New template for trade deals: Govt to focus on tariffs, non-tariff barriers to clinch early agreements

The ongoing trade talks with the US for a bilateral trade agreement (BTA) are also part of this “early harvest approach", focusing on negotiating tariffs and non-tariff measures, with sensitive issues such as intellectual property rights and emigration set aside for now, they said.

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“This new approach is aimed at accelerating outcomes in the ongoing trade talks while avoiding the long-drawn negotiations typical of comprehensive FTAs," said the first of the two persons cited above.

This would mark a fundamental departure for Indian trade negotiators. 

India, as part of its FTA talks, has thus far been pushing for its skilled labour, especially in IT services, to be allowed to live and work temporarily in countries such as the UK. Likewise, developed countries are pushing for stronger Indian protections on intellectual property rights.

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Other contentious areas include European insistence on labour and environmental standards for Indian goods.

These short-term trade agreements, which may be structured as early harvest deals or phased pacts, are expected to focus on specific sectors of mutual interest rather than full tariff liberalization across all goods and services.

This shift in the policy landscape is seen as a response to the growing trend of countries announcing one tariff measure after another. The steep increase in tariffs by the US has prompted countries, including India, to rethink their strategy and pursue early trade deals to ensure smoother trade flows.

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“Amid the changing geopolitical landscape, early trade deals aim to make the movement of goods and services between countries easier. If successful, these early harvest agreements can provide a strong base for a full trade deal in the future," said the second person.

Both the persons spoke on the condition of anonymity.

Experts say India’s focus on limited trade deals is a smart way to get quick results but warn that past mistakes must be avoided to protect key interests.

"This is a practical approach. At the same time, we should be careful not to leave issues of our core interest to be addressed later. In the case of Asean (grouping of South-east Asian nations), we first finalized the agreement in respect of merchandise trade, and then we entered negotiations on services. Our perceived advantage was in services, but having finalized the goods deal earlier, we lost a bit of negotiating leverage while adopting the sequential approach. We should draw appropriate lessons from this experience," said Abhijit Das, former head of the Centre for WTO Studies, New Delhi.

Analysts point to a possible model in the Australia-India Economic Cooperation and Trade Agreement (ECTA), signed in December 2022. The pact has turned out to be a strategic success for both countries, leading to a significant increase in bilateral trade—particularly in Indian exports to Australia—validating the benefits of early harvest agreements.

Since the ECTA came into force, India’s exports to Australia have seen notable growth. Exports rose from $6.95 billion in FY23 to $7.94 billion in FY24, reflecting a 14.2% increase. In FY25 (until February), exports stood at $7.76 billion, indicating a marginal year-on-year dip but still showing sustained momentum, as per data from the commerce ministry. This growth underscores the early gains delivered by the trade pact.

At the same time, India’s imports from Australia declined, suggesting a narrowing trade deficit. Imports fell from $19.01 billion in FY23 to $16.15 billion in FY24, and further to $14.41 billion in FY25 (until February), pointing to a shift in the trade balance and greater export competitiveness under the ECTA framework.

Encouraged by this momentum, both countries are now negotiating a full-fledged comprehensive economic cooperation agreement to deepen trade ties across more sectors.

India is negotiating trade agreements with the UK, EU, Peru, New Zealand, Chile, Oman and Sri Lanka, among others. It is also exploring talks with the Southern African Customs Union (SACU) and Israel and reviewing its existing FTAs with key partners, including Korea, Asean and Japan, to address trade imbalances.

A full-fledged FTA is a broad and comprehensive trade pact that covers almost all sectors of trade between two countries. It typically includes goods, services, investments, intellectual property rights, government procurement, and even issues like labour and environmental standards. Negotiating an FTA usually takes several years because of the wide range of subjects involved and the need to resolve sensitive issues.

In contrast, an early harvest deal is a more limited, short-term arrangement. It focuses on areas where both sides can quickly agree, such as lowering tariffs on select goods or addressing specific non-tariff barriers. These deals are meant to deliver quick results and are often seen as a stepping stone to a broader FTA later on. They leave out contentious subjects like intellectual property rights or regulatory frameworks, which take longer to negotiate.

“The pattern of agreeing on areas that we are able to reach agreement on is theoretically a good one. Traditional trade negotiations have not adopted this approach because no country wants to give up any potential bargaining chips. If the current trade environment allows us to strike partial agreements, it will be very helpful in lowering trade barriers and be beneficial in boosting both India's manufacturing and consumption sectors," said Rahul Ahluwalia, director of the Foundation for Economic Development, a think tank.