Bilateral Investment Treaties – Impact on Your Import and Export Business

Last Updated at: Mar 23, 2021
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In order to cope with the pandemic, most countries are undertaking urgent measures to arrest economic recession. There have been internal measures such as easier loans, export schemes, concessional reforms. In addition to these, there are external measures by way of a bilateral investment treaty that can boost trade and help businesses prosper. India and the European Union recently began talks for concluding a new bilateral investment treaty. In this post, we analyse the impact of bilateral investment treaties on import and export business.

What Are Bilateral Investment Treaties?

Bilateral investment treaties, as the name suggests, are treaties between two countries aimed at protecting the investment made by investors of both countries. These treaties cover a variety of conditions such as: 

  • Giving fair and equitable treatment to foreign investors and investment
  • Allowing repatriation of profits – this means free and unrestricted sending off money from one country to the home country of an investor 
  • These also provide for legal measures such as compensation, regulatory measures, and dispute resolution 

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How Will the India-EU Bilateral Investment Treaty Help Importers and Exporters?

If concluded successfully, the India-EU bilateral investment treaty can help Indian exporters as well as importers engaging in trade with European traders significantly. The following can be the advantages of such a treaty: 

  1. Improved market access to Europeans countries, with significantly reduced customs duty and other tariffs
  2. Trade relations: since the EU is a 28-country bloc, a bilateral treaty with the entire EU region could significantly increase trading relations
  3. Level playing field: the creation of a level playing field in most areas, such as approvals, licensing conditions, and export and Import regulations for Indian as well as European firms 
  4. Boost declining imports and exports: in a ten-year period of trading relations beginning from 2005 onwards, exports from India to the EU declined by almost 7%. In the same period, imports from the EU into India also registered a decline of around 5.9% 
  5. Lower taxes on imports: it could make previously high taxes on items from Europe, such as automobiles, wines, and spirits, subject to lower taxation in India 
  6. Capital movement: easier investment regulation and free capital movement, increasing foreign direct investment in India
  7. Tech collaboration and jobs: similarly, European investment in Indian companies can create opportunities for growth, technological collaboration, and job opportunities in India 
  8. Smoother dispute resolution: dispute resolution provisions such as international arbitration, and smoother enforcement of awards by national courts

IPR Protection Under Bilateral Investment Treaties

The term ‘investment’ in most bilateral treaties includes intellectual property rights (copyrights, patents, trademarks, trade names, industrial designs), goodwill, technical processes, and know-how. This grants equivalent IPR protection in a foreign country. However, the exact nature of protection and exclusions are determined in the actual treaty agreed between the nations. 

How Does a Bilateral Investment Treaty Impact Businesses in India 

  • Reduced shipping time, cost, and processes involved. It was observed that multiple logistic requirements at airports, shipping yards etc. That involves duty payment, customs, and other procedures caused unnecessary delay. Imports and exports with a country that India has a bilateral investment treaty with can significantly reduce such lags 
  • Gems, jewellery, garments, and textiles from India have always found a lucrative market abroad. Through a bilateral investment treaty, there could be a boost in international demand for these exquisite Indian goods and handicrafts 
  • The level of exports in a country is often directly proportional to its growth rate, and it holds true in India’s case as well. Greater exports often translate into higher growth due to profits, foreign exchange, and technology 

Does a Bilateral Investment Treaty Cover Services and Service Professionals?

Easier work visa and study visa norms included in the treaty make the exchange of professionals easier. However, in most bilateral treaties involving India, there has been reluctance in including service professionals. Several service sectors in India, such as accounting services, legal services, insurance, and banking are heavily regulated. However, the pandemic has fostered greater cross-country transactions in services, and this may be included in future bilateral investment treaties. 

Ease of Doing Business in India – ‘Trading Across Borders’

  • In a remarkable journey of progress, amidst an economic slowdown in 2019-20; India had recorded a massive leap of fourteen places to finish sixty-third in the ease of doing business rankings, 2019, published by the World Bank
  • A positive record witnessed in many areas of core evaluation such as ‘trading across borders. It is the ease of doing business rankings that have also contributed to India’s rank. 

Bilateral Investment Treaties – Hens That May Lay Golden Eggs

  • With technology being increasingly leveraged by upcoming startups as well as traditional businesses. There is no denying that for a nation to continue to attract investment. We need new partnerships and exploration of opportunities 
  • Bilateral investment treaties in budding sectors like artificial intelligence, big data, food processing, aeronautics, renewable energy; and tourism can play a major role in promoting import and export businesses in India

 

Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.