Intellectual Property Rights (IPRs)
Secondly, the agreement focuses on promotion of digital trade through Domestic Electronic Transactions Framework that calls for cyber security and the cross-border flow of electronic information (Chapter 9). India and UAE have agreed for a dialogue on regulatory matters relating to digital trade aiming to exchange information and experiences in digital identities, data protection, anti-money laundering, and unsolicited commercial electronic messages. Thirdly CEPA aims to promote innovation and facilitate the diffusion of knowledge in order to develop cooperation on IPRs pertaining to MSMEs and science and technology (Chapter 11). The two countries are to cooperate on the domestic and international intellectual property policy and the implementation of multilateral intellectual property agreements including those concluded under the auspices of WIPO. They are also to cooperate on technical assistance for developing countries, genetic resources, traditional knowledge, and geographical indications.
Cooperation on MSMEs and Services sector
India and UAE intend to promote jobs and growth by fostering close cooperation between MSMEs of the two countries in terms of infrastructure development including MSME centres, incubators and accelerators (Chapter 13). New Delhi and Abu Dhabi recognise the integral role of the private sector and agree to strengthen collaboration on activities to promote start-ups owned by women and youth. CEPA covers broadly 11 categories of services including business, communication, construction, education, environment, finance, health, tourism, recreation and transport (Chapter 8). India and UAE have committed around 100 sub-sectors in services as the sector contributes 48.9 per cent of GDP in India and 58.2 per cent of GDP in UAE (World Bank data 2020).[xv]India and UAE also agreed to promote a climate for expansion of trade and investment in products and services.
Potential Gains for India and UAE from CEPA
It is to be noted that the UAE is currently the third-largest trading partner and the second largest export destination of India. The bilateral trade valued at US$59 billion and India’s exports to the Emirates was worth around US$29 billion for the year 2019-20. In addition, UAE is the eighth largest investor in India with an investment worth US$18 billion, and Indian investments in the Gulf country amount to around US$85 billion.
India and UAE are to benefit immensely from the partnership. The agreement has the potential to benefit Indian products worth about US$26 billion as they are currently subjected to 5 per cent import duty by UAE. On the whole, UAE is offering elimination of duties on 97 per cent of its tariff lines and consequently 90 per cent of the India’s total exports to the UAE will become duty free. CEPA can lead to employment generation in India as it provides the zero duty UAE market access to India’s labour-intensive sectors including gems and jewellery, textiles and leather, plastics, wood works, engineering products and automobiles. It also has permanent safeguard ‘rules of origin’ mechanism to protect the domestic industry from imports surge due to tariff concessions. In the long term, the UAE can act as a sourcing hub for India’s capital goods. The goods can be exported to Africa and Europe after value addition in UAE. CEPA also has a provision on mutual recognition of professional and skills qualifications and it will facilitate professionals and skilled workers to deliver services. UAE hosts around 4.5 million Indians of which majority is engaged in services sector.[xvi]
CEPA can lead to signing of agreements by the two countries with their other trading partners. The partnership agreement heralds a new beginning for UAE as it has entered into such partnership for the first time and the success of CEPA may lead to the signing of such agreements with other countries. Similarly with the India-UAE CEPA becoming operational, Oman is eyeing to sign FTA with India.[xvii] India is a party to a framework agreement on economic cooperation with the GCC states since 2004.[xviii] Other than UAE, India has concluded CEPA with Japan and Korea.[xix]
Concerns for CEPA
CEPA is an efficient tool to bolster economic partnerships; however, there are concerns regarding its implementation and benefits. The preference margins that each partner enjoys may not amount to significant enhancement of economic revenues. Secondly, the regulatory measures envisaged by CEPA may impact its smooth implementation. Thirdly, the two partners will have to be cautious about possibilities of import surge. Fourthly, possible dumping of products by other countries will have to be countered.
The extent of benefits of the preference margins will be visible as the trade gains momentum in next few years. The India-UAE CEPA has a provision for regulatory measures particularly with respect to the digital trade. The articles pertaining to the rules of origin i.e., Article 3.1 to Article 3.35 ensures that the circumvention of exports from third countries does not hinders the enhancement of bilateral economic ties.[xx] Also the certificate of origin to be issued by the Ministry of Economy of the UAE will lead to prevention of circumvention of the rules of origin criteria. CEPA has a built-in consultative mechanism to ensure that the third countries dumping goods do not escape the anti-dumping measures applied by India.[xxi]
The India-UAE CEPA is an important departure from the way India perceived earlier FTAs. CEPA negotiations were concluded within three months of being initiated in September 2021 and it has been implemented within three months of its signing in February 2022.The agreement covers a wide array of sectors including digital economy and India has agreed to an extensive market opening commitments.[xxii]
The implementation of the agreement is timely as it will boost the bilateral trade between India and UAE. As the first consignment has been dispatched and there are high hopes on both sides about success of the agreement, the follow up and timely response and delivery is the key for strengthening of economic ties. Success of CEPA will give a boost to India-UAE ties and the two countries will look forward to act on the new frontiers and new milestones marked in the joint India-UAE vision statement.[xxiii]
* Dr. Lakshmi Priya, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal.
[i]Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE), Department of Commerce, Ministry of Commerce and Industry, Government of India, https://commerce.gov.in/international-trade/trade-agreements/comprehensive-economic-partnership-agreement-between-the-government-of-the-republic-of-india-and-the-government-of-the-united-arab-emirates-uae/ accessed on 11 May 2022.
[ii]Joint Press Statement on the Launch of Negotiations for the India – United Arab Emirates Comprehensive Economic Partnership Agreement (CEPA), Ministry of Commerce and Industry, Press Information Bureau, 22 September 2021, https://pib.gov.in/PressReleasePage.aspx?PRID=1757061 accessed on 11 May 2022.
[iii]India-UAE CEPA Will Lead To Glorious, Shared Future: Jaishankar, BW Business World, 19 February 2022, https://www.businessworld.in/article/India-UAE-CEPA-Will-Lead-To-Glorious-Shared-Future-Jaishankar-/19-02-2022-420980/ accessed on 11 May 2022.
[iv] India-UAE CEPA will be game-changer in economic ties: PM Modi, ANI News, 18 February 2022,
https://www.aninews.in/news/world/asia/india-uae-cepa-will-be-game-changer-in-economic-ties-pm-modi20220218220155/accessed on 02 May 2022.
[v]India-UAE CEPA: On the path to a prosperous future, NewsonAir, 19 February 2022, https://newsonair.com/2022/02/19/india-uae-cepa-on-the-path-to-a-prosperous-future/accessed on 06 May 2022.
[vi]UAE-India CEPA framework is crown jewel: Economy minister Abdullah Bin Touq, The Print, 11 May 2022, https://theprint.in/world/uae-india-cepa-framework-is-crown-jewel-economy-minister-abdullah-bin-touq/952059/ accessed on 12 May 2022.
[vii] Amin Ali, CEPA between India UAE to lead to a $100 billion trade in non oil sector and create 250,000 jobs in next few years, The Times of India, 12 May 2022, https://timesofindia.indiatimes.com/business/international-business/cepa-between-india-uae-to-lead-to-a-100-billion-trade-in-non-oil-sector-and-create-250000-jobs-in-next-few-years/articleshow/91517483.cms accessed on 17 May 2022.
[viii]UAE Minister of Economy to lead high-level business delegation to India this week, The Hindu, 8 May 2022,
https://www.thehindu.com/news/national/uae-minister-of-economy-to-lead-high-level-business-delegation-to-india-this-week/article65394468.ece accessed on 10 May 2022.
[ix] India-UAE economic pact will be foundation stone for next era of success: UAE Minister, ANI News, 18 February 2022, https://www.aninews.in/news/world/asia/india-uae-economic-pact-will-be-foundation-stone-for-next-era-of-success-uae-minister20220218224611/ accessed on 03 May 2022.
[x] Startup Push in Indo-UAE Agreement, The Times of India, 14 May 2022, https://timesofindia.indiatimes.com/business/india-business/startup-push-in-indo-uae-agreement/articleshow/91549964.cms accessed on 17 May 2022.
[xi] India-UAE CEPA, Chapter 2, Trade in Goods, Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE), Department of Commerce, Ministry of Commerce and Industry, Government of India, https://commerce.gov.in/wp-content/uploads/2022/03/Chapter-2.pdf accessed on 11 May 2022.
[xii] India-UAE CEPA, FAQs, Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE), Department of Commerce, Ministry of Commerce and Industry, Government of India, https://commerce.gov.in/wp-content/uploads/2022/05/FAQs-on-CEPA_For-Uploading-on-DoCs-website-05-May-2022.pdf accessed on 11 May 2022.
[xiii] Office of the Minister, Ministry of Economy, United Arab Emirates, https://commerce.gov.in/wp-content/uploads/2022/03/3-UAE-Letter-on-TRQs.pdf accessed on 11 May 2022.
[xiv]Joint India-UAE Vision Statement - Advancing the India-UAE Comprehensive Strategic Partnership: New Frontiers, New milestones, Ministry of External Affairs, Government of India, 18 February 2022, https://www.mea.gov.in/bilateral-documents.htm?dtl/34877/Joint_IndiaUAE_Vision_Statement__Advancing_the_IndiaUAE_Comprehensive_Strategic_Partnership_New_Frontiers_New_milestones accessed on 05 May 2022.
[xv] India-UAE CEPA, FAQs, Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE), Department of Commerce, Ministry of Commerce and Industry, Government of India, https://commerce.gov.in/wp-content/uploads/2022/05/FAQs-on-CEPA_For-Uploading-on-DoCs-website-05-May-2022.pdf accessed on 11 May 2022.
[xvi] Population of Overseas Indians, Ministry of External Affairs, Government of India, http://mea.gov.in/images/attach/NRIs-and-PIOs_1.pdf accessed on 04 May 2022.
[xvii]Dipanjan Roy Chaudhury, Oman eyes PTA with India; to boost India's trade ties with Gulf after UAE CEPA, The Economic Times, 09 May 2022,
https://economictimes.indiatimes.com/news/economy/foreign-trade/oman-eyes-pta-with-india-to-boost-indias-trade-ties-with-gulf-after-uae-cepa/articleshow/91450700.cms accessed on 10 May 2022.
[xviii]Framework Agreement on Economic Cooperation between The Republic of India and The Member States of the Cooperation Council for the Arab States of the Gulf, Department of Commerce, Ministry of Commerce and Industry, 25 August 2004, https://commerce.gov.in/international-trade/trade-agreements/framework-agreement-with-gcc-states/ accessed on 03 May 2022.
[xix] Trade Agreements, Department of Commerce, Ministry of Commerce and Industry, https://commerce.gov.in/international-trade/trade-agreements/ accessed on 02 May 2022.
[xx] Biswajit Dhar, Comprehensive Economic Partnership Agreement: What the UAE trade deal holds, Financial Express, 1 March 2022, https://www.financialexpress.com/opinion/comprehensive-economic-partnership-agreement-what-the-uae-trade-deal-holds/2447241/ accessed on 01 May 2022.
[xxi] India-UAE CEPA, FAQs, Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE), Department of Commerce, Ministry of Commerce and Industry, Government of India, https://commerce.gov.in/wp-content/uploads/2022/05/FAQs-on-CEPA_For-Uploading-on-DoCs-website-05-May-2022.pdf accessed on 10 May 2022.
[xxii] Biswajit Dhar, New trade deals: A positive movement, Hindustan Times, 09 May 2022, https://www.hindustantimes.com/opinion/new-trade-deals-a-positive-movement-101652106403624.html accessed on 09 May 2022.
[xxiii]Joint India-UAE Vision Statement - Advancing the India-UAE Comprehensive Strategic Partnership: New Frontiers, New milestones, Ministry of External Affairs, Government of India, 18 February 2022, https://www.mea.gov.in/bilateral-documents.htm?dtl/34877/Joint_IndiaUAE_Vision_Statement__Advancing_the_IndiaUAE_Comprehensive_Strategic_Partnership_New_Frontiers_New_milestones accessed on 11 May 2022.