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SME Related Provisions in Free Trade Agreements – An Analysis of India’s Strategic Focus

Tandon, Anjali (2021): SME Related Provisions in Free Trade Agreements – An Analysis of India’s Strategic Focus. Published in: ISID Working Paper Series , Vol. 2021, No. October (October 2021)

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In the backdrop of the increasing government emphasis on strengthening the domestic and international participation of the small and medium enterprises (SMEs), this paper presents a review of the SME related provisions that have been incorporated into the free trade agreements (FTAs) signed by countries, including India. A comparative approach has been used to bring out the difference in strategic focus adopted by India vis-à-vis other countries. The review of the trade agreements informs that the SME related provisions are not very prevalent, more so in the Indian context. Only about half of the 60 plus trade agreements reviewed are observed to include SME specific arrangements. These provisions are mostly non-binding and of an endeavouring nature, putting the onus on the host country to initiate and benefit from the stated activities of cooperation and similar mechanisms for better opportunities for the SMEs. By comparison with other countries, most FTAs signed by India are either silent on SMEs or lack aggression. India’s emphasis on transparency is minimal in comparison to the inclusion of a cooperation clause in the text of the agreements. The absence of an SME focus in trade agreements indicates that smaller enterprises have been considered at par with other businesses, thus ignoring their exceptional needs and the handholding that might be required for their greater and faster internationalisation. Although it can be argued that the mere existence of an SME related provision may not necessarily result in better opportunities, it is important to highlight the emphasis on SMEs in the text of the agreements, as pursued by other countries.

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