The Impact of Free Trade Agreements on Agricultural Trade

India is the world’s seventh-largest agricultural exporter, shipping goods worth over USD 55 billion annually. A significant part of that achievement is tied to Free Trade Agreements – formal treaties between two or more countries that reduce or eliminate trade barriers such as tariffs, import quotas, and export restrictions. For Indian agripreneurs and farmers, FTAs represent something concrete: the ability to move rice, spices, seafood, and processed foods into new international markets with fewer costs and fewer obstacles. But these agreements come with layers of rules, protections for sensitive sectors, and real competitive pressures that every agricultural stakeholder should understand.

What free trade agreements actually do 🔗

At their core, FTAs are designed to make cross-border trade cheaper and more predictable. When two countries sign an FTA, they typically agree on a schedule for reducing or eliminating tariffs – the taxes charged on imported goods. For agricultural exporters, this directly affects how competitively their products can be priced in a foreign market. Beyond tariffs, modern FTAs also address non-tariff barriers (NTBs) – regulations around food safety standards, product labelling, packaging, and customs procedures that can be equally restrictive. According to the USDA Foreign Agricultural Service, non-tariff barriers including import bans, quality standards, and labelling rules significantly shape the volume and direction of agricultural trade between countries.

India has been actively expanding its FTA network. Nine FTAs finalized in recent years have opened doors to 38 developed and prosperous countries, giving Indian goods and services preferential market access – covering roughly two-thirds of global trade. The stated national ambition is clear: to become the world’s number one exporter of agricultural and processed foods.

Key FTAs shaping Indian agricultural trade 🔗

India-Sri Lanka Free Trade Agreement (ISFTA) 🔗

The ISFTA is one of India’s earliest bilateral agreements. Under it, both countries agreed to eliminate tariffs on a range of goods, including agricultural products. Indian exporters gained easier access to the Sri Lankan market, with trade increasing in products like rice, fruits, and vegetables. This agreement demonstrated how even a smaller bilateral FTA can meaningfully shift trade volumes when tariff reductions are implemented effectively.

India-ASEAN Free Trade Agreement (AIFTA) 🔗

The India-ASEAN FTA, which came into force in January 2010, covers trade in goods, services, and investment between India and the ten ASEAN member nations. For Indian agricultural exporters, it opened up markets like Indonesia, Malaysia, and Thailand – where products such as spices, tea, and coffee saw increased demand due to reduced tariffs and improved market access. However, the agreement has produced mixed results. A gravity model analysis found that AIFTA increased overall trade significantly but had no significant impact on raising India’s exports specifically. India’s trade deficit with the ASEAN region actually widened, rising from around USD 8 billion in 2009-10 to approximately USD 22 billion by 2018-19, as imports from ASEAN grew faster than Indian exports to the bloc.

Research also flagged that labour-intensive and unorganized agricultural sectors face bigger challenges under the AIFTA, as ASEAN members’ exports of processed foods and fisheries products have increased competitiveness in India’s domestic market. This has pushed policymakers to review the agreement with a focus on rules of origin, tariff verification, and trade facilitation measures.

India-Japan Comprehensive Economic Partnership Agreement (CEPA) 🔗

Under the India-Japan CEPA, both countries committed to reducing tariffs on a range of agricultural products including fruits, vegetables, and processed foods. This opened a significant opportunity for Indian exporters to enter the Japanese market – a high-income consumer base with strong demand for quality produce – and to compete with suppliers from other countries on a more level playing field.

India-UK Comprehensive Economic and Trade Agreement (CETA) 🔗

The recently concluded India-UK CETA is among the most impactful for the agricultural sector. The UK will liberalise tariffs at entry into force on Indian meats, dairy products, tea, coffee, spices, fruits, vegetables, fruit juices, and processed agricultural products. The agreement is expected to increase Indian agri and processed food exports by over 50% within three years. The UK is a premium market for niche Indian products like mangoes, grapes, and marine goods, and the CETA gives Indian farmers a direct route to that high-value customer base. Importantly, the agreement protects sensitive Indian products – such as dairy, vegetables, apples, and edible oils – by keeping them under a sensitive list, shielding domestic producers from sudden competitive pressure.

India-EU Free Trade Agreement 🔗

The India-EU FTA is one of the most ambitious trade agreements India has pursued. India’s average tariffs on agri-food products stand at 36%, and can reach as high as 150% – the FTA substantially reduces or eliminates these on key goods. Simulation studies using the SMART model indicate that full tariff elimination could lead to an overall trade increase in agriculture of 238%, with especially strong growth in tea, coffee, and spices at 357%. Both sides have also agreed to exclude the most sensitive agricultural products from liberalisation – the EU retains tariffs on products like beef, rice, milk powder, honey, and soft wheat, while India protects dairy, cereals, and poultry.

How FTAs open market access for Indian agricultural exporters 🔗

Reduced tariffs and preferential pricing 🔗

The most direct benefit of an FTA is reduced import duty in partner countries. When a competitor nation without an FTA faces a 20% tariff and India faces 5% or zero on the same product, Indian exporters have a built-in pricing advantage. This matters particularly for commodity-driven products like basmati rice, tea, and marine products where price competitiveness is critical. India’s agricultural exports grew by 6.4% in 2024-25, reaching USD 51.9 billion, with rice hitting a record USD 12.5 billion in exports – a trajectory supported partly by preferential access in key markets.

Participation in setting product standards 🔗

FTAs frequently include provisions that allow India to participate in the development of product standards in partner countries. This is strategically important. When Indian representatives contribute to setting standards for pesticide residue limits, food labelling, or certification processes, it reduces the risk of those standards being used as veiled trade barriers against Indian goods. The India-EU FTA introduces enhanced cooperation on Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT), including conformity assessment recognition and early-warning mechanisms – which directly reduce compliance uncertainty for Indian exporters.

Ensuring fair treatment through dispute mechanisms 🔗

FTAs also come with dispute settlement mechanisms that give India formal channels to challenge unfair trade practices. If a partner country imposes unjustified SPS restrictions – like banning a product without scientific basis – India can raise the issue through the FTA’s framework. This is a significant protection. Without such mechanisms, Indian exporters would have little recourse against arbitrary market access denials.

Rules of origin: A crucial but complex requirement 🔗

FTAs include rules of origin (RoO), which determine whether a product qualifies for preferential tariff treatment. For Indian agricultural exporters, this means demonstrating that their products genuinely originate from India – typically by meeting a minimum local content threshold or following specific production processes. If a product cannot prove Indian origin under the agreement’s criteria, it does not qualify for reduced tariffs, even if India is a signatory to that FTA. Navigating rules of origin is especially relevant for processed foods and value-added agricultural products. The India-EU FTA includes MSME-friendly rules of origin and self-certification mechanisms, which are designed to make compliance more accessible for smaller producers and help integrate Indian agricultural processors into global value chains.

Non-tariff barriers: The hidden challenges 🔗

Tariff reductions alone do not guarantee market access. Sanitary and Phytosanitary (SPS) measures – regulations governing food safety, animal health, and plant protection – are among the most significant non-tariff barriers Indian agricultural exporters face. Research on India-ASEAN trade found that among all non-tariff measures, SPS measures may impact agricultural exports the most, limiting India’s share in partner country markets even where tariffs have been reduced.

Real-world examples illustrate the stakes. Europe has banned some Indian basmati rice and tea over pesticide concerns, and Japan has banned Indian cut flowers citing pest issues. Bodies like APEDA (Agricultural and Processed Food Products Export Development Authority) play an active role in helping Indian exporters understand and comply with international SPS standards, and in challenging measures that fall outside the WTO’s SPS Agreement framework. Exporters who understand these requirements – and invest in meeting them – are significantly better positioned to hold and grow their market share under FTAs.

The competitive pressure on domestic agriculture 🔗

FTAs are a two-way street. While they open export markets for India, they also expose Indian farmers to imports from partner countries – sometimes at lower prices due to heavy agricultural subsidies in those countries. Global trade analysts have noted that trade deals often demand lower tariffs that expose Indian agriculture to external competition, particularly from producers receiving state subsidies. For example, concerns have been raised about the potential impact of cheap, subsidised agricultural imports on Indian soybean growers, dairy farmers, and plantation sector workers if tariff lines in sensitive areas are opened without adequate safeguards.

This is why India has been deliberate about protecting sensitive sectors in its FTA negotiations. In both the India-UK CETA and the India-EU FTA, high-sensitivity agricultural categories are either excluded from full liberalisation or protected through tariff-rate quotas and safeguard mechanisms. Both sides in the India-EU agreement have agreed to exclude the most sensitive agricultural products from liberalisation, balancing market access with the protection of sectors critical to food security and rural livelihoods.

What Indian agripreneurs should know when navigating FTAs 🔗

For anyone in the agricultural export business, FTAs are not a passive benefit – they require active engagement. The key is understanding the specific terms of each agreement: which tariff lines are reduced, at what pace, under what conditions, and which safeguards apply. Some practical considerations include:

Know your tariff schedule. Each FTA operates on a schedule that phases in tariff reductions over years. Exporters should track the current duty rate for their product in the partner country under the relevant FTA, versus the standard Most Favoured Nation (MFN) rate, to understand their actual price advantage.

Verify rules of origin compliance. Before claiming FTA benefits, confirm your product meets the agreement’s rules of origin. Inadequate documentation can lead to the product being taxed at full MFN rates, erasing the FTA advantage entirely.

Invest in SPS compliance. Meeting food safety, pesticide residue, and quality standards is non-negotiable. Products that fail SPS checks at the border result in shipment rejections, financial loss, and reputational damage. Working with APEDA and investing in testing and certification before shipping reduces this risk considerably.

Track evolving agreements. FTA terms evolve – reviews, renegotiations, and safeguard activations happen regularly. India’s ASEAN FTA is currently under review, and the India-EU agreement is newly concluded. Staying updated ensures exporters are positioned to use new benefits as they come into effect.

Between 2014 and 2025, India’s exports of processed foods increased fourfold, pulses exports tripled, and processed vegetables quadrupled – evidence that when Indian producers meet the standards and terms required, FTAs can deliver real and substantial gains.

What do you think? With India’s agricultural export ambitions growing, do you think the benefits of FTAs are reaching small and marginal farmers, or are they primarily captured by large agri-businesses and processors? As India protects sensitive sectors like dairy and oilseeds in its trade negotiations, how should the government balance long-term export growth with the immediate livelihoods of domestic farmers?

References

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