What are the difficulties with an FTA?
There are many difficulties originating from the army of bureaucrats who will be created to ascertain the country of origin of a good, the amount of value added done in that country and to certify that it qualifies for lower tariffs than other comprable goods coming from other countries. These custom officers will then have a vested interest in the continuation of FTAs rather than a multilateral trading agreement under which India brings down tariffs on goods from all countries. This army of officials which stands to earn bribes and becomes powerful under an FTA regime can create political economies against the first best path — a unilateral reduction in tariffs. It is difficult to remove the inspector raj created by an FTA.
