India and UAE foster economic ties through CEPA

Trade agreements are not merely economic tools; they are binding legal frameworks that shape the rules of global commerce. They decide which goods and services qualify for preferential treatment, how disputes are resolved and how far governments can shield domestic industries without breaching international commitments. The India-UAE Comprehensive Economic Partnership Agreement (“CEPA”), signed on 18 February 2022 and effective from 1 May 2022, illustrates this dual role of law and economics. In just over three years, CEPA has reshaped bilateral trade, redefined legal cooperation and marked India’s first such agreement in the Middle East. For the UAE, it has become a cornerstone of its trade strategy, building on centuries-old ties to form a modern and strategic partnership.

The scope of CEPA is broader than that of conventional free trade agreements, which are largely limited to tariff reductions. It encompasses services, intellectual property, digital trade and government procurement, establishing a truly comprehensive framework for bilateral cooperation. For India, this not only consolidates its commercial presence in the UAE but also strengthens its strategic influence across the Gulf region.

In 2021-22, before CEPA, bilateral trade stood at about USD 72.9 billion. By the first year of implementation, this rose to USD 84.8 billion. Despite a small dip in 2023-24, it surged to nearly USD 100 billion in 2024-25. Within this growth, India’s non-oil exports, such as gems and jewellery and telecom equipment, reached USD 27.4 billion in 2023-24. Imports continued to be dominated by petroleum and precious metals, which kept energy trade at the core of the bilateral balance. Despite this, total trade grew nearly 37% over two years, showing that CEPA’s legal commitments have translated into measurable economic gains.

The strategic importance of CEPA is best understood in the global context. Indian exporters face tariff and regulatory hurdles in Western markets. For instance, the United States of America (US), under Section 232 of the Trade Expansion Act of 1962, imposed duties on a wide range of Indian products, including steel, aluminum, textiles, gems, chemicals, agricultural goods and machinery. These measures increased costs, squeezed margins and created uncertainty, making the US market less predictable. While the US remains critical, CEPA provides Indian exporters with much-needed stability through preferential and legally secure access to the UAE. Unlike the unpredictability of sudden tariff shocks elsewhere, CEPA guarantees consistency, legal certainty and greater confidence in long-term planning.

CEPA makes significant tariff commitments, reducing 97% of India’s tariff lines and 90% of the UAE’s. These are binding legal obligations under international economic law, providing preferential access to almost 7,700 goods, including gems and jewellery, textiles, footwear and engineering products. For Indian exporters in labour-intensive sectors, this is not just an economic advantage but a legal entitlement. Upon satisfying the origin criteria, such goods are entitled to preferential tariff treatment in the UAE, free from any discriminatory measures or additional duties.

However, these benefits are conditional on strict compliance with the Rules of Origin. Rules of Origin (RoO) under CEPA define the criteria that determine whether a product qualifies as originating in India or the UAE and is therefore eligible for preferential tariff treatment. To qualify, goods must be either wholly obtained in one of the two countries or meet a minimum of 40% value addition on an FOB basis, certified through a Certificate of Origin.

CEPA permits preferential tariffs only for products genuinely originating in India or the UAE, either as “wholly obtained” goods or those with at least 40% value addition on a free-on-board basis. Free-on-Board under CEPA means the price actually paid or payable to the exporter for a product when loaded onto the carrier at the named port of exportation, including the cost of the product, and all costs necessary to bring the product onto the carrier.

The Certificate of Origin, issued physically or electronically by the competent authorities designated by India (such as the Ministry of Commerce and Industry) and by the UAE (such as the Ministry of Economy), functions as the proof that unlocks preferential tariff treatment. Without it, goods may be reclassified, subjected to additional duties or even penalised under customs law. Rules of Origin compliance is therefore a crucial safeguard, ensuring CEPA’s benefits are not misused while protecting domestic industries from third-country goods entering through false origin claims.

Tariff concessions, however significant, do not by themselves ensure market access. Even when duties are reduced to zero, non-tariff barriers such as conflicting technical standards, lengthy approval processes, or repetitive testing continue to restrict trade. CEPA directly addresses these challenges by embedding legally binding commitments to reduce such obstacles, providing exporters with clarity and enforceable rights.

In the pharmaceutical sector, medicines approved by trusted regulators, including the US FDA, European Medicines Agency and authorities in the United Kingdom, Japan and Canada, are automatically recognised in the UAE, eliminating duplicate testing. Beyond pharmaceuticals, CEPA mandates mutual acceptance of accredited laboratory testing and promotes closer cooperation on sanitary and phytosanitary standards. These provisions are not merely aspirational; they are enforceable guarantees designed to cut delays, lower compliance costs and ensure that market access is governed by predictable rules rather than arbitrary regulatory discretion, giving Indian exporters a legally secured fast-track into West Asia’s healthcare market.

Disputes are inevitable in international trade and CEPA provides a dedicated mechanism to address them. Modelled on the World Trade Organisation’s system but adapted to India-UAE bilateral trade, it excludes certain areas like digital trade, reflecting the policy choice that such fields are better managed through government consultations.

Exporters or importers complying with Rules of Origin cannot directly access the CEPA dispute mechanism, which is reserved for governments. Disputes are first addressed through consultations, potentially proceeding to mediation and a formal panel. The panel’s decisions are obligatory on governments and failure to comply may lead to suspension of equivalent concessions. CEPA also includes a choice-of-forum provision, ensuring that disputes are resolved in a single forum, preventing duplication or conflicting rulings.

This structured and legally binding framework fortifies predictability, providing exporters and importers assurance that CEPA obligations will be consistently upheld.

CEPA’s impact extends beyond tariffs and regulations; it has reshaped the logistics ecosystem supporting bilateral trade. The value of legal commitments is realised only when goods can move across borders smoothly and reliably. Within a year of CEPA’s implementation, global shipping lines introduced new container services linking India’s western ports with the UAE, reflecting the private sector’s response to predictable market access.

The effectiveness of CEPA depends on robust logistics. Pharmaceuticals need reliable cold-chain networks to benefit from fast-track approvals, automobiles and engineering goods require specialised freight and gems and jewellery demand secure, high-value transit. Legal entitlement alone cannot translate into market access without these systems.

For India, this aligns with domestic initiatives like the PM Gati Shakti Master Plan, integrating ports, highways and logistics hubs. For the UAE, CEPA reinforces its role as a global re-export hub and a gateway for Indian goods to Africa, Europe and other international markets.

Despite its achievements, CEPA faces practical and geopolitical challenges. The most persistent concern is the trade imbalance, as India’s large imports of crude oil and petroleum from the UAE overshadow the growth of non-oil trade, making export gains appear modest.

Non-tariff barriers further complicate the picture. Sanitary and phytosanitary requirements, along with technical regulations such as mandatory Halal certification, have affected Indian exporters in sensitive sectors like poultry, meat and processed foods. According to India’s Ministry of Commerce and Industry, these restrictions contributed to nearly a 30% decline in processed food exports in recent years, showing how regulatory hurdles can dilute tariff benefits.

Geopolitical dynamics also add uncertainty. Divergent foreign policy priorities, such as UAE support to Pakistan and recent conflicts like Israel-Hamas, could affect regional initiatives like the India-Middle East-Europe Corridor.

These factors underscore that CEPA, while a powerful legal and economic instrument, cannot operate in isolation. CEPA’s long-term success depends on robust provisions and the effective management of geopolitics, regulatory barriers and competitive pressures.

The India-UAE CEPA is more than an economic partnership; it exemplifies how law shapes global commerce. Such agreements are not mere diplomatic pronouncements; they are binding frameworks determining how goods move, services are delivered and how investments are safeguarded.

For businesses, CEPA offers opportunity while demanding compliance with origin rules, certifications and standards. For lawyers, it underscores that trade diplomacy matters only when commitments are enforceable and disputes are resolved credibly. For policymakers, it demonstrates that legal instruments can drive both economic growth and strategic influence.

The true measure of CEPA lies not only in trade volumes but in its capacity to adapt to emerging challenges such as digital trade, regulatory cooperation and sustainability. It serves as a blueprint demonstrating that legal certainty underpins long-term economic partnerships and a reminder that in international commerce, law is not peripheral but the foundation upon which enduring success is built.

About the authors: Ritesh Singh is a Partner, Navneet Kishore Singh is a Senior Associate and Manish Arora is an Associate at The Precept-Law Offices.

Disclaimer: The opinions expressed in this article are those of the author. The opinions presented do not necessarily reflect the views of Bar & Bench.

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