Difference Between FTA and CEPA


FTA and CEPA are terms used to describe economic pacts between countries that are aimed at reducing tariffs and improving bilateral trade. Whereas FTA stands for Free Trade Agreement, CEPA stands for Comprehensive Economic Partnership Agreement. Though both are economic pacts, there are differences between the two which will be highlighted in this article.

Unlike FTA, which is a free trade agreement, CEPA aims at lowering trade barriers instead of complete elimination. India has recently signed CEPA with South Korea which is expected to not only help in improving trade volume between the two countries, but will also help in reducing the trade imbalance which is heavily in favor of South Korea at present. Unlike FTA between US and EU which seeks to eliminate trade barriers within the next 5 years, CEPA aims to gradually reduce import duties from the existing 12.5% to a mere 1% in the next eight years.

There have been speculations among the analysts regarding the differences between CEPA and FTA. Critics say that slow moving CEPA is not preferable to a full fledged FTA. However, officials involved in pushing through CEPA with South Korea are upbeat and say that it is actually FTA+. Indian officials say that this agreement between India and South Korea is not limited to goods but is applicable to trade in services, investments and economic cooperation across an entire spectrum. There is also a dispute settlement mechanism that has been hailed by both sides.

Refuting comments that CEPA was a diluted version of FTA, officials said that it is natural that both sides do not get everything they want in bilateral negotiations but there is always scope for future talks.

In brief:

• India and South Korea have recently agreed into an economic pact called CEPA

• CEPA stands for Comprehensive Economic Partnership Agreement, whereas FTA stands for Free Trade Agreement

• CEPA is said to be a diluted version of FTA